Death, Debt & Divorce

Death, divorce and debt are the market makers for property prices in periods of economic slowdown and a retreating property market. Such vendors are the "willing vendors" who will to a large degree chase the buyers. Executors, divorcees and debt stressed vendors are more likely than not, have to sell. And when buyers are thin on the ground, any reasonable offer will more often than not result in a sale. The 3Ds provide the buoyancy the market needs when other vendors may have deserted the market waiting for better times to return. If vendors don't have to sell, they will happily postpone their decision to sell and wait for more favourable times, especially the investor.

Buyers have been spooked and affected by economic factors: higher interest rates, fuel and food increases, layoffs and the wealth affect of a lower stock market.

Jonathon Dixon, managing director of J. P. Dixon, was quoted in the Domain section of the Age online: He says he has never seen the market turn down as fast as it has over the past few months."It's as skinny as I've ever seen it." In June, Australian property statistics were saying that despite the harsh winds emanating from the US subprime mortgage meltdown, prices here were generally "flat but not falling". In the three months since, the widespread wisdom is that many metropolitan districts have come off 10-15% from the prices that were being achieved in 2007. Last year was an odd market bubble." Too hot," says Mr Dixon "It's a different ball game now."

In an up market, you have buyers chasing vendors. In a down market vendors chase the buyers.

The Reserve Banks about face on interest rate increases may be seen to be the tipping point for the property market. At least another interest rate cut will hopefully restore a sense of normality to the property market and kick start the economy. Investors and owner occupiers have been waiting for such signals that there were to be no more interest rate increases and feel more confident in their buying decisions. And we may well see more vendors and buyers returning to the market, that is, those who have been sitting on the sidelines thus giving more depth to the auction and private sale markets.