Waiting for 6 o’clock on the property watch? You may be too late

If you’re waiting for someone to fly a flag when we hit the bottom of the market, think again: life doesn’t afford such luxuries. By the time people realise the market has bottomed out, it’s because it’s started on the upward curve and opportunity has passed! A bit like the gold rush; as soon as word gets out, the herd mentality kicks in, and it’s a difficult force of nature to resist.

So what is happening with our market? Some would suggest this is a typical market cycle. However, look a little deeper and a rather different picture is painted.  Market downturns are usually accompanied by various factors such as interest starting to flatten out, job insecurity, high unemployment, poor wage growth, population decline, large supplies of stock, and all manner of other triggers in different areas of the property market.

However, Australia isn’t suffering any of these. In fact, on the face of it, the picture looks enviably rosy.


  • Turnover in Melbourne is not markedly down. It’s trailing a little from this time last year, however, compared to 2008 and 2009 we’re ahead, indicating a steady stream of buyers and sellers.
  • Unemployment has been below 5% since last year, and although some areas are suffering more than others, the general outlook is excellent.
  • Our interest rates, although not low, are not high either – and no one would argue our population is falling.
  • The RBA has happily announced we’re saving more, and paying down our debts, and despite continuous complaints against the cost of metropolitan real estate, the debt servicing ratio is just 21%. Indeed, more than half of us are apparently paying down our loans faster than we need to.
  • Furthermore, wage growth is relatively firm, and household income was growth strong in the March quarter, according to the RBA


Nevertheless, the face is often very good at contradicting what’s emotionally within, and if truth be known, confidence is anything but robust.  We don’t need an interest rate hike – the RBA is doing a good job of making us err on the conservative side with a mere hint at it.

We all know bills are going to increase, but by how much is annoyingly uncertain.  And furthermore, anyone with investments in the stock market will be looking closely at the current international tremors and not liking the aftershocks.

We’ve all heard the news surrounding the Greek economy and its effect on Europe; America on the point of further demise; and possible warnings of a ‘hard landing’ in major players our side of the Pacific which could, some suggest, contribute to a ‘commodity crash’. However, if you think we’ve started on a downward-sloping curve, be warned: you may miss the boat.

We have a largely discretionary market. The evidence above suggests most vendors don’t ‘need’ to sell – especially if they don’t get their price.  They’re happy to sit it out and wait for better times.

Mortgage brokers have reported a large increase in the number of pre-approvals, hinting that there are plenty of buyers hovering in the starting blocks. The supply-demand argument continues to be a testy debate, but however many houses are built in the outer suburbs of our best performing cities, in far off lands away from the convenience of public transport and amenities, or high-rise, small one and two bedroom apartment blocks which are hardly an attraction for home buyers (nor fit into the typical first home buyer price range, or meet lending requirements). Stock located in areas where people want to live is certainly not in abundance.

Therefore, it’s unreasonable to suggest that real estate will keep dropping in price in the top third of suburbs of those areas driven fundamentally by supply/demand. However, outer-suburban locations, and poor high-rise accommodation heading into oversupply, may sing a different tune altogether and continue to suffer low demand.

With this in mind it’s important to note how dangerous it is to paint the whole real estate market with sweeping statements of downturns – or upturns. Every area must be assessed on its merit – hence many suburbs have shown a rise in median value over the first quarter, while other areas have dropped back to 2008 levels.

In short, the only thing we’re waiting for before the market swings upwards once again is the spark that’s going to inject confidence and an element of security into buyer psychology. However, waiting for that spark is not a wise thing for any investor to do if they want to purchase at the bottom! Have we hit the bottom yet? No one can make that call quite so soon – but if we haven’t, it’s not far away.


Catherine Cashmore is senior buyer advocate for JPP Buyer Advocates – the largest dedicated buyer advocacy service in Victoria. With extensive experience in all matters regarding real estate, JPP successfully purchases and negotiates more than $100 million worth of property each year. www.jpp.com.au

Catherine Cashmore

Catherine Cashmore

Catherine Cashmore is a market analyst with extensive experience in all aspects relating to property acquisition.


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