Australian property: What to know about buying a home as prices are falling

"Buyer's are finally getting more control of the market in the back end of 2022." - Miguel Nitorreda, Data Analyst

Interest rates continue to rise and Australian house values are falling – with the nation’s typical home value down 0.25 per cent since May.

Half of all Australian capital cities experienced declines in the past month, including Sydney, where dwelling values fell 0.4 per cent, and Melbourne, down 0.61 per cent, according to the most recent PropTrack Home Price Index.

With buyers increasingly in control it is a very different market to what it was, even at the start of 2022.

But what should you look out for when buying in a falling market? And how long do you have to make a move?

DON’T RUSH YOURSELF

Although you will not want to miss out on the best deal, it is important to still do your research when buying in a downtrend.

PropTrack senior economist Eleanor Creagh said buyers now had more choice than in recent years, but studying the market for the best opportunities should include watching for areas where auction volumes, clearance rates and even prices were falling.

According to PropTrack research, June’s new listing numbers were at an 11-year high – and more homes hit the market in the first half of 2022 than had done so since 2015.

“And stock isn’t moving as quickly any more, particularly in Sydney and Melbourne,” Ms Creagh said.

For most buyers, they will not have to be as fast to make an offer as in the past few years.

But with market conditions changing, she warned the wide selection of homes could change in as little as six months.

Harcourts Move director Sadhana Smiles said buyers should look at how long homes had been on the market as this could indicate if a vendor was asking too much or was happy to wait for their ideal price.

Ms Smiles also advised buyers to attend auctions for a better idea on what properties were selling for in their desired area, in addition to keeping an eye on private sales.

“If a property has been on the market for a while, consider a lower offer,” she said.

However, Ms Creagh cautioned against only watching the auction market, as many sellers would turn to other options, such as private treaty, as buyers gained more control.

Falling sales volumes or a rise in the average time homes take to sell could help identify private sale markets where buyers had control.

PREPARE TO NEGOTIATE

While it sometimes pays to wait for a better deal, Ms Creagh said trying to time the market was not a great strategy and finding a property that was right for you was more important. But if you do find the right one, you’ll probably be able to negotiate for it.

When doing so, she advised keeping a few things in mind beyond the purchase price.

“Many buyers are also sellers in the same market, so although the property they buy could be cheaper, they would also get less for their own,” Ms Creagh said.

“It’s best to go in eyes wide open so as not to be surprised or caught off guard.”

It could also pay to find out the vendors’s preferred settlement time and work out a reasonable price before making your offer.

Property Home Base founder and flat fee buyer’s agent Julie DeBondt-Barker said buyers might have better success taking a home off the market before a planned auction in a falling market, but needed to make an offer on a contract of sale to do so.

“Verbal offers and email offers aren’t even submitted to the vendor because they’re not legally binding,” Ms DeBondt-Barker said.

THE TIME IS NOW

If you have your eye on a property, now is a great time to buy.

“Buyer demand is moderating, auction volumes and clearances rates have fallen and sales volumes have slipped, along with falling prices … this would be a similar feature of future downturns,” Ms Creagh said.

Ms Smiles also urged buyers to break into the market now if they could, as it was unlikely for it to continue to fall at the current rate. Future declines could be more gradual.

“There are a number of issues at play, (such as) rising interest rates, consumer sentiment, affordability, and the rental crisis,” she said.

“If you see a home you like and it meets your needs and budget, put your best offer on the table.”

Ms DeBondt-Barker also highlighted that it was worth pursuing an “ugly duckling”, as these properties were generally harder to sell, so you could score a better deal.

As a final piece of advice, Ms Creagh said that buyers should remember property was a long-term asset, and should be viewed with a wide lens – not simply based on what was happening in the short-term.

“If you’re ready to purchase, there’s a lot more choice, which could create opportunities for some,” she said.

Source: Realestate.com.au

Holgate, E. (2022, July 23). Australian property: What to know about buying a home as prices are falling. Search for Real Estate, Property & Homes - realestate.com.au. https://www.realestate.com.au/news/australian-property-what-to-know-about-buying-a-home-as-prices-are-falling/