By Herron Todd White
We have been asked to score the property predictions outlined with a great deal of confidence back in our February 2019 issue. Don’t do anything unless you do it confidently is our advice. As luck would have it, we predicted we would be asked to do this well before we were asked and therefore award ten points to Gryffindor. We are that good. We feel so confident in this that we haven’t even reviewed our predictions. Oh… you insist that we have a quick look do you? Ok then, fine. Reading between the lines of our first prediction and discussion point, (we did meander a touch at this juncture if we are truly honest), it was an assertion that the Australian cricket team was on the decline. We hit the important stuff right up front it seems. We tenuously linked this event to the Newcastle property market. Having read it back for research, the point appears completely organic and seems to work quite nicely, so big tick there for us. As to the substance, the cricket team lost the T20 World Cup and won the Ashes. Up and down form there we would suggest and fully supports our adopted position.
Moving to the next point, clearly we nailed it, the fine print being we left it broadly open-ended enough to come true regardless. We are sheepishly looking around the room at each other collectively feeling like one of those fairground charlatans. Successful fairground charlatans to be sure, make no mistake on that score. We have the rapt crowd staring at us in awe with mouths open catching flies for how naturally brilliant we appear. Some kind of wizardry clearly just happened. However, the reality is that we used basic sleight of hand and a few cheap shenanigans while they weren’t looking.
How did we do it you ask? How did the lady, who was quite clearly cut in half with a well-used, but suspiciously clean saw, suddenly extract herself from the box and start strutting around like it never happened? We used the old “percentage chance of multiple outcomes occurring, but covering all bases trick” trick. Sorry. It’s a bit like horoscopes really.
We predicted there was a ten percent chance that the market would rebound. We then said there was a 30 percent chance of a balanced market. At this point, our maths failed us and we said that whatever was leftover was directed towards the downturn continuing. Hedging our bets quite nicely we would suggest. We then spent a few paragraphs waxing lyrical about why predicting the market direction was really hard. We definitely hammered that home. Probably overkill.
In reality, you could make an argument that the market has rebounded from its nadir around May this year. Supporting the rebound theory is the continued occurrence of record or near-record sales occurring in many suburbs in Newcastle and the Hunter Valley. For further details see our most recent columns in Month in Review. Depending on which metric you choose to focus on, the stronger argument is that the market is largely balanced at present with the trend seen as improving by and large. Whilst we have record sales still occurring, we haven’t really seen a general increasing level of values. It’s too soon in the recovery for all that. Anecdotally we are coming across many properties that sold initially around 12 months ago reselling presently. There is not a great deal of variance in value from 12 months to now based on these sales. In reality, some are selling for less and some are selling for more.
What has been the catalyst for confidence returning to the market? It’s multi-faceted (full disclosure: we looked that up, we know you know we didn’t know that word). The election result was a tipping point. Traditionally, elections slow the property market and uncertainty of elections and ensuing policy always translate into less activity. We make no judgment on policies and approaches of the parties; simply put, the uncertainty was made certain. Interest rates continued to lower in light of a softening economic landscape and serviceability requirements also loosened up over time as the distance was put into the banking Royal Commission. These factors have all made some impact on the local residential market. As with all things, whether this is a fledgling recovery or small blip in a falling trend is largely unknown. It could go either way, just like the Australian cricket team. Full circle. Yes, we are that good.
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