Profit from a buyers' market
http://www.theaustralian.com.au/business/property/leave-the-herd-and-profit-from-a-buyers-market/story-e6frg9gx-1226031161640
Profit from a buyers’ market
THEY say death and taxes are the only two things we can be sure about. Here’s a third thing.
We can be certain most Australian property consumers will do the opposite of common sense.
The regularity with which buyers and sellers thumb their noses at logical behaviour is the reason we have market cycles.
Peaks and troughs happen because people flock to buy when sensible folk would stay away, then retreat in droves when the buying is good.
Sellers, meanwhile, sit tight when buyers are active (possibly awaiting some mystical signal for the optimum time to sell), then rush to sell after the excitement has died.
This is why so many Australians dream of real estate wealth but few achieve it.
Only 13 per cent of taxpayers own investment properties.
Nobody ever became rich by following the pack but property consumers have strong herd instincts.
Here’s some evidence.
There are at present more homes for sale across Australia than at any time in the past two years.
According to SQM Research, there are about 340,000 houses and units for sale. You have to go back to March 2009 to find the last time there were more.
At the same time RP Data tells us there are fewer buyers, with home sales levels dropping 20 per cent last year.
Housing finance for owner-occupiers is down 20.5 per cent compared with a year ago (although loans for investors are up slightly) and median price growth in most capital cities has evaporated.
What do the elements of this equation add up to? They equate to a buyers’ market.
No sensible property owner wants to sell into a buyers’ market, but hundreds of thousands are trying to do so right now.
That’s great for buyers. Smart investors get active when a buyers’ market comes along, but buyers have gone missing, and myriad wonderful buying opportunities are going begging.
The number of sale properties in Melbourne is the highest for any time in the past three years, and 50 per cent higher than the same time last year.
This is odd because a year ago the Melbourne market was hot.
So there were relatively few people wanting to sell when buyers were going ballistic.
But now, with the market flat, more and more people want to sell.
Based on the SQM Research data, the number of Melbourne properties for sale has grown steadily since the start of 2010.
In other words, the quieter the Melbourne market became, the more property owners wanted to sell.
Does that make sense to anyone?
In Canberra you have to go back to late 2008 to find the last time there were so many homes for sale there.
It’s the same in Adelaide.
Darwin has the same bizarre contradiction as Melbourne. There are more homes for sale now than at any time since July 2008.
The number of properties on the market has grown steadily since the start of 2010.
During this same period, the previously hot Darwin market has become cooler and cooler. Once again, most sellers stayed out of the market until the boom was over.
It’s like living in a parallel universe, where everything is the opposite of what you’d expect.
US billionaire Warren Buffett, one of the world’s most successful investors, says we should “profit from folly, rather than participate in it”.
Australian investors willing to detach from the herd and act independently can profit from exploiting the buyers’ market.
Terry Ryder is the founder of hotspotting.com.au
(via Instapaper)
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