About once a week I get asked, “Nhan, what do you think is going to happen to the market?”
Of which my standard reply is : “It depends…”
In truth having a crystal would be brilliant…
All I can do however is look at indicators, which gives me HISTORICAL data, and some PROJECTED DATA…
I read recently (in a book written by one of the founders of Paypal) that
“predictions say more about the predictor than anything else”
That was a huge insight for me, I’d never looked at it this way before…
My predictions in the past really showed how conservative I am, and risk averse too, especially when markets are buoyant and everyone is getting into “property development” when they can smell a buck.
But before I show you some cool stuff, check out these 2 links about the Market’s sentiment on the Sydney Market:
Article 1: Click Here to Read
Article 2: Click Here To Read
Here are a couple of indicators to check out:
1. Auction Clearance Rates
This is a really good “on the spot” check to see what people are doing, via their spending.
Part of this is knowing what is typical for the state.
Vic and NSW are happy to buy at auction, whereas Queenslanders prefer private treaty.
Also VIC and NSW often have over 1000 auctions each weekend whereas Qld has alot less.
Checkout the clearance rates here: https://www.realestate.com.au/auction-results/
2. Development Approvals / Masterplans
This is a more of predictor of supply in the short/medium/long term and access to this information will be different from state to state.
Units/apartments are generally oversupplied in the CBD first, whereas land oversupply happens much further afield.
Here is a cool link : https://brisbanedevelopment.com/
3. Postcode Restrictions (Financier)
You may have to speak to your finance broker/ banker regarding getting this information, but I believe it is critical to get it.
Banks know exactly how much exposure they have to certain postcodes/suburbs, and talk about being conservative, these guys win hands down.
They know what is being lent and when to restrict lending.
Note “restrict”, not “stop” lending.
They will continue to lend, just at lower LVR ratios (more deposit required) to reduce their risk and increase the investor’s risk.
At the moment, CBD lending as well as certain mining towns require more deposit due to various oversupply situations.
In summary, do your homework and remember:
“You Make Your Money When You Buy, Not When You Sell”
Because when you sell…
The market may have changed for the worse and you will be left holding the baby!!!
Til next time,
Nhan
