Never before has the “how’s the market?” question been put to me so many times every day. Buyers want the market to crash, homeowners want the market to stay strong, but right now the market is doing what a lot of us are – sitting tight and watching to see what happens.
In the words of Warren Buffet, the main function of a market forecaster is to make fortune tellers look good. The truth is, no one knows what the housing market will do, but the best place to start when attempting to provide an educated response to this question is to explain exactly how market prices are influenced. It is not as complicated as one may think, it’s a simple game of supply vs demand. If enough people want the same property, the price is driven up and you see properties sell for hundreds of thousands over reserve at auction. Similarly if there is little interest on a particular property, it may sit on the market for a while or sell for a price below expectations, depending on the vendors motivation levels.
Let’s look at some formulas to simplify this:
Comfortable vendor + active buyers + popular property = high sale price in short time
Distressed vendor + passive buyers + unpopular property = low sale price and extended time on market
The second scenario is where the market will start to drop as vendors need the liquid cash more than they need the value in the home, and will decide to release the property at a lower price.
So what are we facing right now?
Interest rates are at all time lows as the RBA tries to stimulate the economy during this unprecedented crisis, meaning money is cheap for buyers right now. While there are many active buyers who are still willing to purchase the right home during this time, I would be lying if I didn’t say that buyer activity has dropped significantly. We are seeing some bargain hunter hopefuls who are trying to score a home for 30-50% below value however vendor motivation isn’t meeting their expectations.
Due to huge capital growth in the last 10 years, many Australian homeowners who purchased pre-2010 have a significant amount of equity in their homes and are well positioned to wait out the storm from the comfort of their high value asset. So what about the buyers who set all those street records in the last 5 years? With government stimulus packages, mortgage payment deferrals and the huge opportunity to access low interest small business loans up to $250,000, even those who may be feeling a hit on their income have access to enough back up plans to allow them to hang onto their homes during this time.
OK now shut up and tell me where I can get property 50% off!
I’m sorry if you were hoping I would be presenting you with a list of homes at wholesale prices, but the situation simply isn’t at a point right now where people are being forced to sell at huge discounts. While we have seen a huge amount of unfortunate job loss, the types of industries that have been hit are disrupting the rental market more than the sales market.
The one buyer group that has an opportunity in Australia right now are overseas buyers. With the AUD being so low, overseas buyers are looking to capitalise where possible. The downside is they are unable to fly here to inspect property so if you want to sell right now my strong suggestion is to do detailed drone and walkthrough videos as well as 3D virtual reality inspections.
If you want to sell your home, don’t be scared of the market, you just need to ensure that you adopt the right marketing strategy to achieve a strong result regardless of the uncertainty. If you are looking to buy property, but want to know the best time I have an exclusive hot tip for you. The best time to buy property in Australia is always 5 years ago. With low interest rates devaluing cash and a widely adopted prediction of a huge economic bounce back, the biggest danger for buyers isn’t buying at the wrong time, it is being out of the market.
If you are making offers of $1.3M – $1.4M on properties asking $2M+, all you are doing is insulting the vendor and agent, and proving that you don’t need a long neck to be a goose.
If you have any questions please do not hesitate to get in touch. I am always available.