What's the best market to buy in?

If you’re considering a purchase, what’s the best market to buy in – hot, neutral or falling? It’s a question we get asked a lot.

In a hot market, it still never ceases to surprise us that so many people buy into the narrative and the fear of missing out. As a result they often embark on the buying process knowing that there’s going to be a high level of competition and their chances of securing the property are diminished. It’s also very likely that the property will sell for considerably well above reserve. Often, when they miss out, buyers then bend over backwards to increase their budget and by that time the market may have risen even further. When they do eventually purchase they can find themselves in a suburb that they didn’t necessarily desire to be in, or in a house that doesn’t meet their criteria, and often times financially stretched for the privilege of it all. The mindset is that the market momentum will be maintained, however it’s always temporary.

A neutral market represents a more balanced playing field for buyers and sellers. A-grade properties sell really well and buyers can expect to face some competition and pay a strong price. However, there are fewer of these great properties on the market as people tend to hold onto them in a neutral climate. They choose to wait for an upturn hoping to achieve a premium price and aren’t prepared to part with the property for less. When it comes to properties of a more standard calibre, there’s still mid-range competition from buyers but it won’t be aggressive. As a buyer, it’s a prudent environment in which to purchase.

When it comes to a downturning market, like the one we’re in now, sellers are often still looking to the past 6-12 months to peg their results against, but of course they’re not going to achieve those prices in the current market – they’re likely to be down about 5-10%. On the other hand, buyers’ fear of missing out is replaced with a fear of overpaying. They can become hesitant because they don’t know how long the downward trajectory will last and they don’t want to see further value wiped from their purchase. Essentially buyers and sellers are at odds.

Our advice is that it’s this downturning market that’s really worth taking advantage of, making the next 18 months a perfect time to buy. Why? As a purchaser you need to take a long-term view. Remember that this is only a short-lived part of the standard 7-10 year property cycle. No-one can ever accurately predict the top or the bottom of the market but it will begin to take an upward trajectory soon enough – it always does. If you’re looking to buy in our area, there may really only be a handful of listed properties that meet your criteria, so it’s wise to secure one when you have the opportunity. A downward cycle is also going to mean that sellers are more willing to meet demands and conditions than in a heated market and you can take your time, negotiate and buy without the frenzy.

In our opinion, when money is cheap the market is hot but it’s astute money is looking now!