Has the property market turned?

Thursday, 11 August 2022 — Albert Park

[5 min read]

Dear Reader,

It’s too early to call a change in the real estate market, but I’m going to stick my head out regardless because there seems to have been a small shift in sentiment. We’ll see how it tracks in the weeks ahead.

As per the cycle, we’re looking for falls in the median to stabilise before trending upwards once again as we move into 2023. At least outside of Sydney, and particularly in the smaller states and territories by population.

Over the last two weekends, there’s been an increase in energy on the ground.

More people are walking through open homes, attending auctions, and slightly higher clearance rates are being recorded (a leading indicator of changes in the median).

Also, for the first time this year, I witnessed two properties I was monitoring sell for high prices before auction.

One of those offers was so far beyond expectation that the owner didn’t even want the agent to wait to hear back from other interested parties. They wanted to sign the contract immediately in case the buyer changed their mind.

The property is in Melbourne’s outer suburbs.

The outer regions have held up better in this market.

They capture a ripple of buyers that are downsizing their budgets in expectation of further rate rises.

Still, it’s never a good strategy to place offers prior to auction in a falling market.

Even when it’s relevant, there’s a skill to the process to ensure any offer placed is no more than $1–2K above competing offers.

Otherwise, it’s bidding blind.

Throwing a dart at a dartboard.

In this case, the winning bidder paid $70K more than the next highest offer!

That must have stung a little when they found out.

Negotiation is a skill that takes practice to master.

When inexperienced buyers pitch themselves against seasoned real estate agents that know every trick in the book — they usually end up paying far more than they need.

Let’s face it, it really doesn’t matter how good you are at finding great properties. If you don’t have the knowledge to effectively negotiate them, you’ll come unstuck.

On that note, I took a deep dive into the subject of negotiation in my latest podcast with former police detective Steven van Aperen.

Steve has spoken at more than 600-plus conferences and seminars throughout the world, attended by thousands of delegates.

He delivers training programs and one-on-one training to CEOs, government departments, executives, fund managers, analysts, recruiters, sales teams, managers, investigators, the finance sector, media…and many others.

He’s known as ‘Australia’s human lie detector’, but his techniques cover much more than this.

In the interview, we discuss how to develop the ability and skill sets to read people like a book and how to detect deception.

We also discuss the importance of controlling your emotions prior to any negotiation, and how to use these skills to build resilience in everything you do.

You can tune in here!

Back to the market!

The above example wasn’t the only bullish result I witnessed this past week.

Take a look at this beauty:

The fully renovated period masterpiece is in the bayside suburb of Newport — 10km southwest of Melbourne’s CBD.

Marketed in the mid-$2 million price range, it sold under solid competition from multiple bidders, rocketing $100K above reserve.

Happy vendor = happy bank.

As mentioned earlier, two weeks doesn’t make for a trend. But I’ve been in the industry long enough to sense when there could be a change afoot.

If we just look at rates alone — current forecasts range from 2.85% from NAB to 3.35% from ANZ by November 2022.

Thereafter, CBA is forecasting interest rate cuts in late 2023.

Westpac and UBS suggest 2024.

If you have knowledge of the real estate cycle — that’s right on time for the final two years to the peak in 2026.

Historically, this is the most bullish phase of the real estate cycle. You can find out more here.

The forces driving inflation are coming from mostly imported goods (petrol, materials) along with weather-related events damaging supply.

Domestically, wage growth is sluggish and consumer confidence is at rock bottom.

Ratcheting up the cash rate has little justification against such trends. The RBA is likely to overshoot.

We’re not looking at a property crash — that’s for sure. There are still plenty of buyers active.

We have almost record-low unemployment along with rapidly increasing residential rents and record-low vacancy rates.

It’s prompted an uptick of interest from yield-seeking investors as finance commitments from this cohort continue to rise.

All in all — if you’re in the market to buy — conditions are still excellent for negotiation. But don’t leave it to long, it doesn’t take much of a switch in supply/demand to lose that competitive advantage.

Sincerely,

Catherine Cashmore,
Editor, The Daily Reckoning Australia

Dear Reader,

What will it say in the Wikipedia of 3000 AD? What will be the Judgment of History? We shudder to think…

Will it mention its geriatric politicians…that they were actively trying to stir up conflict with their neighbours, trading partners, and rivals?

What will it make of its greatest economists and leading financial brains…pretending that people can be made richer by falsifying interest rates…lending money below the level of consumer price inflation…and ‘printing money’ to cover budget deficits?

And what about the character of its citizens…who let themselves get ripped off…lied to…and held in contempt by their own elected leaders?

We can only guess…

Making America broke again

But first, we note that another lollapalooza of boondoggles is about to smash into the US economy. NBC News: ‘Senate passes sweeping climate, health and tax package, putting Democrats on cusp of historic win’:

‘Senate Democrats narrowly passed a sweeping climate and economic package on Sunday, putting President Joe Biden and his party on the cusp of a big legislative victory just three months before the crucial November midterm elections.

‘After a marathon overnight Senate session, the 51-50 vote was strictly along party lines, with all Republicans voting no and all Democrats voting yes. After Vice President Kamala Harris cast the tie-breaking vote, Democrats stood and applauded.’

What has been won? NBC explains:

‘The 755-page bill includes $430 billion to combat climate change and extend health care coverage, paid for with savings on prescription drugs and taxes on corporations. It puts hundreds of billions of dollars toward deficit reduction.’

(We presume Nancy Pelosi’s husband papered up well in advance!)

The legislation is cynical and scammy, both in purpose and application. Will it result in better weather? It seems very unlikely. Will it reduce deficits? Almost certainly not. Will it lower inflation? Not a chance.

As is common for boondoggles of this sort, the spending is front-loaded — so the insiders get their money right away. As for the deficit and inflation reduction, they’re barely loaded on the truck at all…and will never actually be delivered.

Congressional free passes

And the real-world results? It depends on the assumptions you make about the future. Here’s how the Tax Foundation scored it:

‘Last-week’s Democrat-sponsored Inflation Reduction Act (IRA), successor to the House-passed Build Back Better Act of late 2021, has been touted by President Biden to, among other things, help reduce the country’s crippling inflation. Using the Tax Foundation’s General Equilibrium Model, we estimate that the Inflation Reduction Act would reduce long-run economic output by about 0.1 percent and eliminate about 30,000 full-time equivalent jobs in the United States. It would also reduce average after-tax incomes for taxpayers across every income quintile over the long run.

‘By reducing long-run economic growth, this bill may actually worsen inflation by constraining the productive capacity of the economy.’

But ‘climate change’ is a free pass into the public’s bank accounts. It is promoted by the press as much as the ‘War on Terror’ or ‘the attempted coup d’etat of 6 January’ or the ‘brutal Russian invasion of the peace-loving Ukraine’. Practically every weather report blames ‘climate change’ — for excess heat…floods…drought…cold — everything. Logically, since the Earth is a closed system, for every horror caused by ‘climate change’ there should be a delight elsewhere — rain in a dry area…warmth where it’s normally cold…sunshine where clouds generally dominate. But no one mentions it.

Instead, for the first time in history, politicians can say that they’re not only complaining about the weather; now they are doing something about it.

Another great crusade, in other words. Free the Holy Land. Drang nach Osten. Whip Inflation Now! And not coincidentally, make the elite richer and more powerful.

Wikipedia 3000

But what will they think of it later? Not just a few years later…but 1,000 years into the future. Will they see it in the same light? Will they get the names, right? Who will be the heroes then? Herewith, a guess:

‘In the year 2022, which is to say, during the lifetime of the great economic philosopher Bill Bonner, the US’s decline was no longer a subject of speculation; it was undeniable. Aggressive meddling — brought forth from a mixture of conceit and incompetence — had brought the country to the threshold of ruin. Its citizens shot each other in US cities, while its army attempted to maintain the empire’s dominant position to the rest of the world. Most of its people got poorer, with wages rising at only half the rate of consumer prices, while it transferred billions of dollars to the richest families in the country.

‘The US economy — once the world’s most dynamic — had been fettered by boondoggles and weakened by central bank management. And its attempts to rule the entire world…by murdering foreign leaders, sanctions, and active warfare…had driven its rivals together to oppose it.

‘The next chapter was foreseeable by all but the American leadership itself.’

Tune in tomorrow for more from the Wikipedia of the Year 3000.

Regards,

Bill Bonner,
For The Daily Reckoning Australia