Most people describe a property market as either a buyer’s market (prices going down) or a seller’s market (prices rising). Simply put, one is deemed bad for buyers and one deemed good for sellers and vice versa.
The current market should be termed a trader’s market. Falling markets come with silver linings & create opportunities for savvy traders. Instead, real estate agents tend to refer to a falling market as a ‘tough market’. Sellers call it a ‘bad market’. The market is neither ‘tough’ nor ‘bad’ if one accepts the reality of the day and then decides the best way to trade the conditions.
Even though prices are falling, a savvy trader can make smart and profitable moves in a bear market.
When property prices fall, transaction volumes tend to fall at an even faster rate. This is because vendors increasingly take a position on price for their existing asset and refuse to sell. As a vendor it is easy to feel as though your property is the only one on the market struggling to sell when in fact the market at large is dealing with the same issue.
Unfortunately, sellers who take a position of pride on price with their existing dwelling, can miss the opportunities that arise elsewhere in the market. Opportunities that more than offset the shortfall you may experience on the sale.
The Sydney market conditions could be flat and/or falling for some time. Those wanting and needing to buy and/or sell cannot afford to take a stubborn view to the current market conditions, if they want to trade successfully. Australian real estate has been generous over the long term, but the short term is prone to price corrections as we are now learning.
Below are 7 tips and strategies to assist you in how to best trade the current market.
1. Sell first, buy second – if you sell first, suddenly the trend is your friend. If you buy first, the market could become worse. Understandably, many people buy first for a fear of not finding a suitable residence. Given the unpredictable nature of the market, selling then renting is preferable to buying and then being unable to sell (without having to slash your selling price).If you sell first and negotiate a long settlement of 12 to 16 weeks on the sale, that leaves ample time to find a suitable home to purchase and make the settlement of both transactions at the same time.
The key is to settle the sale and purchase together. Exchanging contracts at the same time can be problematic.
2. Early first offers – the best buyers tend to come early, which is why the ‘first offers are generally the best’. Ignore the maxim at your peril. Note the statement does not state the first offer, it says the first offers. It does not say first offers are always the best, it says ‘…generally the best’. Look closely at the market feedback on your property for what it is rather than what you want it to be. Hopefully what the market is saying/offering and what you want are aligned.
The best buyers are attracted to new stock on market, that’s your time to achieve the best possible price when selling.
3. Changeover price – the selling price and the purchasing price are not as important as the changeover price. Provided you are buying around the same time, you are either selling high and buying high or vice versa.
Therefore, the key number is the changeover number. If you are upgrading, the key figure is the amount you need to tip in, after you have sold, in order to fund the purchase.
If you are downgrading, the key figure is the amount of money you have left, after you have sold and purchased your next property.
It is common for people to take a position of pride on the sale price (to their detriment) to only go out and impulsively over pay on the purchase.
4. Patient, persistent and decisive – those selling need to brace for a longer than normal campaign in the event they need to wait for the right buyer. Conversely, if the right buyer turns up on the first weekend, be prepared to sell. There is too much stock on the market with more coming, to act indecisively with the right offer.
5. Foresight not hindsight – where is the market going? No one really knows but asking and trying to determine where the market is going is a much smarter question than focussing on where it’s been. The Brisbane property market has not reached new highs for over 10 years. Any seller waiting for a record price needs the patience of St Monica.
6. On market data trumps sold – if you look at recent comparable sales to your home and then compare that list with what is currently on the market, you will see the on-market listings are generally showing better value than the sales.
As the market trends down, sellers need to price against what is listed on the market and less so against those that have sold. This is particularly so with apartments and generic stock.
7. Terms and conditions – a negotiation that is solely about price can quickly unravel. Value can be created in a negotiation if everyone is pragmatic and open minded.
Inclusions, settlement periods, deposit amounts, release of deposit, unconditional exchange are just some of the areas that can create additional value in a transaction. Whether you are buying or selling, remain open to all solutions and you vastly increase the chances of success.