History Doesn't Always Repeat Itself

The market correction after the recent boom still seems to be rippling through the housing sector, with REIWA figures for the September quarter showing a fall in median prices for the third consecutive quarter.

However despite these official statistics and the messages of doom and gloom we regularly see in the media it is important to look at what is actually happening in the ‘real’ world.

Many of you will very clearly remember the stock market crash of 1987 which led to a surge of money flowing into the property sector. Then in 1989 it became apparent that property would suffer the same fate as the equities market. This typical boom to bust cycle left us with an oversupply of housing, high interest rates, high inflation and an extremely flat market for several years.

Unfortunately it’s impossible to predict the future of today’s property market, however given past history we can take a look at current conditions to see if we can draw any comparisons to the crash of 1989. Will history repeat itself?

In 1989 the property market was in a similar condition to today. However from my business and personal experience I definitely see hope in today’s market. We need to look at the ‘real’ market and the ‘real’ economy to really assess what we are seeing with the current conditions.

While figures and statistics can be extremely valuable they don’t necessarily reflect what’s happening on the street on a day to day level. In 1989 we saw the equities market drop 25% overnight. This was very dramatic and caused a tidal wave type surge straight into property. The current equities market has lost 50% of its value however this time it has been a more stepped decline. We have also seen that median house prices have also adjusted over the last periods but they have not dropped anywhere near as significantly as the stock market.

In many cases it is more that a sellers inflated expectations of price has returned to market normality.

Current market conditions also indicate that employment is still very tight, interest rates are very low (and lowering) and inflation is low. Perth also has a much broader population base than previously and is still experiencing strong population growth. This time round circumstances seem to be much better than the late ‘80s and early ‘90s.

I see two key factors dictating market stability, and buyer confidence. Firstly, the availability of money and people’s access to buy it. And secondly, the sustainability of employment. With the recent restructuring of the finance industry the availability of money has definitely stabilised and people are still finding good access to it. While employment will, most likely, be affected by economic conditions we are coming off a very tight market and we may see only marginal shifts in unemployment figures in WA. Buyers should continue to have confidence if they can still see value in the market.

There are still plenty of buyers active in the market. Attendances at auctions are still quite high and there is a really good energy to the bidding. We are also finding a really positive level of enquiries on internet listings, our online property magazine, over the phone and at a pen for inspections. Properties are still selling in a fair and reasonable time and at fair and reasonable prices.

Statistical trends will become clearer over the next quarter or so and we may continue to see some jittery and erratic results from suburb to suburb but there is still movement and energy in the market. People are still buying and selling so there is definitely still plenty of hope!
On this occasion history doesn’t have to repeat itself because the fundamentals are different.