If you believe the 88-year-old investor Warren Buffet, the time to invest or enter the property market is when others are fearful.
Warren Buffett is the chairman & CEO of Berkshire Hathaway one of the most successful investors to ever walk the planet.
18 months ago, Warren would have described Melbourne & Sydney buyers of being greedy in their ambitions to buy property. Auction clearance rates were hovering between 80-90% range and the average time it would take to sell a property was 28 days. In many agents own words, they were simply ordered, takers!
Almost every property we were negotiating on behalf of our clients, was under extreme competition. I remember specifically a property we purchased for a client, received eight signed contracts of sale. At the time we were not the highest offer, but we had the best terms and conditions that favoured the vendor’s situation making the decision easier for the vendor.
We were competing against 3,4,5 + bidders consistently at auction. 9 out of 10 agents would not accept any offers before the auction because they had buyers lined up with finance ready to go.
Fast forward to today and we are seeing the almost the complete opposite.
Clearance rates hovering around 40-50%
Open home numbers – Significantly lower.
Agents are open to offers before the auction on almost every property.
Banks are scrutinising their lending more than ever before.
2019 is without a doubt the year of the buyer! In particular, it will favour a number of buyer categories.
Families who are considering upgrading their property to a larger family home!
Buyers who desire a move to a suburb that may have previously been out of their reach financially.
First Home Buyers – Who are entering the market.
Investors who have the ability to secure finance.
With the election pending a number of investors will remain in a holding pattern until they know exactly what is happening with negative gearing.
This fearful mentality as Warren Buffett would say is the perfect time to be acquiring quality assets and holding them for the long term.
If you find yourself in any of the above categories as a buyer’s advocate, our research due diligence & negotiating expertise can save you our fees upfront upon the acquisition. This together with ensuring you are buying a quality property that appreciates in value, will allow you to add to your portfolio in the future when your cash flows allow.
We are witnessing what many long-time investors have seen before and that is the what we call the property market cycle.
The cracks started to appear in June 2014 when APRA https://www.apra.gov.au/ The governing body for banking, informed the big four banks that they needed to rebalance their mortgage books.
APRA placed a speed limit on the amount of interest only loans they could approve, as they believed that the amount of interest only lending to investors and foreign buyers had inflated the property market and were making it extremely difficult for first home buyers to enter.
The implementation of this change wasn’t really felt until October, November 2017.
Fast forward to 2018 we had the start of the Royal Commission into banking. What has this uncovered so far? The royal commission has exposed the naked truth about banking conduct and some irresponsible lending practices.
Countless apologies and admissions from bank bosses suggesting they’ve made mistakes and have learned from their ill judgement.
What people are describing as a “lending crackdown” or “credit squeeze” is simply the banks behaving as they should, lending more responsibly and conducting thorough loan assessments.
The bank’s hands are tied, and they’ve been burned too badly. Not by falling property prices but by humiliation in the media, public opinion, Apra and royal commission.
The two biggest markets in Australia both Sydney & Melbourne have seen significant declines since late 2017 and there is more pain to come.
Don’t believe all the media hype! A grade property in 2019 will still sell well under competition this year if it is priced accordingly to where the market sees the value.
In summation 2019 is the year of the buyer! If you are a buyer and have your pre-approval completed & your finance is ready, this year is sure to offer some of the best buying opportunities that we have seen since 2011 – 2012.
If you are currently a vendor or planning on selling in 2019 the market extremely price sensitive. In this environment, it is extremely important to select the most trusted agent in your area that understands the market conditions.
Spending $5,000-$30,000 on marketing expenses and not achieve a sale can be a costly mistake.
If you need help selecting the best agent to sell, our vendor advisory services can help you with engaging the best local agent to maximise your sale price. Get in touch on (03) 8374 7652.