Who timed the market?

This year has been one of the most dynamic years we’ve had in property. 2019 has marked a year that was punctuated by one of the most dramatic corrections we have experienced. From a tough downturn to a heated run, buyers, vendors, agents and valuers would understandably feel confused.

Our Federal Election, coupled with RBA interest rate cuts, and lender servicing relaxation gave way to a wave of positive buyer sentiment after May.

Our year flipped from a buyer’s market to a seller’s market almost overnight.

The fascinating thing about any sudden market change is buyer behaviour. Buyers always wish they could time a market. Everybody would love to buy just before the pendulum swings, but funnily enough, when the pendulum feels like it’s in a horrible place, most buyers aren’t brave enough to take the plunge.

The fear of tough market conditions degenerating further is the obvious concern, but the white noise of negative media talk and friends/family concern overlays an even stronger force for a buyer who is contemplating a purchase when the rest of the market isn’t.

It does take determination and guts to buy a property when everyone else isn’t.

In the earlier months of the year preceding the Federal Election, several of our clients opted to put their searches on pause. The market sentiment was terrible and their discomfort with the idea of purchasing was too great.

Some adopted a “let’s wait and see what happens” approach, while others decided they wouldn’t invest in property after all.

Four clients discussed the market conditions and their intended timing with us. We were very clear to point out that a change in government could spell a dramatic change for our property market. Focusing on larger land for a specific segment of our investors became a critical criterion, and maintaining buffers was essential to ride out any continued economic storm.

Yet like any election, we also knew that any result could likely trigger a market recovery.

Buyers fear uncertainty. But once something is certain, ‘business-as-usual’ often returns.

Four clients in particular decided that their time was now, and in those difficult months with nasty news headlines gripping, they backed their own strategies and bought.

In the face of limited social proof, their commitment to their strategies was impressive.

Hindsight is easy to have, but at the time they heard no bell, and had no crystal ball. All they had was a loan pre-approval, an opportunity and a numbers-based strategy.

One couple purchased this cottage in Footscray for $700,000. Moderately renovated, situated alongside other period Victorians and presenting a healthy walk-score, the opportunity was evident and we moved quickly for our clients.

Market timing is not always obvious. A buyer can’t contrast their purchase against the changed market until a comparable property subsequently sells.

For two of our election-timing clients, this past week did in fact deliver them each a comparable sale to illustrate the impact of their timing.

Yesterday the neighbouring cottage sold for $843,000 at auction. It is a comparable property given the identical land size, orientation and era of the houses is an exact match. Yesterday’s sale property is arguably inferior internally and features a slightly less desirable floor plan.

This cottage in Seddon was purchased at election time for $945,000. Featuring a great floor plan and east-west orientated land measuring 250sqm, it was not surprising that the property was leased at the first inspection following settlement.

Last weekend a similar Victorian cottage on 10% less land diagonally opposite sold before auction for some $150,000 more.

The inner-ring suburbs have clearly bounced back and most would argue that competitive auctions indicate current market value.

The intriguing thing about 2019 is the sheer speed of our market’s turnaround. From auction clearance rates in the 40’s to our current market almost nudging 80%, the pace of the shift has been dramatic to say the least.

Market sentiment is a strong force indeed and it underpins supply and demand like no other force.