We have now had 3 Rate Cuts this year. The cash rate now sits at 3.6% for the first time since April 2023. Thats around 150per week improvement in cash flow for someone with a $1m mortgage compared to last year.
Sydney’s auction clearance rate hit 74% the other day. It is rising fast. As Shane Oliver wrote clearance rates and price behaviour track quite closely. The current scenario is normally correlated with 20% PLUS capital growth rates. We haven’t seen that yet, but if the graph holds true it’s just around the corner. In case you want to read more here is Shane’s post and the original graph
The news media typically lacks much nuance. They flip a switch, and bingo, the news has changed its tone from crash to boom. In recent weeks we have seen the Wollongong and South Coast journalists starting to stoke the fire too. Sentiment is just shifting, it already shifted.
Spring always brings the warmer weather and some local property buzz, but we actually thing this is different.
How do we measure buyers taking action before they have bought any real estate? Two options are measuring Online search interest (OSI) and Pre approvals, and then inspections volumes on weekends.
OSI is people “window shopping” on the portals. It has gone up in the last month in nearly all our tracked suburbs.
What if that’s just hope… what about people taking “real action”? That’s pre approvals. Getting a pre approval takes work. Thousands of buyers are waking up after two years of ignoring real estate. Coming off the sidelines and getting ready to buy again. CBA (as just one example) reporting 25% increases in conditional pre approvals recently. Every broker I talk to can confirm a big rise in pre approval activity across the lending market.
What does all this mean?
It means More buyers, more aggressive buying behaviour, no new stock. Property is all about supply and demand. What happens when demand goes up, but supply doesn’t?
It means rising demand and eventually rising prices.
Once a suburb sees a couple of strong sales, that is the social proof people need to step UP their buying behaviour and make stronger offers. In each suburb the same 10-20 homes on the market are swarmed by 300-400% more buyers, who compete to purchased. All of a sudden we are in a rising market. The cost of waiting in rising markets can be very high indeed. It is possible to loose hundreds of thousands of dollars in lost gains by deferring a buying decision at the wrong time.
Think I’m telling lies? Remember I mentioned inspections volumes above? I the last month I have had no less than 10 agents tell me their inspection numbers have gone from 1-3 parties at an open home earlier this year to 10-20 parties. That’s not 300% it’s 900% increase in inspections over the same houses that were listing and selling a few months ago. Multi bid situations and sales above the asking price have risen rapidly.
While this will surprise many people, it shouldn’t. If you watch the underlying indicators, study the right metrics and human behaviour long enough, you can see it coming each and every time.
This will be the third property cycle I have participated in going back 22 years. Each cycle is unique of course but the similarities in the sentiment shift are uncanny.
People move from nervous (about price falls) to depressed (the market will never recover), to confused (I don’t know what’s going on) to concerned about missing out (I should probably hurry up) to downright panicked (I am missing and properties are now too expensive, my life is ruined). The struggle is real for many decent folk who just don’t know how to make their next move, and with prices where they are the stakes have never been higher.
It’s not trivialising human emotion, it’s observing patterns over the long term.
If you pay attention to the underlying drivers of the market, and not just media hype, you will see what’s coming and you can plan accordingly. If you have a buying decision to make, by all means gather as much research as you need, but then perhaps be just a little more decisive.
Whatever you do – don’t panic buy. Negotiation and due diligence are always important to execute on the right house. If you want help, that’s what we are here for. Whatever you do keep your brain switched on and don’t forget to ask lots of questions – do thorough checks on anything you are going to buy.
But in this market sitting around waiting for further price falls could cause regret, so also be wary of the cost of doing nothing.
