a race to the bottom

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    It's a race to the bottom when picking property prices, but you'd better hurry
    BY: HOTSPOTTING: TERRY RYDER From: The Australian November 26, 2011 12:00AM
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    ONE of the slides I throw up on screen when speaking at seminars shows my perception of typical property investors.

    The image of a flock of sheep is meant is lighten the mood while making a point, but nobody laughs.

    People don't like being characterised as jittery herd animals incapable of independent decisions or sensible actions.

    But that is how most property consumers behave and why we have so many dormant markets across Australia. It's also the reason so many Australians aspire to grow their wealth but so few achieve it.

    The latest home-finance index confirms that property consumers collectively have everything in their favour but are disinclined to take action. They await some magical signal that it's OK to buy something.

    There's a paucity of confidence, certainly, but the biggest problem is the inability of the average punter to think and act independently.

    According to the Commonwealth Bank/Mortgage & Finance Association of Australia Home Finance Index for September, Australians are well-positioned financially but are reluctant to act.

    Consumers' savings are healthy and their mortgage stress is low.

    One-quarter of homeowners are saving at least 20 per cent of their take-home earnings. In September, 78 per cent of mortgagees said they were easily making repayments, up from the May index (68 per cent).

    Those struggling to meet repayments have decreased from 26 per cent in May to 17 per cent in September.

    But the survey found the ratio of respondents planning to buy property in the next 12 months had fallen to 17 per cent, down from 22 per cent in January.

    It should be noted that the survey, in September, pre-dated positive data about real estate from the Australian Bureau of Statistics and from mortgage brokers, who report a big increase in loans inquiries from investors and first-time buyers. It also pre-dated the Melbourne Cup Day interest rate cut, passed on in full by all big lenders except the National Australia Bank.

    Mortgage & Finance Association of Australia chief executive Phil Naylor says consumers have put themselves in a position to act when confidence returns: "With a recent interest-rate cut, high savings and low mortgage stress, prospective home buyers are in a relatively good position. Reticence about buying property seems linked to the perceived state of the economy, not to the personal financial state of consumers."

    Commonwealth Bank's Kathy Cummings says while some buyers are holding back they are financially healthy: "Consumers lack confidence, but high savings means they're probably waiting for the right time to buy."

    This is a comment I hear a lot from property consumers: they're waiting for the market to bottom.

    I ask them a series of questions, chief among which are: which market are you talking about? And how will you know when the market you're watching has bottomed?

    Very few can answer. They don't know which information depicts the bottom, or how to gain access to that data, nor do they have any understanding that the data doesn't become available until months after.

    For the best markets in Australia right now, the bottom is already long past.

    Anyone thinking of investing in the many vibrant regional markets across Australia - places such as Gladstone in Queensland, the Hunter Valley in NSW, Bendigo in Victoria and Whyalla in South Australia - has already missed the bottom. That doesn't mean there are no opportunities there to invest well - but if it's the bottom you were waiting for, you'd better get busy.

    Terry Ryder is the founder of hotspotting.com.au.

    [email protected] 


    http://www.theaustralian.com.au/business/property/its-a-race-to-the-bottom-when-picking-property-prices-but-youd-better-hurry/story-fn9656lz-1226203748022
 
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