The PROPERTY DOCTORS, Sydney Australia Novak Properties
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The PROPERTY DOCTORS, Sydney Australia Novak Properties
NOVAK NEWS - IS IT A GOOD TIME TO BUY OR SELL UNDERSTANDING THE FOUR PHASES OF THE SYDNEY PROPERTY CYCLE?
Ever wondered why some property investors always seem to make smart moves while others struggle? The secret lies in understanding property cycles—the fundamental rhythms that dictate real estate markets.
Michael Burgio and Stevan Bubalo take listeners on a fascinating journey through the four distinct phases of property cycles: downturn, stabilisation, upturn, and boom. Rather than abstract theory, they deliver practical insights about recognising each phase and leveraging its unique advantages.
Counterintuitively, downturns offer golden opportunities for upgrading properties. The mathematics is compelling—lose $100,000 selling your apartment in a down market, but save $250,000 on the larger home you're purchasing. Meanwhile, stabilisation phases provide precious breathing room for thoughtful decision-making without the pressure of rapidly moving prices.
Their analysis of current market conditions reveals we're likely entering an upturn phase, with increasing buyer numbers at inspections and quicker sales reflecting growing confidence. For property owners contemplating their next move, this timing insight proves particularly valuable.
The hosts share fascinating anecdotes from their frontline experience, including heartbreaking stories of sellers who misjudged cycles and found themselves priced out of the market they hoped to re-enter. They also reveal insider techniques for identifying market shifts before they become obvious—monitoring luxury car listings, tracking expired property listings, and reading media sentiment.
Whether you're a first-home buyer, investor, or looking to upgrade, this episode equips you with the cycle-reading skills usually reserved for seasoned property professionals. Listen now to gain the critical market intelligence that could save you thousands on your next property transaction.
Good afternoon everybody. Welcome to Monday Night News. It's a Monday, I know that for sure. I've got myself, michael Berger, my colleagues Devon Bublo, and tonight we're going to be talking about the property cycles. We've got downturns, downturns, stabilizations, upturns and boom. Sorry, I just dropped a drink, a little hair everywhere, passing it on.
Speaker 2:That's a terrible start. No, we're right on track. So good to be back with you, michael, on this Monday night. And tonight's topic, something we thought might be of interest to everybody and that's not just spruiking real estate, but let's talk about the cycles that you're going to find in the world of real estate. And where are we? In what cycle are we?
Speaker 1:And let's just go from there we're just talking about the macro cycle. So there's micro cycles where everyone talks about selling in spring and month to month. We want to go a little bit broader and a little bit more holistic when it comes to cycles over years.
Speaker 2:So, yeah, look, as Australians, we absolutely love real estate, northern beaches, most people, michael, you and I could attest that everyone likes to make fun of being around a real estate agent. But wherever we go we go to a party. Everyone wants to talk about the market, a real estate agent. But wherever we go we go to a party. Everyone wants to talk about how's the market, what's going on ins and outs. So, look, we've basically come out to identify that the property cycles, or the market, is actually split into four individual phases and each phase comes with pros and cons and probably more so to do with residential real estate, commercial, probably a little bit more factored by economical circumstances, but we're going to talk more residential today.
Speaker 2:So what are the four phases in real estate? Number one is when that market starts coming down. That's called, obviously, the downturn phase, stabilization, it levels out, then we'll start to see an upturn and, um, then it's generally followed by a boom period. So, um, let's get into it, michael. We'll talk about kind of what, what phases, what they, what they detail, and then, essentially, when we've seen them.
Speaker 1:It's a little tricky because a lot of the time you don't know what phase you're in at the time. A lot of it's looking back, historically going. It's almost like it's we shares. It's very tough to sell at the top and buy at the bottom and top analyst always says you don't know you're at the top until it starts going down and you don't know you're at the bottom until it starts going back up. Yes, so it's very easy to look um, and you always have the people who, well, I've got one client, we drive past this one house and he goes oh, I could have bought that for X amount this many years ago. So it's, I suppose, just because you're in a downturn or a stabilisation period. There are pros and cons to buying or selling and, believe it or not, sometimes it may be good to sell in a downturn market and maybe we'll start with that. Yeah, um, some pros and cons on a downturn market. So maybe, first of all, what is a pretty self-explanatory.
Speaker 2:It's a period um in which property prices are generally falling or coming down I won't use the term falling because I don't really fall far, but they definitely do cycle up and down and it's typically the downward cycle. And there's a number of factors that can really come into play for these periods. Obviously economic factors, um rates, things like that. That's typically what seems to drive our, our markets um economic slowdown. You know the g, gfc, that type of stuff. It's typically got to do more around the access to money, things like that. So that's a good point.
Speaker 1:Our interest rate. So a government decision can impact the market and it's probably very easy. Just in the last couple of years, if you look at, we'll get into where covert and what that cycle was. But just in the last two years where you saw interest rates go from 1.7 percent to six, seven percent, we saw that market go down. Yeah, but pros and cons of buying or selling in a downturn a big pro if you're upsizing.
Speaker 1:This is almost like a market time to do it yeah, this is a cycle that you want to be doing a deal and the reason is and the simple numbers. Let's say you're selling your million dollar two-bedroom apartment. Let's say an upturn market it was 1.2, now it's a million. You may think that's terrible, but you've got to look at what you're going to buy now. Let's say you're upsizing to a two million dollar house and in an up market that is 2.2. But in a down market that is 1.8, 1.9. So even though you're selling for 100 or 200 grand less, you could be buying. I need to make the downturn a bit more drastic. Let's say 2.5, now it's 2 million. You're saving 500 000. Yes, you sell for 100 grand less, but overall you're in a better position?
Speaker 2:I don't see. You'll take 10, just say it's down 10. You lose 10. You're down 100 grand 100 000. Sorry the one you're buying two and a half. Yeah, it's down 250 000.
Speaker 1:So you're actually in the green 150 000 um upsizing in that down cycle I suppose that downturn market's a bit tougher if you're the one selling that house you want to upsize in the down market downsides if you can avoid it.
Speaker 2:Um, what are the signals? What are some of the things to look out for and how to identify what a downsizing market, uh, might look like is typically your homes are going to sit. What a downsizing market might look like is typically your homes are going to sit on the market longer. They go market. They go market will push out. A Northern Beaches property will generally sell within two to four weeks. In a downturn market it could be eight weeks, sometimes even 12 weeks.
Speaker 1:You could see a property out there, I think, a trend for agents. We look at expired listings. So typically when an owner signs of agreement it's 90 days with an agent. So it's um, because even in a good market some listings can go a little bit longer. So but the downturn it's really 90 days plus I, I reckon. So if you start seeing properties be with one agent, not sell, go to another agent, that's probably your easiest indicator to see, and it's not just one property You're talking. If a suburb may, let's say, chroma, 10 houses selling a month, if you're noticing 10%, 30% of them are taking a couple agents to sell, that's probably a key factor for you to look out.
Speaker 2:Yeah, definitely, definitely. The other thing also is discounting, so it's not that common, but agents will generally have a guide price. You see that price coming down. It's typically an indicator of, and not for one property but across the majority of the suburb. You will see.
Speaker 1:Cause there are bad agents out there who sell low pricing in good times. Absolutely, there's a few down the street.
Speaker 2:So that's your downturn market and I think, as an indicator for Sydney and definitely the Northern Beaches, that was 2022, 2023, even last year, 2023. Probably the main one, I would think. Um, just as interest rates kept pushing up and up and up, and uncertainty and an unclear message from from um the federal reserve bank as to where rates were going, really, really pushed that market down. So that was a downturn market.
Speaker 1:The next cycle stabilization. What is that?
Speaker 2:stabilization. Well, it's, it's pretty easy as well. It is a level playing field. It's typically the market isn't showing price, isn't showing indicators of trending downwards anymore, but it hasn't seen or is not seeing a rapid increase or any kind of increase really in um, in property pricing and, like you said, michael, there's there's pros and cons to both as well um I think a good pro would be um, buying and selling is a big decision for families.
Speaker 1:They think about it a long time. There's a lot of emotion, there's a lot of decisions out there and what can be very bad. And agents always say you want to buy and sell in the same market. And a big reason for that is there's nothing worse than, let's say, in an upmarket market you're selling your million dollar apartment to buy that house for two million dollars, but the market's going up so much that you wait six months and the property you were going to buy is now worth 2.5 and you can't afford it. And then you look back at what you've sold now. Now that's 1.2, 1.3 to buy back in.
Speaker 1:That can be very heartbreaking and we see a lot of people end up just not buying and stay in the rental market. When I remember hearing this forest story in Worrywood, it was before COVID. This guy, finance, thought the market was going to tank because of COVID. They sold their townhouse for, let's say, it was 1.5. As we all know, the market went up 50% and they were priced at they couldn't do anything and that's heartbreaking to hear. So that's where a stable market, as much as it doesn't have all the media attention of a great market booming, it can be um desirable for when you you've got a bit more time to make your decision, you can do that due diligence yeah and it's just you feel safer, you can make you know again just the pressure of the whole property property situation it's not on you.
Speaker 2:in the indicator of the stabilization period is that you're seeing properties transacting, typically probably within a four to six or eight week period, but you'll notice that the advertised price and the sale prices are relatively similar to where they are. Um, there's still agents that under quote, but the majority of them will be selling close to what the advertised price is um with those. So stabilization period sorry to give you an idea is I would say say we've just seen one, we're coming out of one Even today is I think we're on the fringe of the upturned stabilisation phase. As agents we're tracking the number of buyers coming through, open homes and so when we're seeing a consistent number of potential buyers coming through, not a huge increase, that's telling us it's a stable market as well. We can week out.
Speaker 1:But I think you're spot on with the key. It's also very hard for owners to get the information with pricing. But if you have a good relationship with an agent, they have access to software where they can. Rp data will capture the list price. So the agent started at $1.8 and it sells for $, for 1.9 or 1.8, and it's downturned that list for 1.8, then it's 1.716. A lot of that data is not necessarily as easy to get publicly and realestatecom can be quite misleading with, as you said, agents under quoting to make it look good. But any decent agent should be able to get you some of this data as well. Yep, now the next phase upturn. The upturn phase. Let me guess Things are going up.
Speaker 2:Things are going up. So it's not that it's completely out of control, but prices are moving up. It's typically got to do with confidence and again our market's driven more so by access to money. But we're seeing the messages in the media already Interest rates starting to come down, talk of future interest rate drops as well, and these are boosting buyer confidence and we're starting to see obviously a very, very busy weekend across the apartment market. This Saturday, I think my colleague Glenn our colleague Glenn had three apartments open, over 40 buyers through those three apartments on Saturday, which is a huge increase from maybe three or four weeks ago and we're probably seeing, you know, half of those numbers. The upturn phase is a good time to buy as well, so you're kind of getting into it just as the market's picking up. If you're looking at buying, it's still a relatively I won't say safe, but it's a little bit easier of a path to navigate.
Speaker 1:But better buying if you're downsizing, because when we're using that analogy before your $2 million house, you can get a $2.2 million price. So you're up $200,000 compared to the $1 million maybe $1.5 million, but keep in mind more competition. So this is when you're in the downturn where you may be the only offer maker. You've got a little bit more time with that transaction, getting contracts to check. So probably more so in the next phase, which we'll get to. But you see a lot more buyers pushing for an exchange on a cool-off period just to lock up the property. But this is also when the agents can be like another buyer's got a contract. So I think to notice speed you have to execute once you see the property, you hear it. I saw it on Saturday and it's already sold.
Speaker 2:It's on Monday or it's sold on Monday. The other thing I was going to say is that typically an upward cycle, as much as there's competition for buyers, as more buyers are entering the marketplace, typically you'll see an increase of listings. So owners that have decided not to sell because prices were coming back and now thinking look, this is the time for me to get on the market, sell and look to change my property position. So, um, with the upturn, not only are there more buyers circling the market, you should see an increase in the number of properties for sale. So there's.
Speaker 1:There's definitely these pros and cons for each of the markets, like the as much as booming, if you're buying, it may not, um, sound good because you're potentially paying more, but you also have more stock to choose from. And then, as much as everyone says, oh, they want to buy when the market's going down. Yeah, it's very tough and you touched on it before media sentiment each market plays a big role. I know, I see this a lot in residential compared to commercial, where an article could, or a news, uh, uh, the presenters online are talking about um, interest rates dropping, great market, a great real estate market, things, things are going up. You will hear the next conversation with a buyer or a seller how about the market? How good, did you see this? Did you see that? And everyone's just got that extra jump in their step when it comes to auctions, bidding or making offers. And then, on the reverse, when things are negative, like it's highly emotive's, um, highly emotive, I think would be the word yeah, um, the way you can.
Speaker 2:I was gonna say also that, as a consumer, like michael said, we as agents are on the front line, so we've got our fingers on the pulse. We can see these changes coming through. If you're a consumer, you're a buyer in the market, you don't have access or you don't know a good agent, um, have a look at the properties you're looking at and then see how quick they're turning over, but also pay attention to how many other people are attending the open homes that you might be attending. If the volume's high and the turnover's quick, we're in an upward cycle.
Speaker 1:There's a lot you can see without having any knowledge of knowing any agents. You can see for yourself. You can see if there's a lot of people at the open homes. You can see if properties. Properties are up and like realestatecom, I believe, they tell you when something's listed and so, like you can see how quickly properties are selling to give you a bit of an idea. But let's get on to the next one. The fun one phases in property market.
Speaker 2:The boom, the boom boom. When did we see a boom sort of boom straight after, covert. Whenever I think there's going to be a drop, like you just mentioned, mich Michael, with the gentleman in Worrywood, and a boom cycle is basically, from my experience, is the upturn phase, but it combines a larger volume of buyers. But then it also starts putting in the fear of missing out with buyers and essentially, yeah, the buyers fuel their own market to this degree and it takes off and it can go, it can move really rapidly.
Speaker 1:Essentially, you see a property on saturday, it's sold on saturday, yeah, this is when, I think, just taking a step back also we saw the latest boom was influenced by the government slashing interest rates. Yes, so that's a like you want to. People always want to look for indicators. How can you get in before the boom or when you should act? A lot of it is based. These macro cycles are heavily impacted by global affairs and national policies. So we saw the virus COVID and everyone thought the market was going to go down. And then the government impacted the market by let slashing interest rates from four percent to 1.5 percent and then you saw the market shoot up. It's um, it's crazy how and this is where it's very important which government's in in power, and also, you may not be into politics or anything like that, but it's good to sort of just keep an ear out of what are they doing and how could that impact the market. So we're in a boom. What, uh, let's say what are some pros for buyers for?
Speaker 2:buyers. You can buy a property quick. That's a pro. There's more choice, more choice more choice. Yep out there, um. I think if you're an experienced buyer and you know how to transact quickly, it's going to put you in an advantage, um, over buyers who might have just entered that property cycle so having your finance approved, the confidence definitely.
Speaker 1:This is when the the saying is like I'm not, we've got all, like we're buying it, all cash we can make. Make the offer today, sign the contract no cooling off and execute.
Speaker 2:That's not very important in a downturn because there may only be one buyer, but in the booming you're competing with multiple buyers probably four or five offers on every property that you're looking at, and you're right, michael, and it's those buyers, I think, that have experienced the upturn. Um, I've also experienced the process of how to put in an offer, moving quickly, things like that. Now, dare I say, um, we have a, we have a saying, and it probably applies everywhere. What is it? In good times, bad habits form. In bad times, good habits form when the market's really good. There's a lot of people that decide to join the real estate industry and you know their, their experience or, um, their luxury car purchases go up.
Speaker 1:I used to track that, actually the pricing, when the end of the you know the check the property listings. I was checking the luxury car listings. So during the good times there was very little. Everything selling quick. They'll say only 10 Audi, r8s or Porsche, and then in a downturn you see all these things go up.
Speaker 2:So it would indicate the number of luxury cars for sale, that's a good point.
Speaker 1:So, yeah, in a boom time the agents won't call you back on monday. In the down time they're calling you back on saturday they're calling you back. A good agent will call you all the time. But that's the importance of being proactive. A lot of the time the agents don't have to work too hard to sell the property in the boom and its buyers basically throwing themselves. It's like being the pretty girl at the dance everyone just throwing.
Speaker 2:We will know but, we've seen in movies, guys just throw themselves at the pretty girl yeah so, but the boom cycle as well and this is the message I'd like to say to people is the best time to buy a property or sell a property is when you need to buy or when you need to sell a property and people say buyers will say, oh, I don't want to pay, I don't want to buy in the boom, or I overpaid for a property. You're only overpaid for a property when you sell the property and didn't turn a profit. You know if you're going to hold that home or that apartment or that commercial space for you know seven years or 10 years you're going to be coming out ahead and I've seen buyers believe it or not. Just as an example, I'll have an apartment for sale at a million dollars.
Speaker 2:The market's super hot. It goes to 1.1. They turn around they say, look, I'm, I'm sick of competing with everyone, I'll just pay 1.2, buy the thing. Okay, it's. It's significantly over market the price they've paid. In two, three years the property's worth 1.2. Yeah, and they've secured it. You know, a few years earlier I haven't, haven't really capitalized on three years growth. They're going to hold it for another 10 years and they're going to double their money anyway.
Speaker 1:We have a great graph where it's like the last 40 years of history in pricing and it's literally every 10 years the property market has basically doubled. So if you overpay, just wait a few years. But also there's nothing wrong with overpaying if you've loved the property and you're sick of it, absolutely.
Speaker 2:If you're going to live there, it's the home that suits your family and you're going to get in there, and it's close to the school you want your kids to go to, or your kids go to what's it matter?
Speaker 1:Are you going to?
Speaker 2:sell it in 20 years.
Speaker 1:Also, I remember when I was looking for my apartment I probably shouldn't have because then I just paid it because I was like it doesn't matter, I just wanted to secure it.
Speaker 2:And we're not saying look, don't go beyond your means, Obviously be smart and you've got limits to work to, but I haven't seen property turn bad. Like my colleague Glenn says, it's not fruit, it doesn't go bad.
Speaker 1:What are some negatives during real estate?
Speaker 2:in the boom Look, it moves quick. It's incredibly frustrating as a buyer in that boom period where you know, as agents, even they say, oh, you're the agent, you're doing this on purpose. It is just such a large volume of buyer activity that we're managing that. It is incredibly stressful for a lot of buyers. It's a lot of work on the agent side that you don't see in the background as well, managing all these buyers and trying to communicate with everyone to the best, to the best capacity.
Speaker 1:But the bottom line is it moves really, really quick so it's important to buy in the same market, because you could be needing to buy something, definitely if you're selling and buying.
Speaker 2:You want to do it in the same market. Typically, what follows the boom is the downturn. Yes, so the buyer frustration reaches to a point where buyers like you know what, I'm sick of this not going to buy anymore, and then a large portion of the market drops out. The government might uh, you know, embrace right, yeah, try to settle the market, and then you see that downward cycle again so to spot the boom, would you say.
Speaker 1:That's when you start hearing oh, this sold for half a million at auction. This is when you see sold in 24 hours.
Speaker 2:Yeah, this is when you see like what else well, the indicators to me is how quickly properties are selling.
Speaker 1:Yeah, so, on the market, off the market, on the market off the market and maybe more off-market deals, because agents that don't have more markets yeah, I know, in the downturn nearly everything has to go to market, do all the marketing to find the buyer.
Speaker 1:But in the in a boom or a good time like a lot of time you have a property, you get 40 people through the opener, you got 10 offers. You can sell another couple of properties without any marketing. That's right. So that's probably in the upturn and boom a little bit more important to try and get on the agent's database even a lot of um, seasoned clients of our seasoned buyers. We see them create a second email address just for real estate. Yeah, because they know the importance of judging yeah, absolutely, absolutely.
Speaker 2:Mine's called stevan bulo property dot one seven, seven, five, six, six, three, one, something like that. No, it's kidding, um, but they're kind of the four phases to look out for. Where are we at the moment? Personally, I feel as though we've come out of the stabilisation, we're in the upturn phase, and the reason I say that is on the front line, we've seen a good increase in the number of buyers circulating in the marketplace. We've seen relatively interest rates the positive message with interest rates we're seeing offers coming in on the majority of properties relatively quickly in the residential market, and these are all indicators that there's a slight upturn.
Speaker 2:In my opinion, I think rates will play the biggest factor right now because obviously we all feel better, but you know, unless we can spend more, we can't pay more. So I think we're in the upward trend now and I think a lot of people also that had thoughts of selling realize how hard it was to get a loan and are keeping property longer. So there's there's not as many listings on the marketplace either. So all those factors indicate to me that we're starting to see the market move a little easier. Good, I think that covers it. I think so. I think so, guys, like always, if we can help you michael Bergio, stevan Bublo. We're at NoVoke Properties Anytime. Reach out Love to answer any questions you've got.
Speaker 1:Thank you very much. Cheers, bye, bye.