real estate newsletter

Over the long weekend, like many Aussies do, we met up with some friends for dinner, and conversation naturally turned to the property market. Around the table, predictions, largely based on media gossip and speculation, were of distress and disaster, with those of our friends who are yet to buy their first property in two minds about whether the changing market will be beneficial or not for them, and our home owner friends despairing about how much property value they will lose.

In an age where every newspaper, news blog, breakfast TV show and social channel is reporting on the real estate market multiple times every day, we have an abundance of information available to us -- but no real way of discerning what is most accurate.

With media headlines and articles fixating on words like 'decline', 'drop', 'plummet', it can be easy for anyone to get a bit panicked. It can also be too easy to review your decision to buy or your pending plan to sell, and suddenly become worried that you stand to lose -- and based on newspaper articles -- lose big.

But it's important to remember that headlines like 'Property market is just about the same' or 'No need to fret about real estate' just don't sell papers, there needs to be some drama, or there is no story.

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It's also important to remember that there can be somewhat of a chicken and egg situation when it comes to media and property. Sure, the market may be cooling slightly due to a range of factors (which is completely normal!), but will anything newsworthy actually happen if the media doesn't publish dire headlines that cause people to panic unnecessarily and become too uncertain to invest or sell?

It absolutely is easy to get weighed down by what we read, but the best approach to understanding what is happening is to read widely and remove the emotive adjectives and adverbs from every article you look at. Ultimately, David and Libby Koche hit the nail on the head on the weekend when they suggested that experts have predicted various and opposing changes to the market are in store, but no one can predict, with any great certainty, what the future will actually bring.

So, what is the market really doing?

At Sale Ezy, we're not big into sensationalist headlines and stirring up panic, but we're also not about creating a false sense of security to lure people into doing something they shouldn't. We know our family and friends read our blogs and seek advice from us, and we want both them and the rest of our readers to have a really clear and unbiased understanding of property in Australia. So again, we encourage everyone to read widely!

What we do know, is the market is changing slightly at the moment. Whether the current change is an indication of ongoing change, a minor correction, or just some of the usual fluctuation that happens all the time, is hotly contested, but we're voting a little of column A, B and C on that one.

At the end of last year and start of this year, indications were excellent for the strength of the market. Auctions and clearance rates were high, prices remained strong and demand was seemingly unending. Cut to a few months later and there is no doubt that things have cooled off slightly. But what some people don't realise (and others don't report), is that any market can and does fluctuate naturally, it doesn't mean a dire, world-ending event is just around the corner.

After a strong start, April and May saw house prices dip slightly in some areas (Brisbane and Adelaide rose slightly, in contrast), though auction rates and clearances remained high.

Over the weekend, we saw a decrease in auction volumes across most states, which not surprisingly appeared at the top of many property news articles to kick off this week. But those readers who read on, will know that a dip in auction volumes is very common on the Queen's Birthday long weekend (as it is most holidays), and actually, auction rates in some capital cities (including Sydney and Melbourne) were near record highs, an indication of a still robust market.

Ultimately, what we can be sure of is that the market is fluctuating slightly, and we know this is something that happens all the time. Sydney and Melbourne particularly, have been very strong for quite a long period, so a little fluctuation and even a little correction, is completely normal and nothing to fear.

What indications should we keep an eye on?

This is a tough question, and one we are asked often. The reason it is difficult to answer is that there are so many factors at play. Even experts have very contrasting predictions based on the same fluctuations and indicators.

Right now, we know prices in some key markets have fallen slightly. When we say slightly, we often mean so slightly that the change is not even consistent enough for everyone to see it. You might attend one auction in one Sydney neighbourhood where the sales price seems more realistic than usual, and in the same weekend, attend an auction just around the corner where prices still seem very high. Slight dips like this can be an indication of more consistent dips to come, but they can also just be the product of timing, economic and political influences, new inventory or a range of other factors.

Clearance rates are high -- this is a really good sign that we are still operating within a robust market. While clearances have peaked in the last few years at as high as 80%+, it's most common to see them in the 70-80% range when the market is very strong. What this means is that of all the properties going to auction, around three quarters of them are selling by the hammer, as opposed to being passed in for post-auction offers.

At the moment, clearance rates still fall within this positive range. If the average clearance rates dip consistently into the 60% range, potentially this is a sign of a larger correction. But before panicking, be careful to take note of what else is happening -- could it be an immediate reaction to a banking announcement, rate change or inventory release that won't have an ongoing influence?

Rental market changes are also a good indication of market fluctuation, as lower demand (higher vacancy rates) can make people less inclined to purchase investment properties for fear of lower return. Right now, in Sydney and Melbourne, demand for rentals remains high, meaning investment is still a positive option for buyers.

How will market changes affect your property value?

Perhaps one of the most challenging things about some of the sensationalist headlines being printed, is the effect they can have on property owners and their mental health. Buying a property is a big deal, there's no disputing that, and we buy in the hopes that we can build some future security for ourselves and our families -- make some money, have an investment that is worth something now and down-the-track.

Suddenly finding out your property value could possibly fall through the floor, and all the work you did scrimping and saving could be for naught, is nothing short of distressing and sometimes depressing for property owners. This is why we suggest reading widely and not reacting without proper consideration.

A market correction may mean a lot of things, but it is highly unlikely it will render real estate a worthless investment. Yes, it might see sales prices come back somewhat, but it doesn't indicate your investment will stop appreciating, it just might do it at a slightly slower rate -- meaning your nest egg will still be exactly that. See our article, 'will a market correction fix real estate' for a more in-depth explanation that might put your mind at ease.

If you're thinking about getting your house or property valued, our article, 'Property pricing: how much is your property really worth' is a great place to get started, with handy hints and tips and links to great tools.

To get started assessing your options for selling your property, our free ebook, 'A simple and effective guide to selling your own property' offers must-read insights into selecting an agent, non-agent options, pricing, marketing and negotiating.