It’s the week before Christmas 2010 when I bump into Alex, a local landscape architect.
Alex is a great guy but on this occasion it’s like talking to a statue carved out of ice.
So I have a go at breaking the ice.
“Everything okay mate?”
He shakes his head with utter disbelief and then he unloads.
Short story goes like this…
For the past three months, he’d been working with a youngish couple (Jayson and Jayne) in Mosman on the lower North Shore of Sydney to redesign their front and back yards.
Anyway, Alex reckoned Jayne would email him every second day with another instruction…” …add this, change that, move this, cut that out”
It drove him to despair.
Presenting the final plan
He met his clients in their newly built mansion and as Alex began unveiling the plans, Jayne stopped him.
“Before you start, we need to tell you something…we’re not going ahead”.
“Haha, very funny”
And Alex proceeded to take out the plans.
“We’re not joking” she said sheepishly.
When Alex saw she was serious, he could feel the hairs on the back of his neck stand up.
“Why am I finding this out now and not a few days or weeks ago?”
It turns out, Jayne and Jayson had one hell of a fight the previous Friday night after a few drinks and realised they had a choice…
They either sell the house or get a divorce…which would have meant selling anyway.
So the following morning, Jayson went and saw a real estate mate of his and put the house on the market.
But on one condition…
Under NO CIRCUMSTANCE, was the agent to put a ‘For Sale’ sign out the front.
(That would be too humiliating).
Eventually the agent acquiesced and then shared this little gem with Jayson…
“Just so you know, your house and one other in your street, are the only two NOT on the market right now”.
Alex reckoned Jayson was almost dry reaching by this point.
What happened?
By late 2010, the after-effects of the GFC (2008) were beginning to bite hard. Especially jobs cuts.
You see, Jayson was a big swinger with an investment bank and when they shut down his ‘desk’, he and Jayne were totally blind sided.
Eventually they fell behind in their repayments and were forced to sell.
(BTW, property prices in Mosman dropped by as much as 40% during the GFC. Not that Mosman was on its own).
Get out now!
About two weeks ago, NAB’s CEO, Ross McEwan advised struggling homeowners to get out now while they had some equity left in their home.
This shouldn’t come as a surprise though.
Since we went into lock-down, I’ve been suggesting to clients in our monthly videos to take their read on the economy from the banks.
Not only can the banks see the financial positions of nearly all Australians, they have more skin in the game than most as well.
More than the media, politicians, analysts, fund managers, stockbrokers, the whole lot.
In other words, the banks can see what’s coming and they’re worried.
In fact, I reckon there’d be a few bank executives getting around town in nappies at the moment.
Profit on the purchase
In the last couple of months, I’ve had a few clients ask about getting into the property market, especially with interest rates this low.
My advice is to keep your powder dry.
The banks have already indicated the Sydney and Melbourne property markets could drop 20-30% by the end of 2022.
And that’s because 1 out of 10 mortgagees are already in financial distress and its expected that figure could climb to 1 out of 5 in 2021. All thanks to rising unemployment. Interest rates don’t matter anymore.
So what should you do?
Profit on the purchase!
Be patient, let the market drop and then buy. Which sounds obvious doesn’t it?
The problem is, by the time the market drops things will look really grim and it will seem like the property market will never recover.
But it will.
Just think about the people who would have bought Jayne and Jayson’s house in 2010.
They would have locked in a big fat profit the day they exchanged and then enjoyed the property boom that followed…all from the view of a stunning looking garden.
Have a great weekend!
Adam
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