Monday 21 May 2012
Separating truth from spruik.
What a difference a year makes. At least if you've ignored all the hype.
It was about this time in 2011 when the word went out we were in the midst of a rare phenomenon — a buyer's market.
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Clearance rates were on the slide. Supply was way up. Most importantly, prices were down in many parts of the country.
This was the time to buy, it was said. Don't wait — these favourable conditions wouldn't last long — because the market had hit bottom.
There was plenty of scepticism, to say the least. The claims smacked of self-interested optimism at best; an increasingly desperate spruiking at worst.
Back then, in the blog post "The Myth of the Buyers Market", I had asked the question: Is it a buyer's market or just marketing for buyers?
Well, one year on, judge for yourself.
This is where the market stood in April 2011, according to RP Data-Rismark's index of dwelling values (houses & units):
Year to April 2011
These falls had barely begun to take the edge off the massive price growth experienced in the previous two years. While there were undoubtedly some good individual buys to be had, a buyer's market it was clearly not ... yet.
Fast-forward 12 months and the picture is a hell of a lot different. Rather than bottoming out in mid-2011, across-the-board declines followed throughout the capital cities. The slide proved to be pretty steep in Hobart, Melbourne and Brisbane.
Year to April 2012
Plenty of pundits and industry people will disregard or dismiss this whole exercise by attacking the use of metropolitan median figures.
They are too imprecise; they don't tell the story about what's happening in pockets of the market or particular price bands.
Fair enough, up to a point. Nobody buys a house based on the Melbourne metro median, but nor do they base a purchase decision on the suburb or council median either. Individual purchases are exactly that.
Nevertheless, these figures do point to a trend that certainly runs counter to the buyer's market mantra we heard last year.
And for the average punter, someone who doesn't need to buy a home but can move into the market at a time and place of their own choosing, the figures are quite stark.
In many parts of the country, the decision to wait just one year could have theoretically saved them a bundle:
Change in $ for a $500,000 home over year to April 2012
And this only accounts for price movements in the last year, not from the market's peak.
(Tax reform group Prosper Australia has done some calculations on what those prepared to wait could have theoretically saved that also includes mortage repayments, etc.)
So where does that leave us? Have we reached the elusive promise land of the buyer's market now?
A couple of weeks ago I was inclined to believe we had, at least in some parts of the country.
There were some tentative signals: the sharp cut in the interest rate; moderate improvements in the auction clearance rate; declining stock levels; rising employment.
I said as much in my Melbourne Market Wrap column less than a week ago. Now, I'm not so sure.
The global economic and financial system is, once again, casting an ominous pall over Australia.
Personally, I'm glad I'm not in a position to have to make such a momentous financial decision right now.
Still, considering how steeply house prices have fallen in my patch, I'd definitely be happy that I waited until this year if I was heading into the market...
(Disclaimer: I am an owner-occupier of a single-dwelling home in Melbourne's inner suburbs. I do not own any investment properties. I am not in the market to sell or buy.)