Australian Property News

How to tell if it’s the bottom of the property market

Posted on Monday, June 20 2011 at 3:28 PM

The market has cooled, properties are up for sale for longer periods of time and there are fewer buyers out there. So we should be at the bottom of the market, right?

The problem for many investors is that they don't know if prices will continue to fall this year. Is it better to wait for more reductions, or get in now while the market is slow?

Catherine Cashmore of JPP Buyer Advocates says the main problem with trying to pick the bottom of the market is that no one really knows just when prices will start to rise again.

"It's very difficult to judge when the bottom of the market is, but what you can do is look at the general mood out there and stocks of supply," Cashmore says. "There's a lot of stock but there's not a lot of quality stock. It's the quality stock that’s diminishing."

Cashmore says loan approvals are still quite high and lots of homebuyers are getting pre-approvals right now for homes under $700,000. In other words, property is still popular.

"It's the Australian dream, people want a property and they don't want to rent. Quality stock is actually dropping so when you do find a good listing it will still have competition."

Jan Somers of Somersoft believes investors should never try to pick the bottom or the top of the market.

"If you wait and wait you'll never get it right and the trick is to get in and hold on for the long-term," Somers says.

"You can look back and say 'if I held off a year it might have been better', but in the long-term it doesn't really matter."

To give an example, she explains that she and her husband bought their first home in 1972 for $12,500.

"Whether we paid $10,000 or $14,000 it doesn't really matter," she says.

"The key is to get in when you can afford to. You don't wait. There are people who use it as an excuse to never do anything. So when you can afford it, that's the right time."

Patrick Bright of EPS Property Search agrees with Somers, adding it's impossible to pick the bottom of the market.

"You won't know for at least a year or two," he says.

"You need three or four quarters of past stats to look back and say 'yes, that definitely was the bottom of the market'."

He says investors should always buy something with a 10-year outlook in mind.

"If the market shuts down for the next 10 years, would you be happy to own it? If the answer isn't yes, you shouldn't be buying it. Trying to time the market is more down to good luck than anything else."

He adds another way to make sure your property won't be affected by the current downturn is to look for something low-risk.

"Buy in a good quality location where there are lots of jobs and where there's plenty of demand and little supply," Bright says.