Tips for buying in a buyers’ market

Tips for buying in a buyers’ market

We have seen significant change across the national housing market during the past 12 months. Sydney and Melbourne’s previously overheated market has gone into decline, Adelaide and Brisbane have remained surprisingly flat, while Perth’s battered market has started to rise after reaching the bottom of the cycle. What this now means is that for home buyers – in our five biggest capital cities at least – it is now a buyers’ market.

This turnaround has been a long time coming for Sydney and Melbourne where there has been a strong sellers’ market for at least five years. With Sydney property values down by 4.2% since this time last year and Melbourne dropping by 1.2%, it’s now buyers who are in a position of power.*

Stock levels are up, giving buyers more choice in their purchasing. Settled sales are down, indicating less demand and therefore less competition among buyers. Homes in these cities are also selling more slowly, which gives buyers more time and puts pressure on sellers. Vendor discounting is up, as sellers must adjust their expectations on price. Auction clearance percentage rates are well down from the high 70s we saw in 2017 and are now hovering in the 50s. Some experts are tipping that values may still have further to fall, which takes any urgency out of the purchase for buyers.

In Perth, where values have declined by 11% since 2014, buyers have been understandably hesitant to purchase. But the market has now flattened out considerably with a rise in values of 0.1% over the three months to May. A number of factors show that the market is turning including reduced selling times and stock levels, and increasing sales numbers. These present a great opportunity for buyers to get a good deal.*

Adelaide and Brisbane have been relatively flat for several years, giving buyers the power but not the inclination to purchase. A number of positive indicators could mean that these markets are now on the improve, making a purchase more appealing. In Adelaide, reduced stock levels, faster selling times and a drop in vendor discounting are all positive signs, and Brisbane is now experiencing good population and employment growth, which typically precede a growth in property values.

With this in mind, here are some top tips for buying in a buyers’ market:

  1. Do your research: make sure you know the property’s current market worth by looking at recent sales of comparable properties in the same area. There are opportunities for great buys in this kind of market, and you certainly don’t want to pay more when there’s a chance the value could drop.
  2. Get financially ready: make sure you have your finance approval done so you are ready to pounce on a great deal at a moment’s notice. Line up a solicitor too in case you really need to move.
  3. Negotiate the price: real estate agents also struggle in a slow market. They often prefer to make the sale, get their commission and move on to the next property rather than haggle for a little bit extra. They may go in to bat for you by convincing the seller that the price you’re offering is the best they will get. Vendors can get desperate too. They may have financial reasons for needing to sell quickly.
  4. Look out for ‘motivated sellers’: that is, if the home has been on the market for more than six to eight weeks, has undergone some price reductions or is vacant, the seller may be very keen to get rid of the property as soon as possible. As well as negotiating on the listing price, you could also ask the vendor to throw in any furniture or fixtures as an added bargain.
  5. Decide what a property is worth and stick to it because there are always other fish in the sea in a sluggish market and this gives you the upper hand. There’s no need to push the price up by getting into a bidding war with another buyer or dealing with a stubborn vendor who can’t accept the property’s true value. Don’t be afraid to walk away.
  6. Consider making a low-ball offer – that is, offer a price that’s much less than the guide. You may be surprised by an acceptance or counter offer close to your bid. It’s a good idea to wait until the property has been on the market for at least a few weeks though, as it is unlikely to be accepted soon after the property goes on the market. When making a low offer, politely back up your offer with reasons why you think it is worth less. Handing over a signed contract, a cheque for the deposit and a deadline for acceptance is also a sure way to put pressure on a vendor.

Buyers – don’t feel guilty. Vendors, at least in Sydney and Melbourne, have been laughing all the way to the bank for years, so it’s fair play that buyers get a turn at playing the power game. While conditions vary from state to state and between city and regional areas, if you are looking at houses in one of our major capital cities, remember to play it cool, negotiate hard and stick to your guns. With any luck, you’ll get the break you deserve.

*Figures from property information group CoreLogic

DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.