Why is it a good time to buy?
Many people believe that the driving factor behind how much capital growth they achieve from their real estate investments is the amount of money generated when they sell a property.
But seasoned property players know this is not the whole story.
What really counts is the opportunity cost when you buy. The fact is that if you buy an investment-grade home at a reasonable price at a time when other prospective buyers are holding back and the market is flat, you’ll be streets ahead of the other property punters in the long run.
“The sure fire way to ensure that you are successful in climbing the property ladder is not what you sell a property for, it is what you buy a property for,” says Arch Staver, Nelson Alexander’s sales director.
“If you buy well, the natural course is that your property will appreciate in value at a strong rate.”
Property observers view the current downswing in Melbourne prices as only a temporary trend, and see a bounce-back in prices and demand as inevitable, given the historical precedents.
There have been plenty of downswings followed by recoveries before. The early-1990s was notable for a slide in prices that tossed up some great buying opportunities. A recovery in prices followed. Similarly, in the months following the 2008 global financial crisis, some house prices fell but within a short time the market took off again.
Frequently, when the market goes through a change, people think that it is going to last forever, so they’re scared to make a move.
It can be a little like when the market is running high. Buyers and sellers think that sale prices will be high forever and they start making bad decisions, thinking, for example, that all types of property will perform strongly.
Buyers with their feet on the ground and an astute appreciation of the current state of play in the market can turn the hesitancy and psychological trends now at work to their clear advantage.
“It is fascinating to me that in a booming market, in which prices are going up on a monthly or even a weekly basis, people queue up to buy,” Mr Staver says.
“And now the environment is perfect for the astute buyer, but there is a reluctance to purchase, even among those who don’t have restrictions on their loan finance.”
It’s important to recognise that negativity is contagious, and that no-one can pick the bottom of the market.
But astute investors and home buyers know that now is the time to buy – and not just because prices have eased.
One of the key advantages of buying in a flat market is that you don’t have to rush into a purchase. You can be relaxed about it.
Now you can do your research and take your time with the thought that the market isn’t volatile.
Even in the quality segment, the market is holding its own, so you can be very selective about assessing and valuing properties.
You should also recognise that residential property prices have historically gone up in a non-linear growth pattern. You don’t get incremental growth of, say, exactly 10 per cent a year every year. Rather, prices can go up sharply for a five-year period at 15 per cent a year or so, then the market may go through a lull before activity again starts to hot up.
Mr Staver says buyers don’t need to overthink market trends.
“Prices have flattened, so it’s a good time to buy,” he says.
“If a property falls within your price range and it meets your criteria, there has never been a better time to buy.”