The true impact of the last week's developments within the housing market could be a matter of perception.
We have had a number of pieces of news of late that are likely to strengthen property markets across the country.
The thing is, prior to the potential trifecta of market stimulus – that is, no changes to housing taxation polices, APRA loosening lending criteria for banks, and the likelihood of an interest cut or two – part of the reason for our problematic markets was perception.
What I mean is that is buyers were spooked by economic factors that were unlikely to ever become a drag on the market anyway.
Let me explain further.
Market feels
As we all know, markets need consumer confidence to perform well, and that was sorely missing for a few years, which dragged prices down.
However, for most of that time, it was really just a confidence issue, rather than something real – like high unemployment – directly impacting the market.
What we did start to see, though, was a situation beginning to directly negatively affect market activity over the past year in particular.
I’m talking about the lending restrictions which meant that many prospective purchasers, who are usually considered attractive by lenders, simply couldn’t secure finance to buy anything at all.
Thankfully, it appears now that state of affairs may be short-lived.
The point I’m trying to make is that, up until that point, many buyers were nervous when they had no right to be.
Many probably couldn’t encapsulate why they were fearful, but no doubt it had to do with property price falls in Sydney – even if they lived in Adelaide.
Of course, experts understood that Sydney’s market, as well Melbourne’s, too, was simply moving into the next phase of a normal market cycle.
On the other hand, many punters thought the property sky was falling.
A case in point are two auctions that took place on the morning on the election where bidders were very price sensitive because “property prices are going to fall when Labor wins the election”.
That was a perception clear and simple because we all know what happened on Saturday night, plus it was not a certainty that prices would fall – and now, hopefully, we will never know.
Ignoring market noise
Over recent years, mind you, savvy buyers and investors have been making hay because they knew the sun was shining.
The majority of buyers, however, seemed intent on hunkering down for a rainy day that never eventuated.
As Warren Buffett said, be fearful when others are greedy, and be greedy when others are fearful.
Of course, it takes confidence to stake your claim when everyone else is stewing on the side lines waiting for a sign that the market is strengthening.
The problem with that “strategy” is that everyone learns of the market upturn at the same time, which means that the opportunities to secure the best properties for good prices have mostly disappeared.
The most successful buyers and investors are the ones who know the difference between market perception and reality.
Plus, they’re not afraid to make their move while the masses are shaking in their boots about something that they can’t quite put their finger on.
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