by Carly Susic, Melbourne Buyers Advocate
Buying at the bottom of the market is the optimum goal for many homebuyers. If you get the timing right, house prices increase and your property is worth more. This gives you excellent gains when you sell. This summer, many buyers are asking about buying at the bottom of the market, with questions like:
- Are we at the bottom of the market?
- What are the signs that we are at the bottom of the market?
- Will the market recover with interest rate cuts in 2025?
Even though many buyers aim to take advantage of the bottom of the market, it can be difficult to time and not as important as buying the right property. Read on to find out why.
Be wary of agents who say we’re at the bottom of the market
Naturally, agents want to persuade you to buy, so they’ll encourage you to take advantage of the current market conditions. When I attend auctions, as I do most weekends, I hear agents and auctioneers saying:
- “This is the best buying you’ll ever get”
- “You will pay more for this next week”
- “Smart buyers are snapping up properties now”
- “Buying at the bottom of the market is the best thing you can do”
- “We are already past the bottom and we are on the way up—get in now”
Keep in mind the goal of the agent: to make a sale.
Whereas the goal of the buyers’ advocate: to help you buy the best possible house at the best possible time at the best possible price.
Agents definitely have great insights into market peaks and troughs, but not all will be honest with you about what’s actually happening.
So are we actually at the bottom of the market?
The only way to truly know we are at the bottom is when prices start rising again. So it’s very difficult to predict in advance. It’s my view that the market is not yet at the bottom, it’s more of a flat plateau. Yes, 2024 has been a very slow market for Melbourne real estate. But I don’t see any indicators that the market is now at the bottom and on the way up again.
What I do see is a sluggish market, with low demand from buyers, vendors hesitant to sell and competition only happening for quality homes. And with the year at a close, the market takes a break for summer which will only exacerbate the current trough.
Timing the bottom of the market is impossible
We only know when the bottom of the market occurs with the benefit of hindsight. So if you are trying to wait out the market so it reaches the bottom, you are unlikely to get it right. Those who do happen to purchase at the bottom of the market do so more out of fortunate timing rather than strategic skill.
Why I think we are not yet at the bottom of the market (in late 2024)
Firstly, there are no signs of market recovery as yet. When the market hits the bottom and turns around, we see indicators such as:
- more buyers looking
- more properties going to auction rather than selling prior
- quotes being adjusted upward instead of downwards
- conveyancers, building inspectors and other industry operators getting busy again
These indicators are simply not happening as yet—hence my conclusion that we are not yet at the bottom of the property market. However now is a good time to buy and whilst we are not calling the “bottom” of the market, we are seeing better buying conditions than we have seen in some time
Looking ahead, I believe any recoveries in the market will be slow and steady in 2025.
We’ve had thirteen interest rate rises, so one or two rate cuts in 2025 will not be enough to kickstart market growth.
I expect we will experience most if not all of in 2025 a sluggish market, with recovery only starting after multiple rate cuts which may not be until 2026.
Nine News reports that the four big banks are not expecting rate cuts until May 2025 at the earliest — at least five months away as I write this in December 2024. And without significant cuts easing cost of living pressures, the market is likely to simply stay in this plateau for most of 2025.
Agents love to speculate that as soon rates drop, buyers will be back on the market. But it will take time. People have lost trust—we have been surprised by unexpected rate hikes and now we’ll need to lock in multiple rate cuts before we can really trust things are headed in the right direction.
Future uncertainty on a global scale
On a global scale, we have the arrival of Donald Trump in the White House, and his inflationary plans to introduce tariffs. The economic impacts of this policy may be felt worldwide, and the uncertainty will reverberate in the local market, making buyers and vendors alike cautious. If they can afford to wait things out—they will.
The federal election impacts the market
Whenever there is a federal election in Australia the market tends to stall, waiting to see who takes government. The two competing parties will have differentiating policies on housing, the economy and cost of living, so the market waits to see who’s in charge and which policies will be enacted. The latest date the election can be held is 17 May 2025. So we will be heading to the polls within six months, and the market will press pause until then, adding further dampener on potential market regrowth.
Banks are continuing responsible lending
The national banking regulator, the Australian Prudential Regulation Authority (APRA), protects financial stability by ensuring that lenders don’t take on risky loans that they’re unable to fulfill. Lenders and banks are required to assess whether a borrower can continue servicing a loan if interest rates rise. The current threshold is three percent, meaning any lender must add three percent to its current rate to determine if a borrower can service the loan. Despite calls for the buffer to be reduced, because of the impact it has on first home buyers, APRA recently confirmed the buffer will remain at three percent which forces banks into responsible lending. Getting a home loan is not easy and banks are not going to implement huge changes unless there’s a competitive benefit for doing so. Which gives us another reason why a market recovery is likely to be on the slow side in 2025.
Buying at the bottom of the market doesn’t guarantee a bargain
Imagine you were planning to sell your home in the next two or three years. And you’re reading in the media and hearing talk in the industry that we’re at the bottom of the market. Would you want to sell now? No! If you could afford to wait a few years for the market to bounce back so you could sell at a higher price, would you? Yes!
This mentality is common at the bottom of the market. As much as buyers love the idea of buying at the bottom of the market, vendors equally dislike it. Who wants to sell their house at rock-bottom prices?
So, those vendors sit on their hands and wait it out. So at the bottom of the market, there is not much quality to be found. Any quality that is on the market, will force competition. So we get a situation where quality homes are selling well as buyers compete for the handful of good homes on the market. Those quality homes are exempt from the typical bottom of the market forces.
Don’t buy just because it’s a bargain
I’m seeing a lot of ex-rental homes coming on the market targeting owner-occupier buyers. Landlords are offloading rental homes due to a variety of factors. These include economic pressures, and increased land taxes. Somex-rental homes are very ‘lived-in’ because tenants tend to be rougher on houses they don’t own. Plus landlords like to minimise investment in upkeep. So we’re seeing plenty of neglected ex-rental homes coming on the market.
These may not be the homes you want to invest in, just because you are getting a bargain. These homes might cost you in expensive repairs later on because they are overdue for renovations. Don’t let your desire to buy at the bottom of the market lead to a poor investment. Quality houses on sale at the bottom of the market are rare—and highly contested. So you may be better off waiting for the right house.
But, don’t put your future on hold to get the timing right
Some buyers love the idea of buying at the bottom of the market. They’ll wait it out, just for the chance to get a bargain. But meanwhile, life rolls on. You may get stuck in a less than ideal living situation, because you haven’t bought the right house yet.
If you buy at the bottom, you may be selling at the bottom too
Unless you are a first home buyer, you’ll be likely to sell your home to fund the next purchase . So any potential bargains you enjoy will be negated by the reduced rate at which you sell your home. In the long run, you’ll be no better off. You can of course buy and then wait to sell your home. But you’d need to be able to service mortgages on two properties for that time. This is an investment very few buyers are capable of servicing.
The one buyer who benefits most at the bottom of the market
If you’re upsizing, you have the best chance to take advantage of the bottom of the market.
Let’s say you have a growing family and your current home is too small. Your current home is valued at $1 million, and you’re looking to buy at the $2 million mark. If the market bottoms out, your home drops value by 10%, meaning your home is now worth $900,000. But the home you want to purchase also drops by 10%, down $200,000 to $1.8 million. Suddenly, you can grab a two million dollar home for less. Or you can still buy a two-million dollar home and get something even better.
Even though you are selling at the bottom of the market, you’ll enjoy a greater variance in price shifts at the upper end of your buying limit. This gives you a chance to step up the property ladder. So if that’s you, it’s important to get the strategy and timing right to take advantage of the current market.
To recap: buying at the bottom of the market
- It’s a nice idea in theory, but near impossible to execute well
- We only really know we’re at the bottom of the market with the value of hindsight
- The quality of homes on the market at this time are often not ideal
- Don’t buy a house just because it’s a bargain – it may cost you later or be difficult to resell later on
- Upsizers have the best chance of taking advantage of the bottom of the market due to their increased buying power
- As of late 2024, we may not be at the bottom of the market, and recovery in 2025 is likely to be slow at best
You may also like:
