This week's market wrap: Market's down - I'm buying. 🗞️

The Australian property market has changed. Prices are down, buyers are cautious, transaction volumes have fallen and agents are feeling the pressure.

But while others are trying to pick the exact bottom, I’m looking at quality property that’s already 15–20% cheaper and seeing opportunity.

Could prices fall further? Absolutely. But I’m buying for the next decade, not the next 90 days.

Transcript

Copy

Tom Panos 0:00

Today's market perhaps gonna be a little bit different. Today I chose to have an easier Saturday. Like I've had the last few weeks. Last week was a hospital one. I had a few auctions, I could have done, but I gave them out to other auctioneers because, quite frankly, at the moment, they need the money more than than I do because a lot of these people have auctions as their full-time work. And I'm talking to auctioneers and agents around the country today, so don't worry about that. We're going to cover that in a moment. I can tell you, overall, the story hasn't changed dramatically from what we've seen over the last few weeks. The market's tough. Transactions are down, buyers have become cautious, vendors are still adjusting, and agents, mortgage brokers are feeling it. But I want everyone to remember something that I've said for years. What's that line? Some of the best gifts in life come badly wrapped, and strangely enough, over the last few Saturdays, I've actually started enjoying a bit of the slowdown. Not getting up early, not racing from auction to auction, spending more time with family. Today was a bit of a somber day, the last 48 hours. It's the anniversary of my young brother's uh death, 2018. It would have been 50 51 this year. So I've had time to spend time with family because my mum obviously gets very emotional at this time. And maybe that's something everyone needs to understand right now. Markets change, seasons change, your life shouldn't fall apart because the markets changed. So before I get into the economics, the government, the agents, and where I think property is going, please understand this. Don't catastrophize a correction. Because Australia has been through these before. And we all go through them now and we'll go through them again. And what's actually happened? We had a property market that was already correcting, right, from the interest rate rises rises we had late last year. Affordability was already stretched, confidence was weakening, right? That was already happening. So that ridiculous budget and the timing of it was even more ridiculous, right? You just couldn't have brought it in at the worst possible time. And the market went from slowing down to going into a bit of a standstill for a while, but it started sort of volume started to move a little bit now. The markets that that matters because property isn't just another asset in Australia. For millions, Australians have got their home as their biggest asset. And that brings me to something economists call the wealth effect. Right? When your house is worth more, even if you don't sell it, you feel richer. You renovate, you go buy a car, you go to nicer restaurants, you book holidays, you're spending money. But when your house falls in value, the opposite happens. You pull your head in, you postpone the reno, you hold on to the car for another year, you don't upgrade, you don't spend as freely, and that ripples through the entire economy. And that's what we're beginning to see. Now think about the scale of this. If the Australian residential property market eventually experiences, say an 8% peak to trough decline, you're talking about an enormous amount of household wealth disappearing on paper, potentially appearing a trillion dollars. But here's the killer the property value falls, but the debt doesn't, as Ben Kingsley, my mate, said from the property council, you still owe the money. Your 1.5 million house might become worth 1.3. The bank doesn't ring up and say, hey, we've noticed your home has fallen by 12%, so we've decided to reduce your mortgage by 12%. No, the asset gets smaller, the debt stays exactly where it is. That's why falling property prices don't automatically make everyone feel better, right? So let's talk about that. Who actually benefits, right? This is where I think policymakers misread the room. Yes, lower property prices, absolutely they can help somebody to buy, right? It's true, but the group immediately capable of buying is much smaller than the people sometimes pretend. You need a deposit man, you need sufficient income, you need borrowing capacity, you need the ability to service the loan, and most importantly, you actually need to be at a stage of life where you want to buy a property. I mean, I talk to a lot of young people, they're my daughter's ages. A lot of these people, man, do you think that they're looking to get taught up in mortgages? They're into traveling, they're building careers, man. They wanted to start businesses before Mr. So-and-so decided to become their business partner. They're living their dream lives. So you can theoretically make housing cheaper, but that doesn't necessarily mean millions of first home buyers are suddenly going to appear on Monday morning saying, I want to buy. Meanwhile, millions of existing homeowners, which is about 65% of the country, just watch their largest asset fall in value. That's political and economic equation, I think we've underestimated. You may have helped a relatively small group while making a very large, bigger group feel poorer, and when people feel poorer, they behave poorer. That is what is the wealth effect. So why am I not panicking? Okay, because ultimately property comes back to something incredibly boring: demand and supply. You can announce housing targets, you can hold your press conferences, you can put numbers on a PowerPoint presentation, you can tell me what your treasury did, but somebody still has to build bloody houses. And Australia has a productivity problem. Productivity simply means how much output do you produce from the resources and hours we're putting in. If one trade can complete five jobs in a day, and another one can only complete one, right? That is what productivity is. And right now, Australia has got a lot of people that can't do five jobs in a day, they're doing one job in a day. Construction costs remain high, labour's difficult, projects don't stack up, infrastructure takes time, planning takes time, and meanwhile, people need somewhere to live. So fundamentally, I don't see Australia's long-term housing shortage disappearing at all. That's why I'm optimistic about the eventual recovery more than some commentators. Now, when I say recovery, don't misunderstand me. I'm not talking about, hey, you've missed it, and the market went up 10% in a month. I'm not saying prices suddenly rocket back. I'm not saying that we're going back to the boom conditions next month. I'm saying eventually the market finds equilibrium, vendors start getting into acceptance. That's the new price. Buyers recognize value, transactions start happening again because markets don't need everyone to become optimistic. Sometimes they just need everyone to accept reality. And that brings me to the industry that I operate in. I've got a coaching business that works with the agents across Australia, New Zealand, and the UK. We coach some of the best agents in the country. We have four coaches in our business. So I have all these conversations that my three coaches report to me and the coaching that I do. And right now I reckon basically there are three groups emerging. The first is the truth teller. These are the agents who say it as it is, not better than it is, not worse than what it is. They tell the vendor your property isn't worth what it was worth six months ago. They tell the buyer, if you like it, it's good value, buy it. If not, don't worry. They deal in reality, and guess what? That's exactly what consumers want right now. The second group are the exaggerators. For years they could say, I've got another buyer. If you don't buy, I've got this other buyer. There's someone else interested. You better move quickly because someone's coming in with a deposit. Because during the boom, half the time there was actually another buyer. But now that second buyer's disappeared, or the third one, or the fourth one, they're gone. And suddenly some agents are discovering they don't know how to negotiate without FOMO doing the work for them. They don't know how to tell a vendor, I'm not working at this price. And they're going to struggle. Then you've got the third group. The agents simply aren't like these people were brought up in the environment of the boom the last five years and they're just rattled. And this is where the next couple of months become interesting because real estate income has a lag. An agent getting paid in May, maybe the receiving commissions they did from deals in March and April, but the transactions started disappearing in June and July. They're hitting the bank accounts in August and September, October. That's when reality arrives. And I genuinely feel for the decent, hardworking agents who have families, mortgages, and businesses, and all the other people intercollated to the property industry, the mortgage brokers, removalists, you know, tradies. I'm not worried about the truth tellers. They'll be fine. They survive all the years. Because difficult markets don't destroy great agents. They expose who was relying on the market to make them look good. They're the ones I'm worried about. So what do we watch now? So could we become what can be the circuit breaker that changes things over the next couple of months? Here's what you should be watching: economic data of the following. Look at the inflation numbers, look at the employment numbers, look at the consumer confidence numbers, housing finance, auction clearance rate. Look at those, but auctions are only like 15% out of the total market of Australia, so don't worry too much. But watch the withdrawals in there, watch transaction volumes, and obviously every signal coming from the RBA about the future direction of rates, it matters. Because markets don't wait for newspaper headlines saying the button is here. They move beforehand. Bar inquiry starts to increase, good properties begin selling, withdrawans decline, and clearance rates start moving up. I'll be giving you clearance rates tomorrow morning at around nine o'clock. Finance gets a little bit easier, and suddenly somebody who six weeks ago was terrified of buying starts saying, Maybe we should have a look. That's how markets turn. Slowly, then seemingly all at once. And remember this 40 years in this business, nobody rings a bell at the bottom. By the time everyone agrees the market has recovered, the best buying opportunities are normally behind you. So what am I personally doing? I get DMs from people asking. Well, let me finish by telling you my personal perspective. I'm in buying mode myself. I buy real estate over the years. I'm not buying because of negative gearing, never have. I don't gloat about, oh, I'm losing money, the government's going to help me lose half my money. I'm not buying because I think I've magically picked the bottom. I'm looking at properties today in some cases where 20 cent 20% below the levels they're previously trading at. To me, that's interesting. Could they go down further? Absolutely. Could they fall another 5%? They've gone down 20%. Could they drop another five, the ones I'm looking at? Maybe, maybe seven. Of course they could. But I don't care that much. Because when I buy, I'm trying to buy good property in good locations with good loan, long-term appreciation. And if I'm holding something for years, I'm not going to torture myself because I could have theoretically bought it for 2% or 1% cheaper in two months' time. I'm looking at the bigger picture. I'm thinking of horizon periods of years. I'm not looking at months. And here's something else I recognize. I have an unusual vantage point. I've got connections with tens of thousands of agents in the country, and I speak to them on a daily basis. My conversation are with them. I speak to auctioneers, I speak to buyers, I speak to sellers. I'm an ambassador to some of the greatest data companies in the country.au, ID for me. And I've been around long enough to have lived through different property cycles, and I'm looking at both quantitative data from these organizations, but I'm also at the coal face looking at qualitative behavior. I'm looking at what the numbers say, and I'm looking at what human beings are actually doing. You put those things together. I've got historical data, but I've also got frontline behavior. And when those things start lining up, you begin getting a picture. Does that mean I'll pick the exact bottom? No chance. Nobody does consistently, but I don't need the exact bottom. What I need to do is to buy a great asset at a price that makes sense to me. Because fortunes in real estate aren't normally made by someone perfectly predicting what happens next Tuesday. They're made by buying quality when other people are scared, panicking, holding it long enough, and then letting time do the heavy lifting. That's the secret, my friends. That's where I'm at. I'm watching, I'm looking, I'm buying. Ladies and gentlemen, have a good weekend.