‘A buyer’s market’ – what does this mean for would-be Warrnambool investors?

Posted on 20/03/2019 by Andrew Morris in Finance, Mortgage Broking
Andrew Morris
Andrew joined Sinclair Wilson in May 2017 as Mortgage Broker, having spent the past 10 years in the banking industry. With a small business background - in hospitality, no less...

There’s a lot of action in the property market at the moment – good and bad, depending on where you’re looking.

In some locations – particularly metro areas – some property market analysts predict home values could fall by as much as 11% this year, pointing to house values dropping by as much as 7% already in some Melbourne and Sydney suburbs.

But it’s a different story in regional locations, like Geelong, Ballarat and Warrnambool, where values are steady and rental returns strong.

So while the predictions to date may seem like gloom and doom to some people, there are a lot of prospective home buyers who see it as an opportunity to join a promising market, or prepare to grab a bargain.

When it comes to buying a Warrnambool property, supply and demand will always be king – it’s this that determines who (as in, buyer or vendor) gets the upper-hand on price.

So now, with home values and auction clearance rates falling in some regions, but holding fast in others, could we say it’s a ‘buyer’s market’ yet? Read on to find out.

What is a buyer’s market?

The term ‘buyer’s market’ usually applies when buyers have more power in the property market than vendors (or sellers) and therefore, have the upper hand when it comes to negotiating the final price for a home.

Basically, a buyer’s market occurs when there are more properties for sale than there are people willing and able to buy them.

Signs that we may be encountering a buyer’s market could include:

  • Unusually high numbers of properties for sale in any given city, suburb or area
  • Low auction clearance rates
  • More vendors preferring private sales over auctions
  • Property remaining on the market for longer
  • Vendors more prepared to negotiate on price.

Does this mean it’s a good time to buy?

A buyer’s market could be a fantastic time to purchase a home, provided you research your purchase very carefully. There are some risks involved, but if you perform your due diligence and select the right property, you should be able to overcome them.

You will need to be careful not to overpay for any home you purchase in a buyer’s market, so the right property market data will be critical to your negotiations. Additionally, if the price of the property you buy should continue to fall, you may potentially find yourself in a negative equity situation – that’s where the home is worth less than you have borrowed to purchase it.  But careful research and a 20% deposit could help you avoid this situation too.

Generally, it makes good sense to purchase a home when prices are low.

If you plan to live in the home for a while or hold it as an investment property in the long-term, then you will likely be able to wait out the peaks and troughs of home value changes to eventually come out on top.

Should you wait and see if prices fall further?

The problem with taking a ‘wait and see’ attitude is that it may cause you to miss the opportunity to save – home values won’t continue falling for very long (and, in the case of regional markets like Warrnambool, they aren’t actually falling!)

The great thing about a buyer’s market is that there are plenty of properties available and more time to explore them because they’re on the market for longer.

When researching which property to buy, the same rules apply as always – you need to look at what drives demand and capital growth in your area of interest:

  • Is the property close to public transport, schools and amenities like shopping?
  • Are there good employment opportunities?
  • Is the local economy growing?
  • Is there steady population growth?
  • Is rental demand high in the area?
  • Do the numbers add up – will the property give you a good return on your investment?

Get your finance in order first.

As we’ve said before, it is important to get pre-approval on your home loan and to confirm your borrowing capacity before looking to make a property purchase.

Get your finance in order before you consider putting down a deposit or signing a sales contract – contact us now to start this process.