- Homebuyers and investors are now in a good position to secure properties for a bargain price
- It is vital to understand the local property market you are interested in
- it is also vital to know the seller's motivations
The Australian property market is now in a ‘buyer’s market’ phase, meaning that with waning competition for properties, homebuyers and investors are in the position to be able to secure properties for bargain prices, and get much more value for their money.
Buyers agent Lloyd Edge explains what a buyers market is, when it occur and how you can advantage of such a market.
What is a buyer’s market?
Mr Edge said that a buyer’s market occurs when property purchasers have an advantage over property sellers – or better known as vendors – in price negotiations.
“During a buyer’s market you will see real estate become more affordable because market supply is increasing and properties are taking longer to sell in the market which means there are more choices for buyer’s,” he said.
“This results in sellers needing to reconsider their price expectations on their properties and buyers are able to shop around more for the right property.”
When does a buyer’s market occur?
A buyer’s market occurs when property supply increases and demand for properties decreases at the same time.
Given higher interest rates increasing alongside inflation, some buyers have left the market completely while some sellers are unable to afford their mortgage and are subsequently forced to list their properties.
Both of these will increase supply on the market.
“With an increasing number of sellers having an urgency to sell, this also creates advantages for buyers in the market, added Mr Edge.
“With a higher supply of properties on the market the flow on effect is that properties start to take longer to sell and are staying on the market for longer and vendors start to become increasingly nervous and urgent about the sale of their properties.
“When interest rates are increasing, buyers will be able to borrow less. Alongside rising inflation where buyers can afford less. The result is buyer’s budgets are lower and sellers then need to start to offer discounts on their properties and this is why buyers are seeing they are now able to get ‘more bang for their buck’ than in recent years.”
What are the advantages of a buyer’s market?
Mr Edge said the main advantage of a buyer’s market is that sellers reduce their expectations, and are more incline to negotiate on price as sellers needs deals to be transacted.
“This means that the buyer will hold the upper hand during negotiations,” he said.
“Because properties are taking longer to sell, an advantage for buyers looking to purchase their home means that there are a lot more options on the market and there is not such an urgency to make a rushed decision.
“For property investors, you are able to grab a bargain in these market conditions that will prove to be a good purchase over the long term particularly if you can negotiate smart with motivated sellers.”
What strategies can I use in a buyer’s market?
In terms of strategies to employ in a buyer’s market, Mr Edge had several to offer.
Firstly, he said to constantly re-assess the market conditions.
“It is important to always understand the comparable sales in the area and make sure that they are reliable and relevant. If you rely on sales prices from last year or even last quarter, you may risk paying too much as the market conditions are very different and constantly changing,” he said.
He also said that is vital to understand the seller’s motivations and use this to your advantage during negotiations.
“Be flexible with the terms in the contract to nab a good purchase price,” he said.
“Ask the agent about whether there is any other interested parties in the property. Knowing about how much competition there is for a property will assist you in negotiations. You can also attend open homes to see if there is much interest in the property to aid in your negotiation strategy.
“If the property is going to auction, see if there are many registered bidders and hold back before bidding to see if anyone steps forward. But remember, if a property is passed in at auction or doesn’t meet the reserve price then the highest bidder will be called for private negotiation first”
