Recent price movements aside, it’s critical that each purchase is judged on its own merits. Sometimes that might mean walking away.
Australian property buyers face a considerably less daunting market than at the same time last year, when surging demand left many squeezed out by fierce competition.
Nationally, residential property prices reached their strongest annual growth on record in 2021, rising 23.7 per cent, the Australian Bureau of Statistics says.
After the skyrocketing prices – a new peak was reached – the market has now moved into the adjustment phase, driven predominantly by rising interest rates. The rate of growth is now easing across the nation.
No one really wants to sell in a cooling market. Domain
According to CoreLogic data for May, Sydney and Melbourne values have dropped, but still tower above pre-COVID-19 levels. Perth and Adelaide values are still increasing, but sit below the peak quarterly rate of growth.
The trend reduces the fear of missing out (FOMO) that dominated many buyers’ minds last year, allowing for a greater focus on the prospective asset, rather than the competition. And for first home buyers in NSW, the changes to stamp duty and alternative tax options, potentially provide an extra boost.
Let’s look at some key advice to help optimise buying decisions in the current market.
Asset selection remains paramount, regardless of market activity.
Don’t divert from key asset criteria in search of bargains. Properties are often cheap for reasons other than the supply and demand dynamic – some of which could involve costly repairs or diminished capital growth.
Even in a softer market, good quality property still attracts strong levels of demand. Buyers need to be prepared to set a realistic budget or risk continually missing out.
Sourcing a property in a rebalancing market often requires a fair degree of patience. While everyone wants to buy in a cooling market – no one really wants to sell.
Discretionary vendors are likely to hold off putting their property on the market, so the level of choice from a buyer’s perspective wanes.
Keeping in close contact with agents in times of limited supply helps ensure off-market properties and upcoming listings aren’t missed.
Don’t feel compelled to jump at the first property. The market is far less likely to run away from buyers as it did in 2021.
Conversely, don’t become pedantic or complacent. In a slowing market many buyers get caught over-finessing and lose valuable opportunities as a result.
Assessing the asset value of a potential property is a critical and multistep process, giving buyers important insight into the home’s investment potential.
Judging the standalone technical value of a property involves analysing key property characteristics – including location, position, proximity, as well as land size, and orientation. Building size, style and condition are also critical; and for apartments and terrace homes, car parking can be a major factor.
Buyers should also assess comparable sales within the area, which provides a key value barometer. In a moving market – rising and cooling alike – the most recent sales provide the greatest accuracy.
Judging market sentiment is also vital in a moving market. Have similar recent listings had greater demand or supply? How many bidders are attending auctions for similar properties? Are they bidding strongly, or are properties regularly passing in?
Having done the homework, buyers should feel confident when entering an auction and any subsequent negotiations.
When competing at auction, buyers should look for particular nuances around the bidding process.
For example, an auctioneer who takes a high initial vendor bid compared with to the quote range, quite often indicates limited interest in the property.
Buyers must ensure they hold the highest bid if a property is passed in, which puts them in pole position when it comes to post-auction negotiations.
This is where comparable sales knowledge can be key – particularly those at the lower end, which can be used to justify a reduced offer.
Likewise, if a building inspection has been conducted, faults and issues with the property can be used as leverage.
Be prepared to walk away from a property if negotiations reach an impasse. Such a threat may lead to a change of heart from the vendor. But it’s a high-risk move that may mean losing the property.
Recent price movements aside, it’s critical that each purchase is judged on its own merits.
That’s because long-term, quality assets always outlast shorter-term market trends.
Follow the topics, people and companies that matter to you.
Fetching latest articles
The Daily Habit of Successful People
Recent Comments