It’s All About Trust
It’s been a while since I’ve sent out a market update, although with good excuse; along with my usual business activities, I’ve been busy buying properties for my personal portfolio. Along with many other active investors, I believe the current market offers some excellent opportunities.
But a recent email of thanks from one of my subscribers prompted this overdue communication - and I have to say first of all, we always love to hear that our advice has paid off. This particular client was talking specifically about my prediction in mid-2011 that interest rates would fall, and fall dramatically. At the time, we were really swimming against the tide as almost every commentator (apart from Westpac’s Bill Evans) was predicting that rates would go up.
Well, we were right - there’s been a full 2% worth of cuts since then. Now we’re sitting on a cash rate of 2.75%, the lowest it’s been since 1959. And most likely, we’re still not at the bottom.
That email got me thinking about how important it is for people to feel they can trust their agent. Hard as it can be, trust is critical to achieve a good outcome in property.
Buyers need no encouragement right now – low interest rates and improved affordability has driven demand back up to healthy levels. Buyers see real value at current prices and they’re willing to act fast, even though they’re still hesitant to pay a premium.
On the other hand, many sellers are becoming confused by media reports of a broad market recovery. While it’s true that certain pockets in the southern states appear to be hotting up, we consider these media driven mini-booms to be artificial and unlikely to be sustained. There’s no basis to expect the “ripple effect”, a term often bandied around by agents and journalists keen to give an optimistic view of the future. We’re in the midst of a mining slowdown and unemployment is rising. The reality is that significant price growth in local property is highly unlikely in the short to medium term.
Sellers who don’t trust their agent usually struggle to accept the current value of their home, given it will be significantly lower than the peak. They’re also very susceptible to believing predictions that prices are set to rise. Unfortunately, the end result will be a vendor who can’t accept an early offer at market value, even though it may well be the best offer they’ll get.
To find an agent whose advice you can trust, ask them about their past results. Ask them about their average days on market (ours are less than 30) and after they tell you, ask them to show you the proof (come into my office anytime and I’ll be happy to). Those who can be trusted have nothing to hide and will be happy to answer your questions.
Looking forward to helping you make good property decisions,
Michael Knights