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Ben Kingsley Blog post by Ben Kingsley

Investors – Start your engines…

There is always a positive to any negative.  Talk of a housing market bubble, higher interest rates, softening demand for property, worsening affordability and value decreases are all playing on the psychology of those looking to get into the property market.

It is fair to report that in most markets across the capitals that we are certainly in or moving to a buyers market.

What is a buyers market?

It’s basically a term used  to say that the buyers are now holding sway within the negotiation process and they are usually able to negotiate a price reduction on the property.  This is driven by choice of available stock, supply on the market and sometimes, the time a property is on the market for.

For the record, for those new investors – A sellers market is when the demand is so strong that even if one buyer pulls out there are others lining up to buy.  Prices achieved on the sale of properties during this time are usually higher than first quoted or offered. As investors, we like buyer’s markets because it’s the time within a market where we can buy great properties in great locations for fair value.

In a sellers market, you could argue these properties might actually achieve results that are maybe 5 or 10% above what their fair market value may be and the frenzy within the market is driving this outcome.

Over the past few decades its not often when a couple of market forces align and soften demand to create a buyers market, especially when technically there is still an under-supply within the overall market.

 

The market forces I am talking about are:

  • Reduction in stimulus / Incentives for first home buyers to encourage them to enter the market.  During the early 2000’s incentives were very strong—such as a $14,000 FHOG grant, then there was federal and state  government stimulus during the GFC, which are also now less attractive for First Home Buyers.  Net result is less demand from First Home Buyers
  • Media Hype is effecting peoples mindset and the market sentiment is shifting by the herd mentality views of the media that property is not a good investment at the moment.
  • High Interest Rates / Low Affordability—households across most markets have had to tighten their purses due to increases in interest rates.
  • Greed  – some buyers and investors are holding off thinking  they will get an even better deal if they wait until the so called bottom of the market or when the bubble bursts.  If the experts can’t pick the market—good luck to those who think they can…….

All of these factors are taking buyers out of the game.  For the first time in about 18 months we don’t have the competition we have been competing against for some time, resulting in more choices for us, more negotiating power and overall better buying conditions.

I’m not a believer in ‘timing the market’.

I believe in ‘time in the market’, however with increased stock on offer and a better chance to negotiate  I do believe that the chances of securing a great buy now and over the next 6 months is a compelling argument to act.

PS—Merry Christmas and all the very best for the festive season and the exciting year ahead………

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