After two highly successful stays with the family at a minimum-security 4 star compound in Fiji I finally convinced my wife that the next holiday with the kids had to be in Queenstown. I felt like a change, sure the easy travel, warm tropical water and kids club etc had its appeal but I wanted to spice up the school holidays in a colder and less child-friendly scenario.
What could go wrong? A two hour delay in Sydney, two aborted landings in Queenstown followed by another two hours on the tarmac in Christchurch while Qantas paper-scissor-rocked about what to do next, resulting in a flight time equivalent of Sydney to Heathrow (to get to Christchurch).
Why am I telling you this? A few reasons. What later ensued was a fun stay in a ghastly motel catered by Dominos and cheap wine (an unexpectedly good outcome). Things didn’t go to plan but we survived, thrived and best of all were together.
Perhaps the other reason I told you that story is that the current narrative on the property market is hard to approach and I can be a bit of an avoider. In fact, the reason you haven’t had a newsletter in recent weeks is I’ve had my own failed attempts at literary landings trying to pen a balance of optimism and realism.
Fun fact, on the weekend just prior to the school holidays commencing there were 30 auctions scheduled in Mosman…22 of them were cancelled.
That’s how it was then, fast forward to now and we have guaranteed interest rate hikes, inflation has hit 4.7% and Operation Epic Fury is feeling much less epic and everyone who needs to buy things is furious.
Enter Jim Chalmers…on Tuesday 12th May the budget is dropping and if you have been a long-time fan of investing in real estate you just might want to turn off your devices on that day.
That’s right folks, it feels like we are in the proverbial eye of the storm and if agents were prepared to tell you the truth (a revolutionary concept I know) this market is more than a little bumpy.
So how bad is it? The clouds are breaking my friends…you guessed it…I am going to bring this back, the Dominos and cask wine has just been delivered and it’s five o’clock somewhere.
In general terms the market has corrected by about 10%, there are now enough examples to prove that. Do I think it could fall another 5%-10% in the coming months? Possibly, but here is the rub…many would-be sellers are going to shut up shop and supply will tighten which has historically stopped the bleeding in times of woe.
Another fascinating development (pun intended) is the comedic timing of the sweeping State Government reforms to zoning in an attempt to solve the ‘housing crisis’. Bravo, sky-high construction costs, rising interest rates and what seems to be almost no affordable housing actually being planned begs the question…who is going to buy this stuff? And developers are now asking themselves this same question…hence why many of these projects are starting to fall over.
The answer to ‘who is buying this stuff’ is wealthy investors and downsizers BUT if the government drops policy to disincentivise property investment and downsizers can’t afford to downsize…what happens then?
If COVID taught us anything apart from the Bitcoinesque value of toilet paper it’s that what we thought might happen didn’t and real estate in times of turmoil has had a tendency to hold up surprisingly well.
So fasten your seatbelts folks, this is your captain speaking…these next few weeks promise to be interesting.
Until next week,
David Murphy