Following the Reserve Bank's 25 basis point cash rate cut earlier this month, there's a definite spring in the step of real estate practitioners.
It's been two years of hard slog for most of them, as they sought to win business and sell property into a declining market with few interested buyers. And their renewed optimism may be justified.
Property prices are down around 10 per cent across capital cities from the March 2010 peak but are now stabilising and perhaps showing some initial, tentative growth in recent weeks. Rents remain firm and the cash rate has come down 150 basis points since November last year.
Consequently the gap between the percentage return from property investment - the rental yield - versus the funding cost - interest rates - is narrowing. If this trend continues there will be a point at which a critical mass of investors and prospective homebuyers recognise the opportunity and demand picks up.
That tipping point may be close. It's increasingly clear that the Reserve Bank is signalling another rate cut before year's end. Last week's deteriorating employment numbers have probably settled the case for a 25 basis point cut on Melbourne Cup day and possibly another 25 basis point cut in December.
While these developments are good news for the property market, buyers must be on their guard. There are many very hungry industry participants out there desperate to make up for barren times. In particular, developers will be marketing hard to unload off-the-plan stock in fringe suburbs and CBD high-rise apartment sectors that have failed to sell - mostly because they're too far-flung, are overpriced, or both.
Those selling these questionable assets will be banking on lulling a new cohort of investors and homebuyers who are unaware of the poor proposition they face.
They'll also hope the optimism of a rising market will see people suspend their scepticism.
Unfortunately, the buyers' cause is not helped by an upsurge in reports that send the wrong message about where and what to invest in.
Take the report released in late August by RP Data that listed the suburbs where paying off a mortgage was cheaper than renting.
The conclusion to draw should have been to avoid investing in these places. The locations were cheap and the rents high because there was no long-term buyer demand.
We all need to be wily, especially when information in media, seminars and blogs supports vested interests.
Today's property investment landscape is about putting the pieces of the jigsaw together just right.
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