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Forget one big bubble: we're a nation of micromarkets; "Jump aboard as prices continue to rise," trumpeted local commentators. "Your crash is coming," overseas experts chimed in.
Topic Started: 10 Oct 2014, 09:51 AM (677 Views)
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Forget one big bubble: we're a nation of micromarkets

Shannan Whitney | 7 October 2014

Property media in Australia can be confusing at the best of times. But in August, it was contradictory madness.

"Jump aboard as prices continue to rise," trumpeted local commentators. "Your crash is coming," overseas experts chimed in.

"Beware Australia's housing bubble," cried the Reserve Bank. Treasurer Joe Hockey then dismissed that idea. Next, the Reserve Bank said prices were "not a crisis" before sending "warnings" of an "inflated market" with potential for, yep, "bubbles".

So our dinner tables are now places of effervescent debate. Property is becoming notorious enough to be off-limits alongside sex, religion and politics. With each contradictory headline, prejudices burn on both sides of the fence. Everyone's an expert.

Yet if we focus more on what's happening in our own "micro markets", we often have all the answers.

Supply and demand drives price, so forget looking at Australia as a whole. We need to see the market in specific price brackets, geographies and lifestyles.

Sydney's art deco coastal belt - a micro market of its own. (Image supplied)

When buying, we don't view Australia as one market. We don't even see Sydney as one. And postcodes don't dictate precise boundaries for residents. People see a certain way of life, delivered by a similar category of home, across a variety of suburbs that cater to a specific lifestyle.

Think student belts from Kensington to Camperdown. Think brand new apartments from Bondi Junction to Chippendale. Think luxury homes around waterfronts. Think 3-bedroom inner-city terraces around $1.2 million.

They're just 4 different micro markets, moving independently of each other. And there's plenty more, each with their own lifestyle and buyer profile of residents wanting the same home.

As bubble chatter continues, some of these homes have boomed in value, while some prices have dropped. Certain rents have skyrocketed. Other landlords have slashed prices.

Luxury houses in prestige streets of Woollahra and Point Piper make another micro market. Prices in these pockets are down from levels seen three years ago. Try telling those owners we're in a "property boom". Yet that's what these stories keep beating up.

Not booming: This home in Jersey Rd, Woollahra sold in 2008 for $2.2 million. It recently sold for the same money in 2014.

As savvy buyers and sellers, it makes sense to hone in on these mini trends, because each micro market performs differently over time. The wider data doesn’t tell us this.

Across in Marrickville, this cottage sold in 2005 for $425,000. With some cosmetic updates, it fetched more than $1 million in 2014.

Residents who understand how their own sector of the market is performing can identify periods of dropping price, growth, and steady phases with no movement.

Existing owners can still capitalise on knowledge of micro markets. As sellers or landlords, the trick is to position our property correctly to capture the most demand.

Then, we can strategise and set objectives. We can make changes, renovate to suit the area, market homes differently, or wait. Understanding what's happening around us can be far more valuable than waiting on interest rate changes or following wider data.

When buying, we shouldn't accept reports that all home categories are hot. If Sydney and Australia is booming, we can still pounce on the ups and downs of the micro markets that suit our needs as buyers.

Even within all this "bubble" and "boom", the best buying/selling can find untapped momentum. We just have to become more in tune with our neighbourhoods.

Read more: http://www.propertyobserver.com.au/finding/residential-investment/36555-forget-one-big-bubble-we-re-a-nation-of-micromarkets.html
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Foxy
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Zero is coming...

Will anyone consider that the entire Australian residential property market is a total loss to the home owners??

The only hope they have is ever increasing value of the homes.

Please consider the following comparison.


http://en.wikipedia.org/wiki/Pyramid_scheme

Peter
http://www.afr.com/content/dam/images/g/n/2/1/u/8/image.imgtype.afrArticleInline.620x0.png/1456285515560.png
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newjez
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Alex, the accuracy of the touch screen on your site is terrible. My fingers aren't that fat. Has anyone else experienced this?
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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Mustapha Mond
12 Oct 2014, 11:05 AM
Will anyone consider that the entire Australian residential property market is a total loss to the home owners??

The only hope they have is ever increasing value of the homes.

Please consider the following comparison.


http://en.wikipedia.org/wiki/Pyramid_scheme

Peter
I suggest you read it an really think about it.

Property owners don't need to recruit other people to buy houses for their asset to rise in value. If you want to make up your own definition of a pyramid scheme and just claim anything that rises in value because people buy it is a pyramid, I suggest you tell us what isn't a pyramid it'll be a much shorter list.
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newjez
12 Oct 2014, 01:29 PM
Alex, the accuracy of the touch screen on your site is terrible. My fingers aren't that fat. Has anyone else experienced this?
I've noticed the same thing.. You can use one of those 'pen type things' with the rubber ends and it's ok

Fwiw I do have fat fingers though lol
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Kulganis
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12 Oct 2014, 08:52 PM
I suggest you read it an really think about it.

Property owners don't need to recruit other people to buy houses for their asset to rise in value. If you want to make up your own definition of a pyramid scheme and just claim anything that rises in value because people buy it is a pyramid, I suggest you tell us what isn't a pyramid it'll be a much shorter list.
Regular posters here will find this surprising, I very rarely (if ever) come up to bat for Peter. But he's right in this case.

Value isn't an intrinsic property (gold has an intrinsic property, it conducts electricity, its monetary value also, isn't intrinsic), in order for value to be realised, people need to want the object (and actually buy it). If value could rise regardless of demand, there would be no need for the massive immigration we are currently experiencing, there would be no need for FHB grants.

If larger numbers of people weren't at the bottom of the property ladder, values would at best, stagnate.
"If man is to survive, he will have learned to take a delight in the essential differences between men and between cultures. He will learn that differences in ideas and attitudes are a delight, part of life's exciting variety, not something to fear." - Gene Roddenberry

"Balloon animals are a great way to teach children that the things they love dearly, may spontaneously explode" -- Lee Camp
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Kulganis
12 Oct 2014, 11:05 PM
Regular posters here will find this surprising, I very rarely (if ever) come up to bat for Peter. But he's right in this case.

Value isn't an intrinsic property (gold has an intrinsic property, it conducts electricity, its monetary value also, isn't intrinsic), in order for value to be realised, people need to want the object (and actually buy it). If value could rise regardless of demand, there would be no need for the massive immigration we are currently experiencing, there would be no need for FHB grants.

If larger numbers of people weren't at the bottom of the property ladder, values would at best, stagnate.
I agree with most of that, but inflation eventually erodes debt - even if a properties value stays static in real terms though.
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Kulganis
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12 Oct 2014, 11:21 PM
I agree with most of that, but inflation eventually erodes debt - even if a properties value stays static in real terms though.
Inflation doesn't sit at a steady state though, sometimes there's deflation too. Australia has been very lucky for a very long time compared to much of the developed world, luck eventually runs out. Ask any gambler. It may not happen tomorrow, or in 10 years or 100, I don't know, but it runs out.

And without larger populations driving demand for more and more goods and services, economic activity doesn't happen quite the way people want it to. With ever increasing profits. So inflation turns into deflation, because the whole marketplace is contracting.

Capitalism, in it's current form, in most of the developed world essentially is a ponzi scheme, the only reason people think it's not, is because some people actually do get rich.
"If man is to survive, he will have learned to take a delight in the essential differences between men and between cultures. He will learn that differences in ideas and attitudes are a delight, part of life's exciting variety, not something to fear." - Gene Roddenberry

"Balloon animals are a great way to teach children that the things they love dearly, may spontaneously explode" -- Lee Camp
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