<\/p>\n
In today’s show we find out from\u00a0John Lindeman<\/strong>,\u00a0Director of Property Power Partners,<\/strong>\u00a0if there is a tipping point when we can see a market turn from a sellers market to a buyers market and vice versa.<\/p>\n <\/p>\n Kevin<\/b>:\u00a0 As we continue to look at what\u2019s inside the November issue of Australian Property Investor<\/i> magazine, my next guest is John Lindeman.<\/p>\n There are so many questions that need answering for you to find the best property to fit your investment portfolio. That places even more importance on planning and research before you buy. Property investing is a very complex matter and throws up difficult questions every step along the way.<\/p>\n John Lindeman has answered many of those questions in the November issue of Australian Property Investor<\/i> magazine, and John joins us now. John is the Director of Property Power Partners.<\/p>\n John, thanks for your time.<\/p>\n John<\/b>:\u00a0 It\u2019s a pleasure, Kevin, and hello, everybody.<\/p>\n Kevin<\/b>:\u00a0 John, I know that it\u2019s only one element of the research cycle that we should be doing, but probably it\u2019s one of the most requested, and that is how do I find the best growth areas?<\/p>\n John<\/b>:\u00a0 That is indeed the most commonly asked question I have, as well. I\u2019ve studied the performance of the housing market and the major indicators and dynamics for about 15 years. What I discovered was that there are three key dynamics to the performance of the housing market. I call them the three Ps, which are people, purchasing power, and properties. If you can measure those accurately, then you can indeed work out what\u2019s going to happen.<\/p>\n But just to explain what I mean by those three Ps: people is really just population growth and a movement of people from one suburb or city to another. The problem with that is that we only measure these every five years in the census. At other times, the quarterly stats produced by the ABS are really just estimates, and they don\u2019t do them at suburb level, so we really don\u2019t know where people are moving to and from.<\/p>\n We\u2019re not a police state, we don\u2019t have ID cards, and we simply don\u2019t track these things. In any case, these people could be potential renters or owner-occupiers, so we don\u2019t really know. Even though we know changes in demand or if we could know that, we wouldn\u2019t know what they were going to do when they moved.<\/p>\n The other one is purchasing power, which is then looking more at how many of these people do actually get financed to buy a property. You can get finance figures. They\u2019re updated every month, but they, again, don\u2019t go down to small areas.<\/p>\n The problem there is that some people, like retirees, don\u2019t actually need finance. You have a huge number of people out there who are overseas investors who are borrowing money overseas, so they don\u2019t appear in our finance stats, either. There are huge hidden numbers of potential buyers out there, which we\u2019re not tracking.<\/p>\n I then looked at the third one, which is properties, and I realized that, yes, we can measure the changes in supply and demand, and we can do that quite accurately with data that\u2019s available readily for all investors. It took me a number of years to work out exactly what the relationship of these were and how investors could use the information.<\/p>\n Kevin<\/b>:\u00a0 Without oversimplifying something, how important is supply and demand to a growth area?<\/p>\n John<\/b>:\u00a0 Well, it\u2019s important because, as I indicated, it\u2019s the only indicator that we can obtain fairly accurately and easily. The other ones, you can\u2019t really measure, but you can measure supply and demand. When I looked at the relationship of supply and demand, I found out that it was over 90% accurate in terms of working out where the prices were likely to be rising or falling in a particular suburb.<\/p>\n Kevin<\/b>:\u00a0 So supply really is number of houses on the market and demand is number of sales?<\/p>\n John<\/b>:\u00a0 In a nutshell, that\u2019s how it works. Yes. You\u2019ll be looking on a listing site such as Domain, and you might go in there and look in a suburb and see how many houses are currently for sale. That tells you the supply of houses in that area.<\/p>\n Then you go to the Australian Property Investor<\/i> magazine. At the back, in the market watch section, look up the same suburb and look up the number of houses that have been sold in the last year. It\u2019s the first figure that appears after the suburbs, so it\u2019s very easy to find.<\/p>\n Those two figures are all you really need, but the important thing is the relationship between them.<\/p>\n Kevin<\/b>:\u00a0 I\u2019m fascinated by this topic because I think there are some interesting stats that come out of this. If you look at supply and demand and you look at the number of sales, you get a factor of turnover. Is there a tipping point there with turnover when we can actually see it move from a buyers\u2019 market to a sellers\u2019 market?<\/p>\n John<\/b>:\u00a0 There is, and again, it took me quite a few years to work out what it was. But as with all these fundamental statistics, it\u2019s really quite simple once you know what it is. The relationship is when the number of houses currently for sale in a market is about the same as the number that was sold in the last year \u2013 that is, the number in the magazine \u2013 you have what I call a neutral market, and that means that prices aren\u2019t moving up or down. If the number of sales is higher, then it\u2019s a seller or a boom market, and if it\u2019s lower, it\u2019s a buyer or a stressed market. It was that easy.<\/p>\n Kevin<\/b>:\u00a0 It is interesting. In other words, if no more houses came on the market in a particular suburb or area and there was enough there for sales for a year, that\u2019s about the tipping point. That\u2019s the balancing point. Has that changed much do you think, John?<\/p>\n John<\/b>:\u00a0 It hasn\u2019t. That relationship has been studied by a number of academics around the world, and they\u2019ve looked at the American housing market and the British market. Other academics have studied the Australian market. All come to the same conclusion.<\/p>\n The amazing thing is that, as I said, it\u2019s over 90% accurate in terms of forecasting the direction. To get the direction of change, what you need to do is to study the figures every month. It doesn\u2019t take you very long \u2013 a few minutes \u2013 and of course, you have the API<\/i> magazine, and you can look up the number of listings, so you can get these figures very easily, and they are a really excellent indicator of which way prices are likely to go.<\/p>\n Kevin<\/b>:\u00a0 Yes, because if you go around Australia, there are some markets where there has been enough supply to last for two years, and that\u2019s a good indicator that there\u2019s a lot of downward pressure on prices.<\/p>\n John<\/b>:\u00a0 That\u2019s right. You can very quickly do little tests. Look at places like Moranbah and compare the number of properties sold in the last year to the number that are for sale right now, and you\u2019ll find there\u2019s about five years\u2019 stock sitting there, so it\u2019s a stressed market.<\/p>\n It\u2019s very accurate and easy to do this, and it warns you off markets. If you\u2019re not sure, if you have somebody saying, \u201cLook, these are selling faster than hotcakes; get in quick or you\u2019ll miss out,\u201d you do this little analysis, and you say, \u201cHang on. No, this is not right. There are way too many properties on the market, and the prices can\u2019t possibly be going up.\u201d<\/p>\n Kevin<\/b>:\u00a0 Yes. Make sure you check out John\u2019s article. Your photo is up above it, I noticed there, too, John. That\u2019s in the November issue of Australian Property Investor<\/i> magazine.<\/p>\n My guest has been John Lindeman, Director of Property Power Partners. The web address is UnderstandProperty.com.au.<\/p>\n John, thanks for your time.<\/p>\n John<\/b>:\u00a0 It\u2019s been a pleasure, Kevin. Thank you very much.<\/p>\n","protected":false},"excerpt":{"rendered":" In today’s show we find out from\u00a0John Lindeman,\u00a0Director of Property Power Partners,\u00a0if there is a tipping point when we can see a market turn from a sellers market to a buyers market and vice versa. Transcript: Kevin:\u00a0 As we continue to look at…<\/p>\n","protected":false},"author":176692473,"featured_media":6062,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[32,10,13,23,25],"tags":[101],"class_list":["post-25250","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buying-a-property-topic","category-kevin-turner-sponsored-channels","category-latest-story","category-selling-a-property-topic","category-sponsored-channels","tag-podcast"],"yoast_head":"\nTranscript:<\/h4>\n