June 2011 Property Rant.
Well, well, isn’t it getting interesting out there in real estate land.
Predictions of massive falls in prices, even collapses in the market, with people likely to end up with large negative equity in their properties.
Significant arrears in mortgage payments, and foreclosures on an ever-increasing scale.
You’ve heard it all.
But what’s really changed over the past couple of months?
The media would have us to believe that property values are falling everywhere.
And, of course, the more colourful property gurus and economists are now ecstatic that everything they have been predicting for the past few years is finally happening.
With a predictable smug look on their faces.
They were right all the along, weren’t they?
We told you so, didn’t we?
Well, this Property Rant seeks to distill and instill some reality into this somewhat murky environment.
As usual, the reality is somewhat distant from these more garish statements and predictions.
But they do have an impact on perceptions.
And, as we know, perceptions do have this nasty habit of becoming reality.
Quite bothersome, really.
The facts are indeed self-evident.
Residential property prices are slipping across much, but not all, of Australia.
Some regions, and some sectors within those regions are slipping quite badly.
But is this Armageddon, as we are being told?
Are we looking down the barrel of the worst catastrophe to hit the Australian property market in a century?
Well, some would have us to believe so.
And there are some unknowns out there in the economy that don’t really help.
- There is always the potential for interest rates to continue to spike. Upwards.
Not a good situation if you have a mortgage and are struggling with it already. - There remains the potential for unemployment to rear its ugly head again.
This would not be a good thing for our economy, or our housing prices.
And, yes, we do depend heavily on one or two of our major international trading partners to shield us from this.
But as with all things, whilst there are real risks out there, just what is going to happen?
Depends a lot on where we are positioned in the market. As usual.
For people who own their property with little or no debt, and don’t need to sell, this is all a bit of a yawn.
Like, who cares? Might be a good time to look at buying another property.
This post, like any self-respecting Property Rant, seeks to add some clarity to this matter.
For those people who have a significant mortgage, don’t want to sell and finding it tough to keep their nose above water, this is a time to be careful.
Not a time to panic and do rash things, but a time to be level-headed, and keep a really close eye on your budgets and costs.
For people who, for whatever reason need to sell, these times may not be ideal.
I say may not be ideal, because some areas are still not doing too badly, and in some areas prices are still firming a little.
But generally, sellers need to be aware that the opportunistic price expectations of the past couple of years are not going to happen.
Choose your agent carefully, spend some time on your marketing plan, and be creative. Innovation wins in these times.
For investors, these times are like those that Charles Dickens referred to in A Tale of Two Cities: These are the best of times and the worst of times depending on how you are positioned.
For investors wanting to sell, you will need to be innovative, creative (not dishonest, just creative) in how you go about pricing & marketing your property.
For investors wanting to buy, really your strategy should not be too different to what it has been over the past few years: always look for value, location and (I believe) one of the keys that should never be overlooked options. What choices do I have with any property that catches my eye. The what if factor.
For renters, the year ahead is likely to see your rents rising a little.
So, what’s going to happen in the next year or so?
Some unrealistic property values have already been wound back.
There will be some more of this.
The market will not shift evenly across the nation.
Houses vs units will be impacted differently.
Some cities, and certainly suburbs within those cities will be impacted differently.
Generally, values will ease another few percent, but not crash.
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