With interest rates beginning their downward shift, some of you might be considering buying or selling – whether as first-time buyers or looking to make a move. I’ll go into a lot more detail about buying and selling in my February newsletter, but I reckon there are some important property market developments worth considering now. So, for what it’s worth, here are a few snippets to mull over during the summer break.
Prices are slowly creeping upwards
One thing has become crystal clear to me: the property market of six months ago no longer exists. I’m seeing buyers enter the market with outdated price expectations, only to find themselves outbid by more informed competitors. Properties that might have sold for $850,000 just months ago are now fetching $900,000 or more. This shift isn’t happening overnight, but it’s definitely happening.
FOMO
We’re seeing early signs of FOMO (fear of missing out), particularly among first-time buyers. This isn’t just speculation – we’re already seeing instances of buyers missing out on properties they thought were within their reach. This trend is likely to intensify, especially as recent changes to bank stress testing have increased many buyers’ purchasing power. A $20,000 to $50,000 boost in borrowing capacity can make the difference between securing a property and missing out.
To auction or not to auction?
What’s particularly interesting is how the purchasing landscape has evolved. Auction clearance rates have been notably poor over the past 12 months, leading to a shift toward negotiated sales with conditions. This is actually good news for many buyers, particularly those with smaller deposits.
Speaking of auctions, I’ve developed a rather strong opinion about them, especially for first-time buyers or those with deposits under 20%. Here’s why: for an auction, banks require you to complete all your due diligence upfront, including paying for valuations and building reports, with no guarantee of success. I’ve seen clients spend around $900 on valuations six times in six months, only to be outbid each time. That’s over $5,000 spent with nothing to show for it. This is something I’ll be talking about in more detail in my next newsletter,
The beauty of an auction is that it is the ultimate in transparency and for sellers when the deal is done its done! But it comes with a big negative in my view and that’s the inability to walk through the purchase in a measured fashion step by step.
Be methodical
The current market requires a methodical, planned approach. Rather than focusing solely on interest rates or purchase prices, consider the total picture: your long-term financial management, all associated costs, and your capacity to service the loan over time. As I often tell clients, “It’s more about money management than interest rate management.”
Here’s my two cents-worth for anyone considering entering the property market:
- Don’t base your expectations on prices from six months ago.
- Get pre-approval to understand your true borrowing capacity.
- Be prepared for competition in popular price ranges.
- Time your property purchase with interest rate decisions.
- Think long-term about your property investment strategy.
- Factor in potential market changes when planning your purchase.
Most importantly, start your preparation early. Whether you’re planning to buy in three months or six months, the time to begin is now. Get your finances in order, understand your borrowing capacity, and be ready to move when the right opportunity presents itself.
Remember, the property market doesn’t move in a straight line. While we’re seeing prices trend upward and interest rates trend downward, these changes happen gradually and unevenly. Success in this market isn’t about timing everything perfectly – it’s about being well-prepared, well-informed, and ready to act when the right opportunity presents itself.
The key is to stay informed and seek professional advice early in the process. Understanding your options and being prepared for property market changes will put you in the best position to make confident decisions when the time comes.
Look out for more about this in February’s newsletter. Meanwhile, any questions, contact me here.
