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Although the property market is improving in terms of performance, there are still some burning questions in the minds of buyers. Here’s what your prospective pool of buyers are likely to be thinking as they eye their next purchase.
Is now a good time to buy? That is the number one question on the minds of investors and Australians with notable buying power.
The answer is, of course, it is. It is always a good time to buy; it just depends on where.
Property over the last 150 years has increased on average by 11 per cent a year each year, through two world wars and a depression. People are often so bogged down in using excuses not to jump into the property market or to wait and see, that life gets in the way and they wake up one day and wonder where time has gone, having done very little towards improving their future in retirement.
Land will always appreciate, you cannot easily make more land, other than a government reclaiming land, but that aside, land will always be in short supply. Every war in the history of mankind has been because of either religion or over land.
There are many “would be” property investors that suffer from analysis paralysis. I had one client, who I fired, because he thought, and refused to change his thinking, that the value of a property was summed up by figures on a spreadsheet, based on averages, using a suburb’s growth to justify what he should offer on a specific property. His approach ignored the logic of the inclusions in the specific property, the type of property it was, the layout, proximity to amenities, the street it was on and what someone is willing to pay. I knew at the rate they were going, they would never have an offer accepted.
Prices have declined over the last 18 months, for several reasons, some of which have been the Asian invasion, particularly in the eastern suburbs of Melbourne, paying stupid prices at auction, just to buy in a school zone, it could be fear of missing out, lower interest rates, the list goes on. It is the higher end of the market that has seen the greatest decline, circa 12–20 per cent. There are arguments now that support the theory that the higher end of the property market will be the first to rebound. This may be true, but let’s consider something else.
How I see the world for buyers
The lower end of the market has weathered the price correction storm far better. Why? Well, besides fewer foreign investors buying them up, more people can afford these properties. The 500k–700k price range, for example, is more affordable to more people, hence there is more demand. The time is now to buy in this prices range, providing you do your research.
No one has a crystal ball; if we did, we could buy perfectly at the bottom of the market, and sell at the perfect point of the market being at its peak, but we don’t. So, let’s consider two main elements to a decision. Is time on your side? Or have you left it too late in life, due to inability or inaction to do something productive for the betterment of your retirement. Number two, property is a low-risk asset, in terms of capital growth, when held as an asset long-term.
It has been a buyer’s market for 18 months now, quite the reverse of the last few years. It’s the sellers’ turn to compromise, so it should be(!), and that makes me feel great. Often, great deals can be done when the buyer has more negotiating power, and sellers are desperate. Let’s assume though that you are not good at negotiating or you don’t engage the services of a buyer’s agent to help you; just remember, property is a long-term asset, and with time, mistakes have a chance at being fixed, providing you do your research.
So, the question should not be: are prices going to stop declining; or when should I buy; or is now a good time to buy? The questions should be: do you have a “buy and hold” strategy, not a “buy to flip” strategy; do you have time on your side? Will you undertake sufficient research? If the answer is yes to all three, then whether prices continue to decline is irrelevant. It can be a good time to buy now.
Andrew Crossley, Australian Property Advisory Group
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