It's a Thin Line Between Pleasure and Pain

Graeme Salt

Quotes from Australian Property Monitors (APM) about our two largest cities’ weekend auction results show that the difference between optimism and pessimism is wafer thin.


 


APM said “Sydney’s home auction market continues to fade with this weekend’s auction clearance rate falling to 74.1 per cent - the lowest non-holiday weekend result for more than a year.


 


“Auction clearance rates have fallen each weekend since the Queen’s Birthday holiday break three weeks ago with a downward trend now emerging.”


 


At the same time APM said, “Melbourne’s weekend auction market bounced back at the weekend recording its best result for seven weeks and the second best result since Saturday March 1st


 


“This weekend’s 74.6 percent clearance rate brings the June weekend average to 72.7 percent which, although down slightly on the 74.1 percent weekend average reported over May, nonetheless reflects a consistent and resilient market performance over recent months.”


 


Notice the complete difference in tone? It seems that a weekend difference of 0.5 per cent is the difference between a party and a funeral.


 


Property is actually a long term investment and yet, by all of us focussing on weekly analysis, we are reading too much into what are relatively short-term movements. We need to work out what is "noise" and what counts for the longer term.


 


Most commentators knew that Sydney could not have a 2014 like 2013 so this weekend’s results are hardly suprising. And Melbourne’s 2013 was not that crash hot – so an improvement was not that hard. So the two cities have kind-of met each other half way.


 


Economist Stephen Koukoulas “the lack of interest rate hikes is likely now to see house prices trend up a while longer, albeit at a more moderate 5 per cent annualised pace.”


 


The bottom line is this; if we spent every weekend reading the tea leaves of the weekend property market returns there would be no investment in property.


 


Over the past 20 years Australian residential property has returned 9.9 per cent per annum. That does not mean that such returns will be achieved in the future. Nor does it mean that we are guaranteed to make money if we invest in property. But over such a timeline, weekly fluctuations up or down become irrelevant.


 


Everyone likes a bargain. But who can say that whatever happens over a weekend will determine whether we have property pleasure or pain?


 


Graeme Salt is a Sydney-based mortgage broker.  For a no-obligations consultation, please contact him on 02 9922 5055