Have you just missed the bottom of the market?

BY CHRIS GRAY, CEO, YOUR EMPIRE

Blink and you’ve missed it. Yes, that’s how quickly the market can turn, yet so many buyers and sellers think they can pick the bottom of the property market and delay making a decision. They think they’re being clever; I think they’re making excuses and will live to regret it.

The Corelogic results for February 2023 have just been released and Sydney recorded an increase in property prices, not a fall. Sure, it was only 0.3%, but it’s a sign and yet another example of how quickly the market can turn. No one was expecting it, no one was predicting it and then it just happened.

A similar thing happened in 2020 – 2021 where prices were falling in Covid. Everyone was saying “Why buy now when it’s going to be cheaper tomorrow? I’m going to wait”. And then the market took off, rising 20-30% in around 12 months. Within 6 months of the first rise, many people then said “I’ve missed the boat, I’m too late, property prices are rising too quickly, it’s going to crash. Damn I’ve missed it!”

Whilst I’m not sure if it is the bottom, what I do think is: Not all the markets rose, it was just Sydney. However, the rate of fall in most capital cities did reduce, which indicates that things are slowing, and the ‘bottom’ is getting closer.

There’s still talk of further interest rate rises and that will continue to affect market sentiment (the biggest indicator of demand) as well as borrowers serviceability limits.

However, Westpac talked about 7 rate cuts in 2024 - 2025 (read more) which is an about turn in the conversation from the banks. If more stories like this appear in the press, that is bound to affect confidence in the market that if you can afford to buy now, chances are that your mortgage will be cheaper in the future.

Another big consideration is the talk of the mortgage stress that might happen with a fixed rate cliff coming later this year and that many property owners won’t be able to afford their mortgages doubling or tripling and will be forced to sell. I’m not so sure that’s going to happen as they were still assessed by their lenders at 3% above current rates when they took the mortgage out. Many people aren’t on fixed rates, and many have already changed from interest only to principal and interest repayments. They might be under more mortgage stress than they were before, but they haven’t been forced to sell.

So do I think this is the bottom of the market? Not necessarily and I don’t really care to be honest. Why don’t I care? Well because I’m investing for the long term, and I’ve never tried to pick the market. I continue to hold 100% of my wealth in property as I believe it’s going to be more expensive in 10 years’ time and I’m prepared to cash flow any negative gearing until that happens.

Yes, my costs of holding that property have risen rapidly recently but it’s not going to be up there forever. We’ve had it good for such a long time now as rates have been dropping for almost 15 years since the Global Financial Crisis in 2008 / 2009. We all knew it was going to rise and now it has.

I constantly remind myself of the best tip I’ve heard about property and that’s the law of supply and demand. The reason prices haven’t dropped massively is because in the main areas that people want to live, there is a large lack of supply. If there’s no property for sale and people still want to buy it, prices rise in the good times and stay pretty stable in the tough times.

So, whether this is the bottom or not, take it as advanced warning that things change very quickly and if you get in before the masses, you’ll probably end up with a better property in a better location for a cheaper price.

About The Contributor

Chris Gray is CEO of Your Empire, a buyers’ agency that buys homes and investments for time-poor professionals – searching, negotiating, renovating and managing property on their behalf. Chris has spent over 10 years as the host of ‘Your Property Empire’ on Sky News Business channel, where he’s interviewed various heads of property research companies and major industry figures. Chris is a qualified accountant, buyers’ agent and mortgage broker. For more information, visit www.yourempire.com.au and follow Chris on Facebook: @ChrisGraySydney