Here we are in 2020 and we are dealing with yet another set of circumstances totally from left field. What the world is facing is totally unprecedented and there quite simply is no road map when it comes to working out exactly what the real estate market will do.
Market sentiment is fickle
As you will well remember, after the market peaked in September of 2017, we watched the market fall for 18 months or so until the federal election in May 2019.
We then held onto our hats during what turned out to be the quickest recovery on record, with house prices in Melbourne experiencing double digit growth of 10.7% over the twelve months ending February 2020.
In fact, Melbourne housing values surpassed the September 2017 peak in February 2020, just a few weeks ago.
What the 'Experts' wanted you to believe
Do you remember all the headlines of doom and gloom?
In the midst of the 2019 downturn, the so called experts were telling anyone that would listen that the downturn was going to last for many months, if not years.
As we saw, the market bounced back at an extraordinarily rapid rate, fuelled to a large extent by changes in lending policy coupled with several interest rate cuts. Borrowers enjoyed ready access to money and as the tap flowed, the market rebounded.
Today's real estate market is not the same
What does that mean?
The 2019 downturn was largely driven by artificial factors, one major one being restricted access by buyers in obtaining cash. The banks were restricting lending.
Today, that is not the case. It is why the market recovered so quickly. Buyers had access to cash and were on the the hunt to buy property. Money is still cheap with interest rates at historical lows.
Today's Auction Action
Today I attended an auction in Coburg in Melbourne's inner north. There was a good crowd (all standing 1m+ apart to socially distance as per the guidelines) with four genuine bidders in the mix. The home eventually sold well over the guide price.
The auction clearance rate this week is 62% (versus 54% last year), slightly down on the 64% achieved a couple of weeks ago. We have been seeing clearance rates in the 70s prior to today, so people are being a little bit cautious, which is totally understandable.
A world in lockdown
The COVID-19 Pandemic is unprecedented. Few humans on the planet have previously experienced anything like it.
Yet the 'Experts' are at it again with their predictions regarding the real estate market and not surprisingly, the doom and gloom mantra has been rolled out again. These are the same people that got it so terribly wrong just a few short months ago.
Predictions are short sighted
No one can honestly predict what will happen. How could you? It's been described as a once in a lifetime event.
All we can do is share what we are seeing each week and weekend at auctions. On the ground reporting from those of us that are attending auctions and experiencing the market, not modelling it from afar.
I'll be speaking this Friday on North West FM from 12 noon. You'll find details below.
The need for calm
Let's all keep calm and a level head. Don't buy into the click bait headlines designed to grab attention but which unreasonably foster fear and alarm.
Look after yourselves and those you love.
Follow the guidelines, keep safe and help those who need a hand.
Be kind, to yourself and others.