Yep, its a big drop – how to deal with it!

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SOM

Welcome to the early beginnings of the Melbourne Spring buying and selling market.

Auctions start in a few weeks time.

This weekend’s James Market Insight, is the first in a series of three, about how you can best manage yourself in what’s to come.

Why manage yourself?

One: If you cannot manage yourself, then you dramatically increase your chances of a poor outcome.

Two: There are still significant opportunities for a really good outcome/result – if you haven’t gone to water.

Three: In this market, there are actually many things you can still control. Managing what you can control well, reduces worry and stress.

So where are we at, right now in Spring 2018?

The overall market has been drifting down since 2017 and then it fell off the cliff in May.

Market Price Movements

In our last market news before the Winter break, we put a number on the fall at 10% –  most of that crystallizing in the month of May.

It’s as if we had all be thinking – “Yep, things are not as good as they were” but we were still hoping and then in May of 2018, we all decided en-masse to acknowledge that sentiment had fallen and acted accordingly.

In May/June

  • There were considerably fewer buyers who were prepared to act.
  • Of the buyers who were prepared to put their hand up, many refused to pay prices they felt uncomfortable with.
  • Those who needed to or wanted to sell, accepted the changed buyer outlook.

When we say fell off the cliff, we literally mean that.

May 2018 was one of the swiftest and most severe drops in overall market perceptions ever.

It was as swift as the GFC, whether it will be as heavy or longlasting, only time will tell.

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OMG Mal you’re wrong – that is too big a statement!

Really?

  • is below 1 bidder per auction (same as GFC)
  •  are at any icy cold 50% (same as the GFC).
  • Discretionary sellers have gone into hibernation, as evidenced by the lack of public stock (same as the GFC).

But hey,

  • If you bought well in 2014 and experienced the big 10% drop in May 2018, you could still be 40% up on your 2014 purchase price.
  • If you bought in the last 18 months then yes, your home is probably worth less, but why are you looking to sell now? Good home buying is 5-10-15 years in duration and many times a quick resale, even in the hottest of hot markets, see losses after stamp duty, renovation and other costs are factored in.
  • In a buy/sell situation, it’s not all about the price you buy at or the price you sell at, in isolation – although of course, both are important. A good deal can still be had if the overall exchange price is looked at AND especially if you have traded up, into a better home. In fact, the 2018 market is a lot better than the 2015/16/17 market, if you are a doctor or a professional with a good PAYG tax return and income trail; as the banks (god bless them) still have to lend to somebody after this purge, lest they cease to operate AND prices are lower on many homes at the .

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Not every home has dropped. It has not been consistent. It almost never is on the rise or the fall.

The A Graders with great PPP’s have dropped such a negligible amount, that it’s hard to quantify and maybe the best way to state the case for A graders is, their upwards trajectory has eased.

B Graders or fringe PPP’s – meaning a little further away from transport, a little smaller in the next suburb out and/or with a less than perfect building on it – have dropped around 10%

C Graders – the fall has been traumatic and I’m sorry it’s more than 10%

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So 10% is a blanket statement, not a fact of life for every individual situation.

If we acknowledge the drop, we can actually begin to control the things we can control and stop spending all our nervous energy in denial of changed circumstances.

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What to do?

1. It’s good questioning, not poor answers

1. Our main suggestion is NOW is NOT about giving answers when an agent demands them of you (buyer or seller) – it’s all about pausing and asking the right question back of the agent.  Now, right now is about regular ……………….pausing and thinking a little laterally at times and taking your time to respond (if indeed you do).

Here is a 100% true James story just completed – one of two buy/sells we completed this week

Our client bought two months ago at a $250,000 discount on what they would have paid when asked (but instead of an answer, they asked another question) and then last month sold for a price $250,000 more than they would have answered yes on (but they asked another question instead). All this on a $2,500,000 buy and sell – that’s 20%.

Or that’s $500,000 because of better questions and not giving unnecessary answers, even in a falling market.

Granted not every job has turned out like this in the buy and sells we have managed this year, but this so easily could have turned out differently if the questions and answers were not spot on.

2. Whilst the market has changed, the fundamentals have not.

Now is about change……………….yes………….but it’s also about no change. We are always amazed that in times of uncertainty, how many people “choose” to move away from the fundamentals.

Our favourite PPP’s still stack up

  • Position – close to train with access to a school
  • – on land with a good bones floor plan
  • Price – market price for area property type.

Our favourite three strategy mantras

  • Ask good questions ahead of giving poor answers (research)
  • Happy wife, happy life or happy spouse, happy house (clear goals)
  • Be happy now, but buy with 5 even 10 years in mind. FFF. Five year Future Flexibility. That way you avoid the 10% transaction costs with each move. The first move you lose your deposit, the second move you lose your renovation and the third move you lose your school fees, superannuation bonus and free travel forever.

The above are fundamentals, but these below are not – these are habits (poor ones)

  • Spending a lot of advertising money on a high chance of failing auction campaign
  • All agents are the same – anybody can sell my house
  • Asking prices 20% over the odds. Lowballing on good homes 20% below the odds

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3. Get a grip

Will prices continue to drop? They might, BUT they also might rise?

Huh?

  • We have had a big drop.
  • We may be at a bottom – or we may be on a tread in a downwards staircase. Nobody knows for sure. Prices may rise or fall from here.
  • How you manage yourself will be the biggest reason you are successful or unsuccessful in this market.

Many of us want certainty. But nothing in life is certain – at times we just think it is.

And now more of us think life is uncertain because prices have dropped. Is it flight or fight – are we going to get hurt – I need to be on guard to protect myself, my family.

Can we ask you a question?

Was life certain in 2015/16 when prices were rising?

We think no, but we survived.

Many of us could have bought in the GFC, but we didn’t AND by the time we woke up to the rapid price increases of 2009/2010 the ship had sailed, the horse had bolted and the train had left the station.

The case for further price falls.

More/longer bank tightening. ()

More trimming of the effects of negative gearing – by maintaining/reducing interest-only loans. (demand)

Headlines today that immigration numbers are being looked at. Significant reductions would reduce our population growth trajectory. (demand)

Infrastructure to open up more of regional Australia – rather than a capital city-centric attitude. ()

Community attitudes are changing to addressing rather than ignoring, the affordability issues faced by our young. (supply)

The case for price rises.

In the shorter term, fewer sellers put there home on the market, in the first part of a down market. (supply)

In the longer term, the skilled population is still increasing (demand) AND not seeking good housing isn’t optional forever, unlike shares or jewellery (Ok for some no jewellery isn’t an option either, but you get our drift)

Barriers of entry – new private schools, new train lines are so damned difficult to build and for this reason, there will still be a strong demand for homes for(ever)? where that infrastructure already exists. (supply)

Price is a function of demand and supply.

  • Demand primarily from population and money supply.
  • Supply primarily from land for housing near infrastructure (rail, jobs, school).
  • The thing that has changed is access to money – people still need housing, no more land is being made and population is increasing through migration.

So what has changed in the universe?

In many ways, a lot has changed politically in the last 12 months – and much of it appears (to us at least) to be a good thing. Well done pollies and bankers, you have done some good things – keep it going please!

On the other hand not much – we still have more people and less land, we still don’t have certainty and there are still people who will make good decisions and people who will make bad ones for themselves.

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Next week’s article:

1. Would you bet $30,000 on a longshot at Flemington this weekend? Currently many sellers are doing this with their home, in fact, they are putting a lot more at risk than just wasting $30,000 on an advertising spend.

2. And for those that have woken up – check out our off-market list (it’s growing rapidly) – but there are still traps for new players in off-markets.

3. Why drop your sell offer if you have no buyers or why increase your buy offer if you have no competitors AS OPPOSED TO If you were 10% below the market as a buyer last year and now you have dropped your budget 10%, then you are still 10% below the market and won’t buy. If you put your home on the market earlier this year and you were 10% above the market, then dropping 10% in August means – you still won’t sell, as you are still 10% above the market.

Exciting times hey – we love this market, it gets you out of bed in the morning with a spring in your step – because you can make a real difference.

How we work

OffMarket

Many sellers are not auctioning, they are off-marketing.

JohnandGina

Gina’s Off-Markets this week with John Morrisby – off Wattletree Road Malvern – part of her list – and then with Ian Jackson off Park Street

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IandandGina

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Statement by James Buyer Advocates

Whilst we have supported the idea of pauses in migration until we get our housing in order for young people already here – we are not suggesting our migration program or our refugee intake is a bad thing.

We say this now because the manner and the targetting of African Australians by some of the media and some of our leadership feels unbalanced, unfair and unhelpful and we do not support it. We support the rule of law for transgressors, free speech for all (within reason) AND we also support the notion of an Aussie fair go for each individual.

Please, we are advocating a continuing positive discussion about housing for our young people, be they Aussies of Anglo, African, Aboriginal, Asian or ……other backgrounds.

On this Wednesday, August 1st – Book now

Big response only a few tickets left

Click on Ad below to go to bookings

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With thanks to Creative Visuals, Launch Housing, Marshall White, GDG, The Weekly Review and Seater Design

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