There are two investment sayings which have weathered the test of time, one being that whatever goes up, will come down. In hindsight, one might well be talking about nature and physics rather than cold, hard economic reality. The other saying is that when your cab driver (or Uber driver these days) starts giving you investment advice about a particular product, it is time to sell that product. Not that taxi or Uber drivers are not savvy people; it’s just their wisdom may have been acquired by talking to many people, rather than technical research and analysis.
Property prices in most capital cities of Australia seem to be on the way down and there seems to be little in the way of holding back this slide. Buyers who twelve months ago were rushing in to buy due to a Fear Of Missing Out (FOMO) now seem to be worried about the Fear Of Over Paying (FOOP). Investment decisions are normally propelled by fear or greed and at this time, vendors are still motivated by high valuations of the past and their greed to get that value, while buyers are fearful of paying too much and are holding off their decisions. It seems that the buyers are winning.
In the latest figures, Sydney’s auction clearance rate fell to about 50 per cent, while in Melbourne it was about 62 per cent, both well below recent highs. Interestingly, clearance rates for Adelaide and Brisbane were higher than a year ago. The property market which has seen positive growth for over seven years, is now facing some headwinds.
For the Indian Australian who has migrated here in the last few years and rushed into acquiring property, they may well have to get used to reports of falling prices over the next few months as banks tighten their controls, overseas investors dry up and generally the steam goes out of the market. If their purchase is for residential purposes, they need to think long term and go with the flow. For those who have borrowed to invest, they may find their banks looking more closely at their loans and they need to make sure that their cash flow is secure, and that they have built up some equity in their property so that any downward pressure on valuation does not leave them short.
If you are a migrant looking to buy, then hold your nerve. Economic indicators are pointing to an extended time of downward pressure on property valuations. Currently properties are not selling quickly, sellers have started to discount, and real estate agents are working harder to achieve a sale. It is a matter of time before better opportunities to buy start emerging. Of course, as Indian Australians, we do love a bargain. When you feel that the time is right to buy but need verification, do take a few Uber rides. If your friendly driver says it is not the best time to be buying, you know what to do.