Soggy bottoms

If it feels like this month’s update to the “Are we there yet, Mum” Index has come around early, it’s because last month’s was late. Sue me.

Since the Federal election and yesterday’s decision by the RBA to cave in to the noise prudently lower interest rates to yet an even lower historical low, the Legacy Press (c) and social media has been awash with vested interests talking up their own book.

Notable characters included in this description are Doctor Andrew Wilson (he’s a doctor of property!), the usually mildly sober Pete Wargent and practically every estate agent left solvent and trading. Apart from offering tangible data about “da feelz“, sorry, “market sentiment“, an increase in the auction clearance rate (i.e. the ratio of properties sold against those put up for auction) is presented as evidence for this ding dinging of the bell calling the bottom.

Now, it may well be that the nadir of the Sydney market has been and gone. That data point is, thankfully, a relatively objective measure. We can probably confirm this in about 2 month’s time when this month’s sales information has washed through the databases.

Our updated index (presented below), isn’t suggesting the trend has reversed, however. The relative change in the RBA lending data is still bouncing along at the lowest it’s ever been (before 2017, one could count the months it had been at 0.3% or below on the fingers of one hand) and the CoreLogic price index is still showing “negative growth”, i.e. prices are still falling.

It could be credibly argued that the CoreLogic data is a lag measure, so Wilson, Wargent, et al, could be correct in their bottom-calling, but the RBA data is almost certainly a lead indicator. Awkward…

Bill’s Opinion

The index suggests we’re still about 2 to 3 months from a possible bottom in the Sydney property market, and that’s likely to be the continuing situation until we’ve seen a quarter of a year’s worth of lending figures above 0.3% increases.

For those who pay attention, I’ve switched the trend line from linear to moving average as it seems more useful now we’ve reached a (low) plateau.

14 Replies to “Soggy bottoms”

  1. I am going off topic here, but you have an affinity with sailing. I have no reason to doubt your sanity.

    My grandfather used to own an old yacht. My dad recently found it, laid up in a backyard where it had been for 30 years. It is poor in shape.

    It is an historically significant boat, designed and built in Sydney in 1912 for a prominent South Australian family. It is not enormous at 36.5 ft, but was a nice looking boat.

    It is restorable, at material cost.

    Do I do it?

    I want to and have partner support. But it all feels a bit insane.

    Barring a hot trade war, and withdrawal of international capital from Australia, I am calling propert down marginally for the rest of the year in most places, and up early to mid next year. Balance of risk to the downside if The Tweeter is actually insane.

    1. I’m in the middle of restoring a 30 year old fibreglass boat. It’s expensive and very time consuming.

      It’s also hugely rewarding.

      There’s a book I can recommend you buy and read before deciding you’re going to do it. I’ll dig out my copy and put the name under this comment.

    2. Wooden Boat Renovation By Jim Trefethen. Read that cover to cover before committing…..

      Also, The Restoration Handbook By Enrico Roselló is useful but not totally relevant for wooden boats.

    3. Finally, I considered a wooden yacht restoration a few years ago (hence having the book) but the sale fell through.

      My conclusion prior to not buying it was that I would have to buy some serious woodworking gear (router, lathe, table saw, etc.) and take some evening classes.

      It’s probably best it didn’t happen as I copped a bad injury that slowed me right down for half a year and a rotting hull wouldn’t have helped my mood.

      The good news is yours is already lifted out and in a yard. Is it close by and can you work on it there?

      Build a fully-costed project plan and double any uninformed estimates for time and cost. Some things can be done cheaply/quickly but most boat gear needs to be over-engineered or you’ll end up installing it three times.

      1. Thanks for the thoughts. This is too far gone for me to tackle, so I have a boat builder/shipwright interested. It will probably put his kids through school. Plus a few years restoring old furniture for sale has taught me woodwork is satisfying if done right, but frustrating without the right kit, plus I potentially need to trust it with my life in this case. I’ll do the manual labour where I can fit it in, of which I am assured there will be plenty. If it happens, I’ll blog it somewhere.

        I’ll find the book though as I can use all the tips I can get.

        The hope is sailing it back to Lavender Bay where it was put together >100 years ago, amongst other things.

        I recall your injury, if it was the running related back thing. Hope the recovery is complete.

        1. Where is she currently?

          My thoughts on trusting yachts with my life is that I feel safer if I’ve seen the work that’s gone in to the important parts at least, better still if I’ve done part or all of it myself. Think about it in terms of a parachute; do you trust the one you are handed more or the one you packed yourself?

          The back is fully healed, thanks. I ran 8km today in 43 minutes, including about 180m elevation twice.

          Marrying a physio was a moment of prescient excellence.

          1. It is sitting in a backyard in Altona. About 5km’s from the boatbuilder. I need to get it in his shed, as the deck has rotted and collapsed to expose the interior. Hull planking is in good shape being NZ kauri, with a lot of spotted gum and ply now exposed and prone to rot. With a full rib replacement required, flooring, and other structural stuff I can’t name from memory yet it is a big job. Preferred boatbuilder is Ferdi Darley. Does good work. And I will be watching and learning.

            First job is to get it out of the yard.

          2. I forgot to mention, I know a good bloke with a lorry and crane who can relocate boats at a reasonable price. He’s based in Sydney.

            Let me know if you need his details.

  2. The first rule of the study of monetary policy is that the home of money is the markets. Relax monetary policy and any extra money made available will head straight for the nearest market. The property market is not the only game in town. I topped up my retirement funds very nicely when the US Fed came up with the brilliant idea of stimulating the economy with quantitative easing. Naturally the QE money went nowhere near industry and growth-boosting investment. It went into stocks and to a smaller extent into property. If I wanted to have a flutter I’d choose an index fund (low transaction costs in and out) well before property (high transaction costs, small details like what does the bloody property actually look like and what’s it going to cost to replace those leaking gutters).

    1. Yes.

      My financial advisor always says we follow the markets not the economists. Seems to have worked nicely for us so far. I’m forever grateful to him for getting us into cash in 2007.

    2. MvR

      My shares are doing well at the moment, I havent been checking them as I have been on an extended holiday but my broker sent me an email to say one of them up was up 80% and did I want to take the gain. Which is code for he needs me to churn them to make a bob.

      1. My brother in law often goes to the casino when he is on holiday.

        After some holidays he tells me about his wins. After some holidays we talk about the local cuisine and beaches.

  3. Still a buyers market in Sydney, but the really good opportunistic buys have probably been taken, sellers are a little bit more reluctant to take anything that they can get.

Leave a Reply to Michael van der Riet Cancel reply

Your email address will not be published.