At risk of sounding like a know it all, I will say, “I have seen it all before”. Yes, what we are experiencing in this market has happened before, not once but many times. This is how it plays out –
At the end of a boom market, there is always a correction, and last year we saw that correction take around 30% off the peak prices. As sellers absorbed the shock of this, some withdrew their homes in despair, feeling they had lost so much value in their home. As the year progressed, others came to the market knowing they would be getting less than they would have the year before. A smaller percentage of these people withdrew their homes from the market without selling, frustrated that buyers didn’t appreciate how realistic their price was.
Other sellers accepted the market change, sold their home and went with vengeance into the market to buy their next one.
A slump in the market is not caused by price; it is the consequence of confidence going out of the market. If there is high confidence, prices will keep rising. It doesn’t matter where interest rates are, what legislation or housing policy is being passed or whether banks are lending or not, buyers will find a way to get into a market they are confident about.
When confidence has been knocked as much as the market has just experienced, it takes a long time to return. The market underperforms opposite to how it had overcooked. This is the season that rewards the brave when others can’t see value for looking. Although every expert says the best time to buy is in a market like we are in, most people find it hard to build up the fortitude to do so.
Surprisingly, more buyers have come into the market this year than predicted. Perhaps there is a bit of confidence coming back, perhaps it’s a dead cat bounce that will favour those who have their homes on the market. This too is part of what happens through these cycles.
Regardless of all the mixed messages in the market, I can say with confidence that almost every buyer who changes home this year will look back and say how they got their timing right and how well they have done with property.