Blog & Vlog

How to Tell When the Market Will Change

It sounds impossible doesn’t it.  Everyone always says, “there’s no crystal ball, but when will the market change?”  And they’re right.  There is no crystal ball – but there are signs.

Take the 2009 NSW residential property balloon as an example.  When the inflated first home buyer grant was reduced back to normal levels, buyers were no longer competing for entry level homes.  This had a flow on effect throughout the market as sellers of entry level homes could no longer upgrade.

At the same time the full effects of the Global Financial Crisis were yet to hit Australian shores.

In fact, the “Build a Better Education” scheme and increased first home buyer scheme were deemed by the Government at the time to be our saviours during economic turmoil.  They believed the stimulus created jobs and construction activity, but forgot to have a plan in place for when it all came to an END.

And end it did.  All pretty much at the same time.

Now, crystal balls aside, the writing was on the wall.  Supply had increased and demand had decreased – sharply.  Investors were nervous about foreign debt, shaky job figures and a Reserve Bank that seemed content to wait it out.

But what were the market signs?

  • longer days on market
  • increased competition with supply

Within months, listing prices began to drop.  From there, the number of sales dropped.  And finally, selling prices dropped.  In some cases up to 10% from the purchase price to the sale price.

And here we are with some subtle signs of recovery in – Wagga Wagga at least.

  • Population growth for the last 12 months is higher than forecast
  • $640mil in private and public development and infrastructure is being invested into the local economy
  • Interest rates are still low
  • Employment is steady

and here is the big one;

  • Compared to June/July 2011 when there were 1,180 properties advertised in the local paper, 2012 June/July figures show 885 properties advertised (supply is lower)

Now whilst demand has not increased exponentially, less properties on the market means less to choose from which will increase competition.  This coupled with some local economic confidence will lead to a slight increase in buyer demand as will the increased population growth.

So there is no crystal ball, and absolute predictions are impossible…but you tell me – “is the writing on the wall”?