News & Advice.
Finding Value in a Changing Market.
It’s understandable any potential homebuyer may be feeling hesitant about purchasing property in the near future. The combined effects of Covid, last year’s record home values, an inevitable interest rate rise, and the looming federal election are taking their toll. Now that house prices are slowing, fears of a falling market are further cracking consumer confidence.
Such fears however are unfounded, according to Reece Coleman, director of buyer’s agency Maker Advisory. “There is no reason to hold back on buying now. To find value in this kind of market consumers simply need to do more research and be better organised in their approach to buying.”
The statistics support this view, with the average Australian home having grown in value by $17,000 since January according to the latest CoreLogic data. In Sydney, arguably the country’s most expensive housing market, property prices may be easing but only in some areas and by 5% at most. Despite a growth rate of 0.3% in the first quarter of 2022 compared to 9.3% over the same period last year, prices in Sydney are still riding high following 2021’s once-in-a-lifetime hike in home values.
So what to make of it all?
“The first thing any potential buyer must remember is that property prices are cyclical,” says Mr Coleman.
“Property is not a short-term asset—it’s a medium to long-term investment. Markets will ease and rise again over time—and finding value is possible anywhere on the curve.”
The reality is that Australians own their homes for an average of up to 10 years and most will see a boom and a trough during that time.
“When considering a purchase it’s important to factor in an adjustment in the property value,” Mr Coleman says. “For instance, one of our buyers purchased a home for $1.905 million and then for the two years following, its value remained about $1.85 million. Now 10 years later that same home is worth $5 million.”
As for the current market economic indicators, they are not signalling dramatic drops in home prices according to Mr Coleman. Rather, consumer fears are being stoked by last year’s heated market when “people bought virtually anything with a signboard in front of it,” he says.
“The problem with a market that hot is that even lower quality homes – the quirky type in busy or noisy locations that usually take longer to sell – were selling fast,” Mr Coleman explains.
Potential buyers also need to know that sellers take time to adjust to even the slightest reversal in home values. “When prices rise by say 10% vendors are quick to think their home is automatically worth more. But when they hear prices have fallen, they equally believe it does not apply to them.”
Why value is out there
In some suburbs listings are up 180% over the same time last year according to realestate.com.au data released this month (April 2022). Across Sydney, listings have grown more than 15% month-on-month. Inner city suburbs are seeing the biggest rises, with listings in Erskineville up 162% and Paddington 133%. In Botany they are up 186% and on the northern beaches, 23.8%.
The good news is that selling conditions are good as demand is strong and prices are “still growing compared to where they were” says PropTrack economist Angus Moore.
For buyers, it simply means there is more choice and less competition. “We are in a balanced market where there is demand from buyers and good supply from sellers,” Mr Coleman says.
One rule does not apply to all “Just because the median house price is reported to have fallen does not mean it applies to every home in the country,” Mr Coleman says.
“Premium homes in premium locations hold their values. In addition, since our international borders reopened demand has been strong from buyers looking to buy near schools, universities and other major educational institutions, in places like the inner city and Sydney’s lower north shore.”
How to find value
Broaden your market research
A more accurate picture of home values requires a broader view of the market, again due to the sharp price hikes of last year.
“While legislation dictates that agents use recent comparable sales to estimate prices, it is more relevant now for buyers to look at say 12 months of comparable sales rather than the past six or three months,” Mr Coleman explains.
Be ready to buy “Selling agents have readjusted in that they are now hunting for qualified buyers,” Mr Coleman reveals.
“An agent will quickly qualify you to see if you are ready to buy and there is good opportunity for those that can transact very quickly. This is where a buyer’s agent is of great assistance as they will ensure you are ready to buy.”
Don’t be afraid to sell before you buy
For a start, it will provide insulation from any easing in values. “For the past few years you needed to buy before you sold,” Mr Coleman says. “The situation has changed and with so much stock on the market consider selling before you buy.”
Be realistic about price
Talking prices down will not endear you to an agent or vendor. “Don’t be that buyer, the one who walks into every home and tries to openly talk down the price,” Mr Coleman warns. “We see buyers fight with agents to bring down a price—and it never works.”
Don’t panic According to Mr Coleman, the sense of urgency to buy before auction has virtually left the market.
“By all means make sure that the selling agent knows you have genuine interest in the property and do your due diligence. But think twice before rushing in with pre-auction offers. If you work well with the selling agent they will come back to you before the property trades.”
Consider yield when buying
Rents are recovering strongly as vacancy rates fall especially in inner city areas, which in turn will translate into rising property values.
Look at other areas
If you’re still finding the Sydney and Melbourne markets too intimidating, consider other capital city markets. All are on different property cycles, and one could better suit your needs and budget.
Think about using a buyer’s agent
Knowledge, as we know, is power. An average homebuyer purchases a property once every several years or more. A buyer’s agent on the other hand may transact several properties each week, giving them a significant edge when it comes to being in tune with true property values and determining the right price you should pay for your next home.
“Some of Maker Advisory’s buyer’s agents are purchasing up to a home a day. As a result, we can pinpoint properties that represent good value and track any market changes from one week to the next,” Mr Coleman explains.
“Using a buyer’s agent can help enormously with your property journey and take all the worry and concern out of the process.”
For help with buying property in hotspots like Sydney, the Central Coast, Canberra, Melbourne, Brisbane, the Gold Coast, the Sunshine Coast, or any other Australian city or regional centre, speak to one of our buyer’s agents today to learn more.
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