15 Oct News that terrifies buyers – Cate Bakos
It’s so easy to get nervous when you pick the paper up or watch television and the fear mongering is on. We see things like“ prices are about to drop by 40%”, “the market is about to crash”. It’s no wonder people get disenchanted with the reporting. This is a big subject and Cate Bakos has to deal with this quite often as many in her profession do. She talks to us about it.
Kevin: It’s so easy to get nervous when you pick the paper up or watch television and the fear mongering is on. We see things like prices are about to drop by 40%, market is about to crash, it’s no wonder that people get disenchanted with the reporting. We try and give you a consistent view of what’s happening with the market, and we don’t use emotive terms like price crash and so on. We generally look at things like what’s happening with buyer sentiment, what’s happening with conversion rates, and we look at some analytics.
Kevin: Joining me to talk about this, because it is a big subject, Cate Bakos who is a Buyers agent out of Melbourne, probably has to deal with this quite often.
Kevin: Hi, Cate, welcome to the show.
Cate: Hello, Kevin, It’s great to be here.
Kevin: Yeah, I despair sometimes when, even on television news, you can watch someone reporting about a market crash, and then they’ll tell you in the next breath that these are the areas you can go to to make massive profits, these are the hot spots. It just, to me, does not make sense.
Cate: Yeah, news sells and that’s the issue but-
Kevin: Or bad news.
Cate: Any news, but yeah, obviously bad news is quite punchy, and in this climate, it’s terrifying a lot of buyers. So we field questions, as you said, all the time. People can easily get wobbled when they’re about to do something or have just done something and then see a headline like 40% price crashing in a city like Melbourne or Sydney. And we have to remind ourselves that that’s an enormous figure, and it would be unprecedented.
Kevin: I think John Cunningham recently came out, John was the president of the real estate institute in New South Wales. I’m pretty sure he is the past president, always makes a lot of sense, and he actually came out and felt he had to say something about that. And I’m so glad he did too, because quite often we just let these people get away with it. They come on, get their five minutes of glory, and then we never hear about them again. No one ever holds them accountable for the fear mongering that they put out there.
Cate: And also looking at the integrity of the data, and data can be manipulated in so many ways that when we look at headlines like that, there’s not a lot of integrity there in that data. We certainly have data to suggest that areas have come off, and it’s clear that we’re in a buyers market. When we contrast it with the height of the sellers market last year, the figure is always a median price. So we’ve got to remember that that’s a midpoint or we’re looking at median figures. And that doesn’t mean that every single property is treated the same.
Cate: In fact, in some areas, properties hold firm or demonstrate a little bit of growth. It’s not just post codes, it’s dwelling types as well. So more than ever, we have to look at the data carefully, understand the integrity of it, and also look at it specifically because markets can’t just be defined with one figure.
Kevin: Wonder why we’ve got this fixation with medians because as you rightly point out, amedian is the midpoint. It’s an indication of where the majority people are buying. It’s got nothing to do with values.
Cate: Yeah, it’s a good point. And you can have a month where you’ve got some houses that are large family homes in established areas with high land value. And that can drive a median price because of the nature of the sale. It might be that you get more houses like that selling towards the end of spring because families are gearing up for a change for Christmas. So there’s lots of market nuances and seasonal changes that can affect median, and we have to be really careful about how we cut the data. And also, when we look at how houses and units are qualified, units can incorporate a broad array of property types. And it’s also down to how the agents record the sale.
Cate: So some of our data that we rely on is very flimsy indeed, and it really pays to have a careful look at the data and also understand that when you’re looking at an area that’s not exhibiting enough data points to draw a trend line. So you might see these hotspot areas in little suburbs you’ve never heard of, and it’s because somebody sold a farm site or they’ve sold an enormous piece of land, and all of the sudden, the area is showing a sale that’s an anomaly result.
Kevin: Yeah, and we don’t ever hear about that. We don’t ever hear what goes to make up that median. And the other point too, Cate, is that sometimes these measures are d one over short periods of time. How month to month, you can track what a market is doing is beyond me. I can look at figures over a year and even say, “Well, I’m not even sure that that is giving me an accurate indication about what people are doing.”
Kevin: Sometimes, the best way is to look … someone buys a property today or … or sorry, 10 years ago, they sell it today. What’s happened in that period of time? What improvements did they make? How did they impact the value of that property as to where it is today? That’s the only accurate measure in my view.
Cate: I think you’re spot on. And every now and then, you’ll see a sale type that had a different set of circumstances around it, and even that can skew the data. So for example, when we’re looking at recent comparable sales analysis, we might see some results that stand out as though it might be much higher than we would’ve anticipated or much lower. And so we can call the agent and say, “Hey, can you tell me about that sales result? Why was it so high?” And they might say there were two really emotionally driven bidders there at auction that day, and they had very emotional needs to have that property, and they took it well beyond reserve.
Cate: Or if it was a bargain buy, we might ask them why it was so low. And it could be that the vendor needed a very fast sale, or they had really tricky settlement requirements, or it could’ve been a badly tenanted property, and the tenant was a nightmare and presented badly. There’s so many behind the scenes reasons for the data anomalies, and it’s impossible to cover them all. But if you’re doing careful due diligence, you’ve got to be prepared to pick up the phone and have a chat.
Kevin: Keep your feet on the ground and don’t believe everything you read all the time. Yeah.
Kevin: Hey, Cate, great talking to you. Cate Bakos is the Buyers agent of the year for Your Investment Property, and she joins us as a regular contributor on the show.
Kevin: Cate, always good talking to you. Thanks for your time.
Cate: You too, Kevin. Thank you.