You want to buy property now, but is it the best time?
Most people buy property when the market is at its most frenzied because everyone else is doing the same thing and they’re spurred on by the excitement and hype. The problem is, the market has often already peaked and the chance of making a profit has passed.
On the other hand, some buyers become so obsessed with ‘timing’ the market and waiting until it drops to its lowest point that they miss out and the market begins to climb again.
Ideally, you want to buy property during a rising market and not when it’s peaked, but how can you tell?
The simple answer is, you can’t know for sure. But there are observations you can make to better understand what’s happening around you –
How quickly is property selling?
If properties are being snapped up like hot cakes in the area you want to buy, it’s a good indication that the market is in full throttle seller’s mode (when demand for property is high). Sellers hold the upper hand; they know they have the power and will negotiate hard to get top price – not the best time to buy.
Here’s a good rule to remember: when people aren’t buying, you can get a cracker deal and a string of properties that have been on the market for 6 months or more is a good indication it’s a buyers market. Sellers may be desperate and you hold the negotiating power. In a perfect investment scenario, this is the time to buy.
How do seasonal trends compare with the previous year?
Research past historical data – how does the price per square foot compare for the area with prices this time last year? A local agent should be able to tell you what sort of percentage prices have changed. A considerable drop suggests it’s a good time to buy. If prices have taken a steep climb, you may want to get a clearer picture of where the market is heading. How long have prices been climbing? Can the market sustain continued growth? Don’t leap in blindly; if you wait, you may pick up a better deal down the track.
What projects are being built around you?
Callum Newman, Editor of Cycles Trends and Forecasts, recently noted in his article Timing the Real Estate Cycle that, “Tall buildings are a visible reminder of easy or easing credit conditions. They have a consistent habit of opening at the height of recession. They get built in the good times but they usually open empty.”
He states the current world’s tallest building in Dubai, the Burj Khalifa, as an example.
Take note of what’s being built around you and the different stages of their development. A spate of building projects in their infancy – especially townhouses and apartments – usually indicates a booming property market. If, however, those developments are struggling to sell approaching completion date, the market may be stagnating.
How are the banks acting?
If banks are anxious, it’s a good indication the market is becoming unstable. Are they tightening the belt on investment loans, Lenders’ Mortgage Insurance and lending to buyers applying for large loans? A tightening on lending policies often means the market is reaching its peak.
What are the experts saying?
Talk to real estate agents you know and trust (trust being the operative word; they’re called sellers’ agents for a reason…) Real estate agents understand the local market and will be able to give you an accurate idea of buyers’ behaviours.
Follow respected real estate blogs like realestate.com.au, Domain and Your Investment Property, which offer the latest news and guest posts by industry experts sharing market insights and buying tips.
We also recommend you register with realAs and monitor any patterns in sales prices. RealAs combines crowd-sourced data with predictive computing to bring buyers accurate price predictions (averaging 5% off the final sale price).
Final words of advice…
We’ve said it before – don’t be a sheep. If you follow the flock, the market may bite you. Property markets are cyclical and learning to read and understand them takes years. They have a limit; they’ll only sustain so much before prices become inflated. The majority of buyers buy when the market is at its busiest, and often it’s too late.
The best indications to suggest a market is still rising are –
- Interest from overseas and interstate investors
- Auction clearance rates in excess of 50%
- Local investors returning to the market
We’ll leave you with our number one piece of advice: if you’re a novice, rather than trying to ‘time’ the market, you’re better off focusing on the most important rule there is when it comes to buying property –
A well located, highly sought after property rarely declines in value over the long run.
What’s your advice for trying to ‘time’ the market?