What does property & Bitcoin have in common?
If you watched the news or scrolled through your Facebook newsfeed around October last year, chances are you were introduced to bitcoin. This crypto-currency caused quite a stir, being the headline act for a new transaction system that increased the efficiency of currency exchange and threatened the necessity of a central banking system. To that end, if you mention bitcoin to a passer-by or family member they may look at you like you’re wearing a tin-foil cap. People tend to group crypto-currency investors into the same category as conspiracy theorists, but there is serious merit and technology behind the popular buzz.
However, that is a topic for another day. What is interesting about bitcoin, from a real estate point of view, is how public attention altered its value.
Bitcoin gained traction as a “get-rich-quick” scheme, with many starry-eyed investors dumping money into the currency on reports of massive, immediate returns.
Although bitcoin has been around for about 9 years, it took the media world by storm only a few months ago when more of the public became exposed to the so-called overnight wealth of investors. You might have heard many people talk about how they held bitcoin years ago but sold it, having regretted the move in hindsight. I personally had a friend who told me that in 2012, when he was travelling America, poor and hungry, he sold 5 bitcoin that he owned (worth $13.00 each then) to a shady back-alley character for some cash to buy lunch. Today 5 bitcoin would clock up close to $50,000 AUD.
However, things changed when the media got involved. Bitcoin, like other commodities, is predicated wholly on market sentiment which is a fancy way of saying public opinion. In the early months of 2018, with many people predicting a decline for no other reason than it can’t keep growing, skittish investors sold out, and the market dropped. That is not to say it hit rock bottom, but it fell into a trough.
So what does bitcoin have in common with property? The simple answer: public opinion (and media hype) can have a detrimental effect. Property slumps are a particular example of this.
Across the industry, auction rates have dropped to 60% last week. There are quivers from purchasers in relation to the unknown outcome of the Royal Commission. These influences alone have had an impact on buyer confidence in recent days.
But then the property prices in our regional market have remained strong. Medians have grown in some cases to double what they were a year ago, and strong results continue to be achieved. So where is the doom and gloom
When people speak of downturn in the market, especially in the Kinglake Ranges, it is disingenuous. All that a lack in buyer confidence may mean for vendors is that they will not be able to ask values that have not already been established. The graph looks a little like this.
The blue line charts the Kinglake Ranges’ growth by 49.66% on average between December 16-17, and the approximate 10% industry drop since April. The orange line shows that we are still leagues ahead from where we were 18 months ago.
So you see it is not a drop in the market, more of a settling into established averages. Strong results are still recorded everywhere, but vendors need to pay extra special attention to what is realistic and what is optimistic. There was a time when vendors could ask at the very top end of the pricing scale and in most cases get it, but the market has settled. As previously discussed, the growth boom of the last 6 years (and in particular 24 months) has been a natural catch-up, albeit a quick one. Average capital growth per year hovers around 14% - the same as metropolitan Melbourne – and sales, though their average time on market has increased, are still as steady and ample as they were.
A simple way to explain this within the context of the Ranges is to say that if the market has increased in the last 12 months by 49.66%, but has faced a turn of 10% across the state in the last few months, that is still a positive increase of over around 40% over the last year and a half.
The moral of the story? Do your own research (or let us do it for you). Reporters love a catchy story, whether it is massive growth or massive loss (like bitcoin), but the reality of a steady market is never as interesting. “Steady” may not sell newspapers, but it certainly sells houses, and it is good news if you are a vendor.
To maximise the benefit of our market knowledge, get in touch with the Sales Team at Integrity Real Estate today on 5786 2033.
