How quickly is property being sold? If property is coming onto the market and is gone again the next day, and is simultaneously selling for $20,000 to $50,000 over this is a bad sign. Similarly if auction clearance rates are hitting upwards of 80 per cent you will find it hard to not overpay to enter the market – this could well equate to a longer holding period to realise the returns you had in mind or difficulties in ever achieving a reasonable net yield on the investment.
Walk the beat: Attend inspections and see how many people are there. Are scores of people lining up to see one property? This lets you know that there is a white heat in the market and you might be about to get burned.
The dozen crane rule: Once a market starts moving it often attracts developers. When you start to see this level of development, alarm bells should ring. This development can often lead to an oversupply of property and a subsequent depression in property prices. If there are scores of cranes in the skyline, there is obviously a lot of development occurring and supply levels will start to stack up – so be wary. For regional areas, these signs are going to be different. Always check the level of supply coming onto the market and whether the population growth is strong enough to suck it up.
Keep a look out for these signs in the market and remember that emotions can cost us money. Being able to assess the emotions of others and the markets means you can try and time your purchasing and selling cycles to make the maximum profit.