The Christmas Dilemma.

‘Stay away in May’ is a common saying in the stock market that relates to the trend that shares perform well between November and April and often under perform in the period thereafter. Heading into the end of the financial year there is also often a significant sell off, and the equity markets become flooded with sellers leading to softer market conditions.

Over the years I’ve observed that in the real estate we have a similar trend, but I’ve yet to find a saying that rolls off the tongue quite as easily - the best I have so far is ‘don’t surrender in December.'

This time of year the property market comes apart at the seams, buyers get distracted and conditions become stodgy. With little to report, the media starts to speculate bearishly on what may occur in the New Year and many would-be buyers spook and back away.

This phenomenon is also coupled with short sighted agents desperately pushing to get last minute sales, and sellers that would emotionally prefer to head into the festive season knowing that their property is sold. These are ideal conditions for savvy buyers.

So what normally follows?

Everyone gets a break, much fun is had over the Christmas period, the weather improves and crucially many of us make decisions and resolutions for the year ahead. Interestingly, divorce rates go up over Christmas as unhappy couples decide to untie the knot, the New Year represents a fresh start.

As a result when the market re-opens again post Australia Day, the conditions are normally significantly improved (for sellers). Re-energised and motivated, new buyers appear, and the numbers at open houses go up. We have many examples of holding stock back and selling in February for significantly higher prices than what their neighbour’s sold for in the previous December.

*The only exception I’ve seen to this trend was in 2022 when the world was at the brink of World War III as the Russian army was preparing to invade the Ukraine…that led to a very skittish March Quarter.

So what to do? If you are a seller at the moment you should be very cautious about capitulating just for certainty, there have been a couple of house sales in Mosman in the best 2-3 weeks that I think history will judge harshly.

If you are a buyer these are ideal conditions to secure some value, mark my words there is plenty of historical evidence that clearance rates in December improve significantly in a matter of 6 weeks.

I’m hearing plenty of buyers say we will just wait for the New Year, but as an established office, I can see the pipeline ahead and the flood of new listings you are dreaming of may be better described as a trickle. The property market this year has survived (in many cases thrived) in challenging conditions, what happens if interest rates pause in 2024 or there is even hint at them coming down?

Until next week,

David Murphy