The herd is a strange beast.
You know the famous investing maxim?
Be greedy when others are fearful. Be fearful when others are greedy.
It’s always easier said than done, but if you can stick to your guns on that one, you’ll make a lot a lot of money.
That’s why I thought Westpac’s latest property survey was interesting. It seems to suggest that we might be about, or even just past, peak-fear.
Basically, things seem to be stabilising. But overall, things look very weak:
Consumer house purchase attitudes remain extremely weak. The ‘time to buy a dwelling’ index has lifted 3.8% over the last 3mths but remains mired at historical lows below 80.
The index has been tracking very low levels for exactly a year now, an unusually long period of weakness by historical standards. Since the mid–1970s, most cycle lows have lasted for less than six months. Indeed, the only other instance when the index has been sustained below 85 for this long was during the early 1990s recession!
I’m not surprised. Nothing drives fear into the heart of the Aussie adult like interest rate hikes.
And we have had a barrage of them over the past year. A barrage.
That’s driven Aussie households to the peaks of fear.
But, things are stabilising. They’re levelling out.
And when you dig into the detail a little, there’s a couple of interesting things. The first is that there’s been a pick up of investors who think now is a good time to buy (the middle panel of this chart.)
That doesn’t surprise me too much. Investors tend to lead property cycles, and I reckon smart investors sense that the window for grabbing a bargain might be closing. Smart investors are hungry right now.
Westpac’s price expectation survey is also interesting. The price epxpectations data seems to be levelling out. Given this tracks very well against actual prices, it’s possibly one of the best leading indicators we’ve got.
And it seems to be telling us that the market is bottoming.
There’s a bit of interesting nuance there. Homeowners are much more likely to expect property prices to stabilise from here, while renters are more likely to think prices could ease.
Westpac puts that down to “wishful thinking”!
But if this was the only data point you were looking at, it’s hard to escape the conclusion that we’re at peak-fear, peak-pessimism right now, and that going forward, market conditions will stabilise, and prices will increase.
That’s how I read it.
And that means that your opportunity to play hard-ball and beat a property down on price might be quickly coming to an end.
As I said, smart investors are hungry right now.
JG.