Although it’s a buyer’s market, there are still challenges if you’re looking to buy a home – possibly more so than before. Here’s what you need to know to avoid the pitfalls in this new compromised market.
What it used to look like……
In a buoyant property market as we experienced a couple of years back, there was no doubt if you were looking to buy a home you were going to face more competition. In a ‘hot market’, there’s more activity, auction prices can rise (sometimes on a weekly basis) right in front of your eyes. In a strong market we typically see buyers get frustrated and buy the wrong property because of the frenzy and pressure of missing out. This is a situation where purchase is driven by competition and fear of missing out.
In this type of market, buyers begin to look past crucial factors that normally would be a non negotiable (e.g. purchase of a home that backs onto a train line or a main road, purchasing a smaller property than is actually required for the buyers needs).
Coupled with this, often potential buyers are pushed to beyond their means budget wise and have to find ways to increase their price to stay in front, as the market goes up before their eyes.
This type of decision-making can result in a more bouyant market and an investment that is shorter-term that doesn’t necessarily provide the returns people seek from such a large investment.
What it looks like today…….
In this current ‘buyers market’, there is less activity. This means that lower prices are available for housing but there are actually still a lot of challenges. In fact – probably more than before.
If you’re looking to buy in the current property market you’re faced with mental challenges. Typical fears and questions that you will circle include:
- Should I buy now or wait?
- Should I bid at auction when no one else is?
- Is the market going to drop further or start to increase again?
- I’ve found a house that isn’t quite right but it’s incredibly cheap for what it’s offering – should I buy it?
- Should I buy off the plan now because by the time I settle the market may have recovered?
- What is the best way to purchase? I’ve seen properties up for private sale, private auction, boardroom auction, and expression of interest.
It’s a lot to work through. When the property market was first correcting we were seeing a trend of potential buyers looking past properties with faults. These days, agents are bringing out new sales pitches to attract potential buyers. This, along with a corrected ‘lower’ price, mean buyers can be lulled into a false sense of security and purchase the wrong property because it looks cheap. For the same reason potential buyers get drawn into the sale process in a strong market, they can get drawn into a property deal that seems too good to be true in a market like the one we’re currently experiencing.
With the market going through the correction it currently is, real estate agents are operating at an all-time low. Agents are keen to get a sale and this means negotiations can become desperate. It’s so easy if you’re unassuming to get caught out with an agent’s sales pitch. Yes, you can find some great property buys right now, but you need to be mindful of the cheap properties that have been disregarded by others.
What to look for when purchasing a home……….
This is such an old rule but it remains true. Properties need to be close to transport and infrastructure. Select a home that’s walking distance to cafes, shops, supermarkets, public transport, schools etc. Even if it does not matter to you it likely will matter to the next person who buys it.
A property that is north facing at the rear is one of the key attributes to a great property. That’s not to say that other homes won’t match up – it really will depend on the location of the house on the block. A rear facing south yard or balcony or courtyard though is never recommended.
If you can buy more than one or two of the product you are looking at you should look further afield. Avoid properties that are mass-produced – how will you set the property apart when it comes time to sell? You can’t. A general rule we like to go by and offer to clients is that if you have to compete to buy it, you will have competition to sell it.
Do not buy ‘off the plan’ or purchase anything that promises you a rental guarantee or offers any kind of get rich quick scheme. If it sounds too good to be true, guess what? It is.
Our advice? Buy the property that you can afford, when the time is right, in the location you want and hold onto it for at least 7-10 years.
Like to chat further or looking to buy a home in the current Melbourne market? Feel free to get in touch today.