How to pick the turning point in our property market | Lessons learned from past property downturns?
Jun 26, 2019
Do you want to know when our property markets are going to bottom out?
Think about it…it wasn’t that long ago that the media was telling us that we’re in for even further property price falls.
But look what’s in the media today.
Many people are asking how to pick the turning point in the property market. Is it too early to get in and buy countercyclically? Is this the right time?
In this episode, we’ll talk about what to look for to pick the turning point in the property market.
Also, I’ll share my views on buying counter cyclically.
I’ll also share some of the lessons that we’ve learned from past property downturns, and in my mindset moment, we’ll have a chat about fears.
How to pick the turning point in our property market
Even the smartest economists armed with all the data can’t pick the exact moment the market turns. But there are some signals you can look for.
- The macro economics – The property market doesn’t work in a vacuum, so the world economy and the country’s economy matter. Keep an eye on inflation and wages growth as well.
- Finance – Property markets are driven by the availability and affordability of finance. Keep track of data on credit growth. Credit growth is a leading indicator – it turns positive before the markets do.
- Market sentiment – Increased consumer and business confidence are good signs for the future.
- Supply and demand – The population is growing faster in Australia than any other country, and this fuels demand for property.
- Vendor discounts -- When sellers don’t have to give as much of a discount to sell their home, that’s a sign that property markets are starting to turn, and that will come before property values start to increase.
- Increase in the number of transactions – This will happen as buyers and sellers return to the markets
- Asking prices – Asking price is an accurate real-time indicator of what’s happening in the market
- Option clearance rate – This is a good indicator of market confidence.
Now is a good time to make a countercyclic purchase in Sydney or Melbourne or ride the property wave that started a while ago in Brisbane.
Lessons learned from past property downturns
I’ve been investing since the early 1970s, so as you can imagine, I’ve seen the ups, the downs, the stabilisation phases, and the booms come and go and repeat themselves. I’d like to share with you ten lessons I’ve learned from previous cycles.
- Booms never last forever – Every boom sets us up for the next downturn, so be prepared when it comes.
- Adhere to the strategy – Don’t change your long-term strategy because of short-term factors.
- Getting rich quick is getting poor quick – Successful property investing takes time. There are no shortcuts.
- You need a long-term perspective – Keep your eye on the long-term horizon.
- Property investment is a game of finance with some houses thrown in the middle – Strategic investors buy time by having financial structures in place to ride through the cycle.
- Invest in locations with a future, not a past – Find a location where the local economic growth will lead to jobs and wages growth.
- You know less than you think – An overinflated ego will leave you worse off than you started. Surround yourself with mentors and experts who can teach you things you didn’t know.
- Don’t mistake money for wealth – True wealth hasn’t got to do with how much money or property you have. It’s what you have left when you lose it all.
- When good times seemingly turn bad, property pessimists and doomsayers come forward – Sophisticated investors ignore the white noise and focus on the long term.
- Opportunity is knocking – Take action when those around you are talking doom and gloom.
Links and Resources:
Metropole Property Strategists
Metropole’s Strategic Property Plan – to help both beginning and experienced investors
Some of our favourite quotes from the show:
“As I see it, there really hasn’t been as good a time to buy counter cyclically for over a decade.” –Michael Yardney
“A world without fear would be simultaneously more dangerous, less rewarding – just plain flat.” –Michael Yardney
“Don’t be scared of bad things happening. Do your homework, do your research, and get on with it.”
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