{"id":21843,"date":"2018-07-22T01:00:37","date_gmt":"2018-07-21T15:00:37","guid":{"rendered":"https:\/\/realestatetalk.com.au\/?p=21843"},"modified":"2018-07-22T01:00:37","modified_gmt":"2018-07-21T15:00:37","slug":"avoid-panic-says-one-expert-josh-masters","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/avoid-panic-says-one-expert-josh-masters\/","title":{"rendered":"\u201cAvoid panic\u201d says one expert \u2013 Josh Masters"},"content":{"rendered":"

With words like “avalanche”, “plunge” and “brutal” being used by the media to describe the falling trajectory of property prices and the related credit that banks have sought to strip from buyers at an alarming rate, Josh Masters<\/strong> says suggesting households “avoid panicking” is like telling someone who is afraid of heights not to look down.\u00a0 We discuss data that gives a clearer indication about the actual state of the property market.<\/p>\n\n

Transcript:<\/strong><\/p>\n

Kevin:\u00a0\u00a0<\/strong>There\u2019s always mixed reporting about the property market, but I think we have to understand that with every bit of bad news, there\u2019s always some good news as well. But we also have to remember that bad news sells newspapers and sells stories. Unfortunately, a lot of what we read is believed and is seen to be the whole story.<\/p>\n

I want to talk to Josh Masters from BuySide about this. Josh has written a number of articles, one of which we\u2019re going to talk about now.<\/p>\n

Good day, Josh. How are you?<\/p>\n

Josh:\u00a0\u00a0<\/strong>Good day, Kevin. I\u2019m doing very well.<\/p>\n

Kevin:\u00a0\u00a0<\/strong>I was telling you prior to this interview about the conversation I\u2019ve had with a number of elderly people at a conference I\u2019ve just come away from today, and they\u2019re concerned about the market. Unfortunately, a lot of the press we see is all doom and gloom, bad news, the market is plunging, and all this kind of stuff.<\/p>\n

So, I can understand why they would be concerned, but we have to balance it up. There are a couple of reports that I know we\u2019re going to talk about now that have just been released. Talk about those.<\/p>\n

Josh:\u00a0\u00a0<\/strong>Kevin, it\u2019s important to note that the media feeds on hype, and the more they can go into an exaggerated viewpoint, the more papers they\u2019re going to sell or placements they\u2019re going to sell. I think recently, we\u2019ve seen a lot of that come out. But to bring it back into perspective, there have been two great reports that CoreLogic have brought out recently, one around the volatility of the market and which price points really outperform versus others.<\/p>\n

The graph that I pulled up was the fact that the cheapest margin in the price brackets actually shows the least volatility over time, which means if you want to preserve your capital, it\u2019s often good to get into the cheaper end of the market. It doesn\u2019t go up as high as some others do, but it also doesn\u2019t dip, and it very rarely goes into negative territory.<\/p>\n

On the flipside, we\u2019re seeing some of the most expensive properties right now really suffering, and you have to ask why? But in history, it\u2019s actually been some of the most expensive properties that have been the most volatile. So, in good times, they really go up by a lot, but in bad times, they actually fall into negative territory quite badly.<\/p>\n

A lot of the media releases that we see these days, when you actually dig into where this negative territory is coming from, they\u2019re actually highlighting the fact that it\u2019s probably more so in the $3 million to $5 million price range. And that actually is reflected in CoreLogic data.<\/p>\n

Kevin:\u00a0\u00a0<\/strong>We\u2019ll get a copy of that graph too, with CoreLogic\u2019s permission, and we\u2019ll put it into the transcript. This interview will be transcribed, so go down below and you\u2019ll see the graph that Josh is talking about.<\/p>\n

Mate, pull this into perspective for me \u2013 maybe relate it back to what happened around 1988, 1991, 1992, that era.<\/p>\n

Josh:\u00a0\u00a0<\/strong>Look, the property market, as much as people like to say it always goes up, it doesn\u2019t. It does fall into negative territory. And it\u2019s important to go back in time and look at the historical data and see where the dips have occurred. I think the second chart that we looked at with CoreLogic highlighted the declines in the market \u2013 for brief periods.<\/p>\n

And if you look back far enough, you go back to 1992 when Hawke and Keating were in government \u2013 or at least Keating anyway \u2013 there was the recession that we had to have, as they said. And that was when we saw the greatest declines in the property market in Australia in the last 30 or 35 years, which actually totaled around 11.6%.<\/p>\n

Kevin:\u00a0\u00a0<\/strong>Yes, I think that was around 1988, 1991, something like that.<\/p>\n

Josh:\u00a0\u00a0<\/strong>You were saying you just got into real estate at that time, and you had to go and tell people that their houses were worth a lot less. And it would have been quite significant at that time, because this is just an average figure, 11.6%.<\/p>\n

But it\u2019s good to keep in perspective when people say \u201cOh, the markets are falling,\u201d we see the stock market go up and down like a yoyo, but to think that the most decline in the market was 11.6% for property, it\u2019s actually not too bad in retrospect.<\/p>\n

When we look at the other periods in time as we go through from then until now, we see the average being probably around 6%. Now, that\u2019s really important because when you look at today\u2019s decline in the markets that have happened recently, we\u2019re at probably 4.5% or 5%, let\u2019s say, and people are wondering \u201cOkay, how long is this going to keep going? Are prices going to start going up?\u201d<\/p>\n

It\u2019s easy for us to get stuck in a mentality that this will go on forever. You read these newspaper reports and the sky is falling and it\u2019s a bloodbath. But the reality is we\u2019re probably reaching an average situation that the declines have reached in most other periods of time, and I expect to see some natural price growth coming back into the market.<\/p>\n

We\u2019re in winter now; maybe that will happen in spring. We don\u2019t know what we\u2019ll happen, we can just look at this data and say \u201cOkay, what\u2019s been the performance over time?\u201d<\/p>\n

Kevin:\u00a0\u00a0<\/strong>Yes. The good news is that unemployment figures are quite good, inflation is quite good, interest rates are at record lows, and I think reflecting back to the last time the property market had a major drop was about 30 years ago.<\/p>\n

Josh:\u00a0\u00a0<\/strong>That\u2019s right. And I highlighted in this article, there are a lot of negatives that you can play on out there \u2013 affordability, oversupply, etc. But this is Australia\u2019s 27th<\/sup>\u00a0recession-free year. Unemployment back in the recession in 1992 was around 10.7%; now it\u2019s at 5.5%. We have low inflation, we have record low interest rates.<\/p>\n

And what\u2019s more, the banks are assessing us at around 7.25% before they even give us a loan in order to make sure that the economy is resilient enough when those rates do rise \u2013 and they will \u2013 to be able to afford it.<\/p>\n

Kevin:\u00a0\u00a0<\/strong>On balance, everything does look quite good. It\u2019s not boom time, but it\u2019s certainly not disaster time, either.<\/p>\n

We\u2019re going to put those two graphs that Josh has mentioned into the commentary below here. They come to us with the compliments of CoreLogic, and we thank them for allowing us to use them as well.<\/p>\n

Josh, it\u2019s always great talking to you, mate. Thank you so much for your time.<\/p>\n

Josh:\u00a0\u00a0<\/strong>My pleasure, Kevin. Thanks for having me.<\/p>\n","protected":false},"excerpt":{"rendered":"

With words like “avalanche”, “plunge” and “brutal” being used by the media to describe the falling trajectory of property prices and the related credit that banks have sought to strip from buyers at an alarming rate, Josh Masters says suggesting households “avoid panicking” is like…<\/p>\n","protected":false},"author":176692473,"featured_media":21844,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[32,33,10,11,13,36,22,25],"tags":[101],"class_list":["post-21843","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buying-a-property-topic","category-case-studies-topic","category-kevin-turner-sponsored-channels","category-kevin-update","category-latest-story","category-property-investment-topic","category-research-topic","category-sponsored-channels","tag-podcast"],"yoast_head":"\n\u201cAvoid panic\u201d says one expert \u2013 Josh Masters - 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