The two most powerful motivators. Sure, love comes into play as well but in today’s pragmatic society, it is mostly a fringe player. This is why news companies focus on material that taps into these emotions. We are drawn to items that spark an emotional response.
So, a new year and the predictions are being rolled out. And few topics could evoke an emotional response more than property. We either own it or want to. Either that, or we are looking to exit the market with one, final sale. Yes, there are about 20% of the population who have resolved to rent rather than own for the rest of our lives, but still, the idea of owning is still a knowing temptation in the back of our brain. If only this happened, or that… So, we are all susceptible to the dramatic predictions.
The last 12 months have provided a ripe environment for the fear side of the equation. Our main markets have well and truly fallen from their highs. Initially the press was a little slow to catch on but once the evidence became unarguable, the stories of doom started. ”Not only is the market down but it’s going to be much worse”. “Experts are predicting a 40% fall” etc, etc.
So, let’s take a breath and understand exactly what has occurred so far and what is likely to happen from here. Nobody can reliably advise any of us what will happen, but that’s a whole lot different to considering what is likely to occur.
The latest statistics tell us that Melbourne prices have slid 7% over 2018. But as has been previously addressed, Melbourne is not a single market. The middle ‘burbs in Melbourne’s east have seen a far greater impact; currently about 20% off their peak. The correction for these higher priced suburbs has been much more rapid. At the same time, more affordable suburbs have been doing quite a bit better due to the awakening of the First Home Buyers’ market. The gap in values has been narrowing.
Even though the pain has already been felt by the pricier properties, the breathless press has been scaring everybody with the pain yet to come. Because they report after the event, the media will not get more positive about the prospects for property until it is clear that the market has turned. Then, just like switching from cold to hot, the greed card will be back in play; “Buy before it goes up too much…” Of course, by then, we will be truly off the bottom of the cycle.
So, ignoring the call to be fearful or greedy, where to for 2019? It is highly probable that it will be a soft market, with modest falls to continue. But where the pain has already been taken and prices have already been cut significantly, it is distinctly possible there will not be better buying ahead by waiting. It is our firm position that where the right property for any buyer comes to their awareness, buy it; waiting for the bottom of the cycle will probably leave deep disappointment. As the great Warren Buffett advised, “Be fearful when others are greedy and greedy when others are fearful”.