Market movements and what you’re noticing.
Seeing things through a straw if what we do as we live our lives. This is no different if we are to look at property development through the eyes of the individual developer. But what other perspective do we have other than that of an individual reporter in on a scene, or an experience of a human being in a situation. This philosophical discussion would probably fill an entire article on its own and perhaps preserved for separate occasion.
What I wanted to share was some knowledge of the happenings on the ground, particularly in and around Adelaide. There are a bunch of fundamental changes that are occurring, again probably for another blog post, including lending criteria, amount of money put into the economy including stimulus, general market shift, however, what is actually happening right now is worth discussion.
What To look out for when attitude change, which lead to a market change.
Have you noticed the following in your market?
When agents don’t return calls on enquiries
When the properties you’re looking at mostly are going to auction, rather than via private sale
Price - when properties sell for a significant amount over what you’re prepared to pay (hence eroding margin)
Town planners - when these guys become really really busy
When agents tell you they are having trouble getting stock
When agents tell you that properties are selling like hot cakes
When the attitude of the banks / news reports / the general economy change
What’s happening specifically in the Adelaide market? All of the above!
What does this mean for you as an investor, potentially wanting to get into the market. Your strategy needs to change. I remember looking at the Sydney market around 5 years ago, and the exact same thing was happening there - the market was running hot! deals were being sold for 5% , even 10% above expectations and the best developments deals yielded a return of 0%, ie no profit. That’s how we ended up looking at the Adelaide market.
In another note, in Adelaide, the rental market is running extremely hot as well, driving up further price changes, as rentals become harder to get into, and people, particularly first home buyers enter the market instead thinking well, I’m paying no more than rent at the moment, and we can own our place rather than rent!
The question is will this last forever, the answer, is probably that it will cool, but when this will occur is anyone’s guess - will it be at the end of HomeBuilder grant, or will this be the beginning of a boom in Adelaide we haven’t see for a while, remains to be seen. One thing is clear, the market is running hot, and for investors, it means competition is increasing, and as such it’s becoming harder to get even a good deal. Best to start looking elsewhere, rather than overpay betting on a rise on the end sales values as well. Watch this space!