March 2011 No.

471

Property clock
In theory, at least, now appears to be a good time to buy.

We have featured the property clock in 1.

two previous Snapshots – in late 2003
and again in early 2006. At those times, Rising sales
Strong price growth
PEAK
Flat sales
Weak price growth
Improving yields Steady/falling yields
like now, the residential market was in Increasing building activity Slowdown in building activity
Vendor’s market 12 Cautious market
somewhat uncharted waters. The
housing outlook was then, again like now,
quite polarised. Upswing 9 3 Downswing

Whilst a simple tool, the property clock is Falling sales

6
one of the more effective ways of clearly Stagnant/falling real prices
Uncompetitive yields
showing where things stand. The property BOTTOM Projects being abandoned
clock Buyer’s market

Chart 1 shows the traditional property

clock, with 9 on the clock indicating the
start of an upswing; 12 being the market peak; 3 the start of the downswing and 6 the
market trough. Many of the residential markets across the country – as shown by the
four clocks overleaf – are positioned between 2 and 7 on the clock. Far too many
people wait to buy near the market peak rather than during a downswing or at the
bottom of the market. When you move, either as a buyer or a seller, is second in
importance only to location.

The positions on the property clock are determined by supply – either undersupply or
oversupply. Everything else is either leading in to one of these market conditions or
coming out of it. Let’s start with undersupply.

12 o’clock
An undersupplied market, where demand exceeds total supply. Rents and prices rise.
The economy is strong, as is wage growth. It is a vendor’s market and the best time
to sell.

3 o’clock
Asking prices become overwhelming and the market starts to lose confidence. An
“evensupplied” market, where the number of properties for sale usually matches the
number of buyers. Interest rates often rise and economic growth slows. Buyers wait
for discounting to begin. A very cautious market.

6 o’clock
An oversupplied or buyer’s market. Harder economic times and usually at the tail end
of high interest rates. Borrowers become frugal, some feeling that their income or
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even job is at risk. Residential property in general loses its shine. Ironically, it is often
the best time to buy as many properties are undervalued at this time.

9 o’clock
In the lead up to 9 on the clock, stock is either withdrawn from sale or is sold, often at
prices below replacement cost. The market supply tightens and buyers become more
optimistic. Economic conditions improve, unemployment is low and wage growth high.
Prices start to rise again, making new developments feasible once more. Spruikers
return and property starts to become overvalued once more.

Residential markets also tend to fluctuate between undervaluation and overvaluation.

What is “high” for a market (at 12 o’clock) and what is “low” (usually around 6 o’clock)
is largely a matter of history. Property values usually increase over the long term.
Over-valuated markets can be very seductive and hence why most buy too late, whilst
the opposite sentiment holds true at the bottom of the cycle.

The Matusik Snapshot is opinion and not advice. Readers should seek their own
professional advice on the subject being discussed.
2. 4.
Capital cities Other Qld locations
Sydney PEAK PEAK
Melbourne
& Darwin
Adelaide
12 12
Canberra
Gladstone &
Emerald
Upswing 9 3 Downswing Upswing 9 3 Downswing
Perth & Hobart Cairns. Whitsunday &
Hervey Bay apartments
6 Townsville 6 Bundaberg

Hervey Bay houses Whitsunday houses.

BOTTOM Brisbane BOTTOM Mackay & Rockhampton

Matusik Property Insights – 2011 Matusik Property Insights – 2011

3. 5.
SE Qld locations Product types – Australia
PEAK PEAK Student accommodation
Gold Coast Investment apartments
12 apartments 12 Second-homes “sea
Ipswich & change” resort areas;
Gold Coast houses Small-lot homes

Upswing 9 3 Downswing Upswing 9 3 Downswing

Sunshine Coast Owner-resident Standard detached

apartments/attached housing
6 Brisbane outer product
6
Acreage -
Brisbane inner suburbs & suburbs residential
Second-homes “cool/green
Toowoomba region BOTTOM Brisbane middle- BOTTOM Suburban vacant land
change” locations
ring suburbs
Matusik Property Insights – 2011 Matusik Property Insights – 2011