Some property market analysts are predicting average national home values could fall by 11 per cent in 2019 – and say home values in some suburbs of Melbourne and Sydney have already fallen by more than 7 per cent since they reached their peak in late 2017. Whilst this may seem like gloom and doom to some people, all over the country many prospective home buyers are feeling optimistic and getting ready to grab a bargain.
When it comes to buying a property, supply and demand determines who gets the upper hand on price. So now, with home values and auction clearance rates continuing to fall, is it officially a ‘buyer’s market’ yet?
What is a buyer’s market?
The term ‘buyer’s market’ usually applies when buyers have more power in the property market than vendors (or sellers) and therefore, have an advantage when negotiating the final price for a home. Basically, a buyer’s market occurs when there are more properties for sale than there are people willing and able to buy them.
Signs that we may be encountering a buyer’s market could include:
- Unusually high numbers of properties for sale in any given city, suburb or area
- Low auction clearance rates
- More vendors preferring private sales over auctions
- Property remaining on the market for longer
- Vendors more prepared to negotiate on price.
Does this mean it’s a good time to buy?
A buyer’s market could be a fantastic time to purchase a home, provided you research your purchase very carefully. There are some risks involved, but if you perform your due diligence and select the right property, you should be able to overcome them.
You will need to be careful not to overpay for any home you purchase in a buyer’s market, so the right property market data will be critical to your negotiations. Additionally, if the price of the property you buy should continue to fall, you may potentially find yourself in a negative equity situation – that’s where the home is worth less than you have borrowed to purchase it. But careful research and a 20% deposit could help you avoid this situation too.
Generally, it makes good sense to purchase a home when prices are low. If you plan to live in the home for a while or hold it as an investment property in the long-term, then you will likely be able to wait out the peaks and troughs of home value changes to eventually come out on top.
Should you wait and see if prices fall further?
The problem with taking a ‘wait and see’ attitude is that it may cause you to miss the opportunity to save – home values won’t continue falling for very long. The great thing about a buyer’s market is that there are plenty of properties available and more time to explore them because they’re on the market for longer.
When researching which property to buy, the same rules apply as always – you need to look at what drives demand and capital growth in your area of interest:
- Is the property close to public transport, schools and amenities like shopping?
- Are there good employment opportunities?
- Is the local economy growing?
- Is there steady population growth?
- Is rental demand high in the area?
- Do the numbers add up – will the property give you a good return on your investment?
Get your finance in order first.
In our next article, we’ll talk about why it is now so important to get pre-approval on your home loan and to confirm your borrowing capacity before looking to make a property purchase. As always, it’s a good idea to get your finance in order before you consider putting down a deposit or signing a sales contract, so please give us a call today.