Great Ocean Report April 2016

It’s hard to believe that we are into April already but the upside is that we are getting a good handle on how 2016 is likely to play out, and so far it is looking quite favourable. In fact, mainstream media is struggling to hold our attention on the economic front, so they have to ramp up the bad news headlines in other areas just to hold our attention (earthquakes, ISIS and Donald Trump are dominating our headlines yet none are actually happening here). Bad news headlines keep our attention, just like we slow down in traffic to view a car crash. You won’t see a headline anytime soon screaming “stable property market” or “business confidence highest since 2008”, it just doesn’t sell papers or generate online views.

But in fact, in the main, that is what we are seeing. The stability in the property market is coming from several factors. The obvious factors are continued affordable finance and job security. The unemployment rate for March came in surprisingly on the low side, at 5.7% when a mild rise was expected. Interest rates now look unlikely to be going lower in this cycle given these unemployment and other recent positive figures. The NAB Monthly Business Survey shows business confidence is running at its highest level since 2008 and even the share market is showing positive signs after its volatile run earlier in the year. All healthy signposts which give those who are considering a property transaction more confidence to do so.

The other factor providing stability to the market is less obvious. Australian’s are well known by demographers as having a strong element of FOMO in their make up. That is ‘Fear of Missing Out’. This most commonly happens in a rising market and is usually indicated by very high auction clearance rates (78%+) and the sense of urgency is palpable in the market. Often an economic event, an interest rate rise or a change in legislation will intervene to abruptly stop a rising market (as we saw in both 2003 and 2008) however, with this cycle it has been a much gentler softening. Not enough to halt a healthy market but just enough to make FOMO element subside in the market. The main trigger for this seems to be the tightening of money supply coming out of China by the Chinese government last November. Although this does not directly affect the local coastal property markets, as we have seen very little Chinese money, it affects the metropolitan markets which produces the main buying demographic for our coastal markets.

With the FOMO subsiding in the market, we are seeing buyers being a bit more patient and waiting for the right property that suits them rather than buying just to get in. When the right property surfaces they will engage and this is resulting in increased competition for appealing properties. Many buyers are being frustrated by the lack of options available and are in regular contact with us, as we are with them about what might be coming onto the market. We are seeing an above average amount of off market transactions occurring at present as we are introducing buyers to properties that have not yet been listed publicly.

We are also witnessing strong demand for premium lifestyle properties. The catch is that those buyers are very choosey. Given that it is often not going to be their prime residence, they will wait if the property is not right. However, if the right one surfaces they will pounce and we have seen many examples of this over the past 6 months. We are currently spending a lot of time keeping these buyers updated on the latest offerings that may interest them and also working with our vendors to get their properties well prepared with our pre-sale team to avoid being overlooked when they go to market. The reason the Baby Boomer buyers in particular are waiting for the right property is that these properties will figure prominently in their retirement lifestyle plan. They will spend more time there than they would their holiday house, so they are making sure it’s the right one before writing the deposit cheque.

The seasonality of the lifestyle markets will be much less of a factor this year. Although the foot traffic drops off somewhat in the cooler months, the online traffic is immense at present. One recent campaign saw over 15,000 views in 5 weeks which was a record for our agency for that time period. This generally tells us that an above average number of buyers are either active or at a minimum in contemplation mode. By that we mean that they are travelling well enough financially to consider a possible property transaction. In tougher economic times they simply do not even bother looking and are more focused on how they can save money or reduce debt as we saw in 2011 and 2012 when the European debt crisis was dominating the headlines.

Overall, we are expecting the rest of this year to provide a stable platform to work from for those wishing to engage in the property market as either a buyer or a seller. There will be some distractions being an election year but otherwise, failing some unforeseen event, it is looking like a good year to transact. The strength of each area or region will vary due to local influences; however, the underlying economic platform looks relatively stable from our coalface position.

If we can ever be of assistance in any real estate matters please do not hesitate to call.