Tom Panos opinion: Vital statistic shaping the real estate market for 2022

One often overlooked indicator could be key to helping confused buyers and sellers understand the sudden end of year changes in the real estate market.

OPINION
Who would have imagined the sudden change in the real estate market?

Only a month or so ago there was FOMO (fear of missing out), and prices were going up by the week. Today we have a much different picture.

More properties are being passed in, days on market are getting longer, and many vendors are reducing their expected price to sell.

For many, this is a surprise, but not for me.

In my article in the column two months ago, I predicted that November/December would see great buying opportunities.

Days on market are getting longer. Pic: Simon Bullard.

This prediction is not because I’m a fortune teller, but because 35 years in this business has taught me one most important KPI: The Absorption Rate.

The Absorption Rate is often a number that is not included by Real Estate analysts, but I consider it to be one of the most important.

It describes how soon new listings are consumed by buyers in a given period.

Supply of listings is the major contributor to this formula.

So when I anecdotally discovered that the majority of vendors were holding off until after the lockdown to launch their properties on the market, I was absolutely certain that we would have an oversupply of listings in the last two months of this year.

I’m forecasting that come the New Year, there will be a more normal level of listings on the market which should normalise absorption rate and steady the market.

Furthermore, I’m predicting that in some markets, we could still have further growth. This is because:

— Interest rates continue to be ridiculously low.

— The international borders are opening and returning Australians need a home to live in.

— Mass immigration also needs to be factored in.

Auctioneer Andrew Cooley in action last weekend. Picture: Simon Bullard.

Of course, we have the federal election due in the first half of 2022.

Whilst the Australian Prudential Regulation Authority (APRA) could try and slow the market down further by tightening lending restrictions, I simply can’t see this happening.

Because whilst APRA is an independent body, it is still appointed by the government. And I can’t see the government wanting to create a fall in real estate prices during an election.

So, what’s my advice to sellers?

Firstly, forget about 2021. It’s too late to launch your property for this year, there is too much stock.

Don’t be a mug and try and time the market. Picture: Simon Bullard.

I would be making sure your home is on the market in early January before Australia Day. Don’t do what most vendors do, which is wait until the end of January. You want your home to ideally sell in isolation, not when there’s lots of competition.

Also, don’t rush it.

Speak to your agent before Christmas to get it listed now and launch in early-Jan.

As for buyers, my advice is always the same – don’t be a mug and try and time the market.

The reality is, when buying a property you should be basing it on your life and not the market.

Your time horizon should be at least seven years to ensure you’re covered for any volatility in price movements.

Tom Panos in his role as auctioneer. Picture: John Appleyard

Finally, I want to remind you that realestate.com.au has the largest number of eyeballs on their website over the holiday period.

So, if you’re thinking of selling, don’t miss that opportunity of at least having your home listed online, even if you’re not allowing inspections.