How to read the real estate market

Written by view.com.au in Buying

200,000 years ago an overly hairy man stepped outside of his cave, peered across at his neighbour (who was hacking a new window into his own cave), and grunted. His neighbour looked up, cocked his head with curiosity and grunted back. The man pointed at his cave, then at his neighbour, then back at the cave, then back at his neighbour. This occurred for almost two weeks until the neighbour finally cottoned on that the man wanted to swap caves. So they split a rock in two and chiselled a rough contract into it and the deal was done.

Today, buying or selling your home is essentially the same, but requires a little more research. While we are still essentially just swapping caves with one another, we now have to be aware of how a conversation between Donald Trump and Kim Jong Un might end up influencing the value of our home and whether or not we sell it in the next few months or wait a few years.

Reading the real estate market was a national past time. It has now become a national obsession. Be aware that you can become so engrossed in the various factors that influence the market that you fail to see the forest for the trees, yet it is still important to be aware of the major short term and long term factors that will shift your investments.

Analysing the market in the short term

There is no shortage of pundits vying for screen time to tell you how the economy is travelling and how the real estate market will respond. It is a great idea to stay on top of a range of these voices to recognise some patterns in their analyses. There is always plenty of disagreement from economists about the real estate market and the economy, but through all the noise there are often points of agreement that you should pay attention to if you want to recognise the signs of a cooling or heating market.

On top of the papers, a great resource for seeing how the market is performing in the short term is by tapping into the data. By searching for any address in Australia on realestateview.com.au, you have access to a sea of demographic and market data, which can give you a great idea of the short term trends in a neighbourhood. There are also other companies with great data sets that will provide regular updates on national, regional and municipal markets.

Larger national and even global events have a greater influence on the market in the short term, so keep track on things like the inflation rate, wage growth, policy movements and announcements in parliament and any newsworthy items that relate to the market. Major global events, such as heated discussions between leaders or climate events can influence things like the ASX, which can have its own influence on consumer confidence, spending, and therefore the real estate market.

Analysing the market in the long term

Regularly thinking long term about the Australian real estate market will help you most in planning major financial decisions as they relate to your home, whether it be buying, selling or even renovating.

Keep your eyes peeled at thinktanks, authors, and major data companies for a top-down analysis of long term trends. When doing your ongoing research, look out for analyses of multi-decade trends (i.e. dwelling prices, population movements, wage growth) from these sources. They will help inform your short term analyses of the market, as you may have a greater understanding of where the real estate market is possibly situated within a particular cycle.

Where is Australian politics? Since WWII, Australia has seen the Liberal Party hold significant periods of leadership, broken up by the Labor Party. The duration of the Liberal Party’s time in leadership has gradually decreased, however, so you should not expect this trend to necessarily continue. Yet you can still count on the general trend for voters to seek a ‘fresh start’ at certain periods, especially after a current party has been in government for at least one term. The nature of the 24 hour news cycle and various other influences on politics has meant that we are likely to see governments change leadership more regularly, and as such policies to also fluctuate. Understanding this can help you in making investment decisions as they relate to tax breaks and incentives for buyers.