When prices are going up, everyone seems happy to pay ever increasing prices and nobody questions whether or not it is a good time to buy.
Conversely, when prices are falling everyone sits on the fence waiting for the market to pick up. I’m not suggesting that sitting on the fence is a bad idea; often it’s a good idea but do it ‘cause you mean it. Don’t just follow the pack. The housing market is a bit like watching lemmings.
The worst time to buy is when the market is going up, especially as the market peaks. Chances are you’ll pay-over-the-odds and then see prices fall soon after.
At least after the peak, you know that prices are falling and can adjust your expectations accordingly.
When the market stalls, there are fewer active buyers, properties take longer to sell, vendors are more negotiable, and there’s more stock to choose from. More choice and lower prices is not all bad!
A soft property market can be an opportunity to buy into an area that might be unattainable in a more buoyant market. It can be an opportunity to buy a unique property that would be too popular in any other market. It’s a chance to buy without multiple bidders at auction. Or, if you’re more brutal, it’s a time when you can negotiate down the price.
In these conditions, first home buyers have more of a chance with less houses being sold under the hammer. The auction process and the money spent on all the homework (builders report, solicitor looking over the LIM, and agreement itself) can feel like a barrier, whereas they can swoop in with a conditional offer, and only spend money when they have a property under contract, combined with less stress.
Investors can find plenty of opportunity too but in a soft market where values aren’t increasing in a hurry, they should be patient and see any purchase as a long-term hold. Anyone looking for short term gain should also factor in the 5-year bright-line test.
There are a good deal of motivated vendors in a falling market, but if you don’t look you won’t find them. There will also be ‘unique’ property opportunities, but again unless you look you won’t see them. Look out for the vendor that is upsizing themselves or committed to their next project, selling due to a matrimonial or even a death… they’ll meet the market.
Whilst the media talks year-on-year house prices falling five percent, you will find properties in the market that are down ten percent or being withdrawn from market.
A falling market can be a very good time to buy, but fools rush in.
Nobody ever got a great deal window shopping. If you get active and put forward offers, there are opportunities to make money. Some property prices are already down fifteen percent, and to me, they look like good buys.
You will find plenty of time bound information in the blog section of our website about house prices and mortgage rates that will help steer you around the question of when to buy and what good buying looks like.