One of the things I find that a lot of investors do is spend a lot of time trying to pick the market – that is, trying to pick which markets are going to go and which markets are going to slow – and also those who try and determine where the market is turning from a seller’s market to a buyer’s market and vice versa. In today’s show we talk with Ben Kingsley, from Empower Wealth, about the signs he looks for to detect a turning market.
Kevin: One of the things I find that a lot of investors do is spend a lot of time trying to pick the market – that is, trying to pick which markets are going to go and which markets are going to slow – and also those who try and determine where the market is turning from a seller’s market to a buyer’s market and vice versa. It’s one of those fascinating conversations. I’m going to have it now with Ben Kingsley, who’s the CEO and founder of Empower Wealth.
I don’t know about you, Ben, but one of the common questions I get asked is are we in a seller’s market or are we in a buyer’s market?
Ben: Yes, that’s a great question. This is fundamental research basically. All of us as investors want to try to time the market when we can. I’m still very much an advocate of time in the market as the ultimate – a long-term investor will enjoy the peaks and troughs of a cycle – but in terms of trying to time the market, there is a science to it, and there are things you can look at.
Kevin: Let’s have a look at what they might be. What would you suggest?
Ben: If we’re in a seller’s market but we’re trying to determine whether it’s going to a buyer’s market, the early indicators for the big city markets – where options are involved – are usually a slowing down of clearance rates. Where we’re starting to see the appetite of the buyer is not as strong, so we’re starting to see properties passing, they’re the early indications.
When we’re looking at other markets where options aren’t the most prevalent way of selling – we’re actually talking about Brisbane, Adelaide, Perth, these types of markets – the indicators are days on market and stock on market. Once we start seeing the trend where the days on market is starting to push out, we can start to see that it’s now becoming either a balanced or a buyer’s market. They’re the best indicators.
Kevin: Days on market, of course, from the point of listing to the point of sale?
Ben: Correct. That’s right. Ultimately that’s the only way we can track it, because we’re relying on the data from the likes of Domain to provide that information that we can capture, and then we’re seeing how many days the property has been on the market. Then the stock of market is obviously the concentration of that particular stock in that localized area. Usually we like to think of it as a local government area; just to isolate it to one suburb, there’s not enough data to make a trend or see the analysis work for us.
Kevin: What is the turning point in days on market from where buyers have control to where sellers have control?
Ben: That’s a wonderful question, Kevin. I think it’s different in each market. In some cases, if I’m researching a new market, I’ll actually talk to a couple of local agents in the area. The rule of thumb – roughly – is between 45 to 60 days. Certainly, 45 days, we’ve been up for sale for six weeks. We’re now getting feedback from our agent in terms of are we meeting the market with our price point, and is there’s ongoing inquiry? It’s been up on the website for a while. It’s not getting the same open-for-inspection and interest that it was. That’s what I would look at in a city market.
Regionally, it can be even longer. In some regional centers that indicator can be 120 days, because in reality, unless there’s some major economic activity that’s attracting new arrivals to the area for employment opportunities, we normally see that properties in those areas take a while to sell.
Kevin: Ben, I want to thank you very much for your time. It’s been a great insight there as to the indicators to look for, and certainly days-on-market is one of those.
Just before we go, I just want to make one comment to see if you agree with this about auctions and how much of an influence that has had over days on market, where we see agents who want to take the property all the way through to auction, like a 30- or a 40-day campaign. That’s certainly going to have an impact on days on market.
Ben: It is. Usually, in a really hot market, four weeks is enough for the marketing campaign. In most markets, we usually rely on four to six weeks from a selling cycle. That’s enough time to get the board up, get it listed, open it up four times and maybe a couple of evenings. Then if we have enough interest there, what we’re going to see is you’d be crazy as a vendor not to take it to market – because that’s when you get the emotional result, which is usually an outperform result, as opposed to a private treaty sale, where usually the expectation of the buyer is the price is made and then it’s a discount off that selling price.
Kevin: Great talking to you, Ben Kingsley, CEO and founder of Empower Wealth. Thanks, mate.
Ben: Thanks, Kevin.