Is the housing downturn an opportunity for buyers?

by Prime Estate

The housing downtown has been the centre of conversation over the last year or so.  Until recently, the topic of conversation was generally placed around the surging prices and lack of affordability, and however, now it seems as though the scales have tipped.  With an average drop of property prices by 4.8% in 2018 and as high as 8.9% in some of the capital cities, the biggest question asked by all is “when will the market regain stability?”.

Before looking at the current activity in the market, it’s first important to understand how the housing downturn came to be and what this effect will look like on a greater scale.  The downturn itself began around the end of 2017, right when property prices were setting some of the highest records we’ve seen to date.  As the year was coming to an end, the market began to take a slight swing, and then the real slump in prices began.

Many had wondered when the heat would be taken off the market and the prices would start to drop – this is how it’s happened …

What factors have influenced the downturn?

A multitude of circumstances have influenced the downturn with the top five being:

  1. APRA changes lending policies and cap on investment lending
  2. Banking Royal Commission
  3. Uncertainty in the market
  4. Media’s outrageous predictions
  5. May Federal election and potential removal of negative gearing

And just how bad is the fall of prices?

The sudden and constant drop of prices around the country has sparked concern that it could even be as grave as what happened in the 2007 Global Financial Crisis.  This is what CoreLogic’s head of research Tim Lawless has to say on the issue, “This is the worst fall we’ve seen since the GFC, which was a short and sharp correction, down about 5 per cent from peak to trough”. (https://www.abc.net.au/news/2019-01-02/australian-housing-prices-fall-4.8pc-weakest-since-gfc/10678444)

Where is the market at now?

Despite the extreme claims that the market will crash by 50% (which we strongly disagree with), things appear to be slowing down slightly.  Although we experienced another heavy fall in prices in February, the actual rate of decline was slower than in previous months (https://www.corelogic.com.au/housing-update ). With the slowing rate of decline, one must ask the question of whether or not now is the right time to buy again.

What do we say?

Now would be a great time to take advantage of the deflated market.

Conditions at the moment are perfect for purchasing a property which under normal conditions would potentially be unaffordable.  Right now, regardless of the property type or suburb, the opportunity to make a purchase for a more affordable price is here.  Vendors are feeling the pressures of the drop in prices which means there is generally room for negotiation if you know how to handle it.

At Prime Estate, we endeavour to acquire the right price for our buyers.  Through the use of negotiation techniques and our extensive network of contacts, our aim is to match you with a property that suits your budget and expectations. It’s essential to have a solid strategy in place now as each vendor’s circumstance is different.

One thing which can be done to help improve your chances of a successful negotiation would be to ensure you’ve got a loan pre-approval. You will want to use a broker that can help you to navigate the price and match you to a suitable lender.

Don’t sit on the fence

Even though the current situation is looking good for buyers, there are still a lot of them sitting on the fence.  For this reason, it’s imperative that you get in before them and not be afraid of making an offer.  With APRA having lifted the investment cap, it really is a fantastic opportunity to take advantage of.

Don’t make the mistake of trying to time the market.  The current situation is perfect for buyers and with February showing a slower rate of decline, who knows what’s to come in future months.  Finding a suitable property has a lot to do with purchasing it at the right price … and the time for that couldn’t be any better as the market will not stay this way forever.

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