Land the crucial missing factor
THERE has been plenty of talk recently about Australia’s two-speed economy. It’s party time for the mining industry, which is swimming in extra cash – exhibit A is BHP Billiton’s $22.6 billion annual profit announced a little more than a week ago. However, many other business sectors, including retail, manufacturing and exporters, are on struggle street and cutting jobs.
A two-speed economy is a tricky one to control for our governments and the independent Reserve Bank of Australia as efforts to fix things in one area can make another area sick. How the authorities get us out of this one will be interesting to watch.
Just like the national economy, South Australia’s real estate market is displaying more than one speed.
Unfortunately for investors and sellers, some of those speeds are in reverse.
The latest data from the State Government shows metropolitan Adelaide’s median house price slumped 1.2 per cent last financial year to $405,000.
There were some positive pockets, with central metro Adelaide up 0.7 per cent but inner metro Adelaide took a beating, down 3.1 per cent to $618,500.
Adelaide apartment sales halved in number and the median price slumped 12.7 per cent to $370,800.
Our country property fared better, although the median house price for rural growth areas was still down 0.6 per cent overall to $268,500. Such regional centres as Port Augusta (up 8.5 per cent), Mount Gambier (up 5.7 per cent) and Port Pirie (up 4.7 per cent) bucked the trend.
However, my spies tell me that several towns outside the mining hot zones are doing it tough, with a glut of houses that just aren’t selling.
So how do we react to this multi-speed property market?
Well, don’t expect much from state or federal governments, which are up to their necks in other issues.
And the Reserve Bank isn’t going to take SA into account too much when it decides on its next interest rate rise or fall, considering we’re a relatively small part of the national economy.
For property investors, the key is to avoid trying to time the market. Take a long-term approach and ignore the short-term ups and downs as these current falls may be among the most volatile SA’s real estate sector has seen for many years.
Trying to time the market is also dangerous for home buyers and sellers. If you buy and sell in the same market, whether it’s rising or falling, it’s unlikely you will be a long-term loser.
The biggest risk – particularly in today’s climate – is to buy a new home without selling your existing home. Not only is there likely to be painful bridging finance, the chance that the home you’re selling won’t fetch what you need is higher than normal.
Patience and a commonsense approach are the best way to survive a market that’s going both forwards and backwards.