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What types of properties should you buy in a Buyers Market?

Updated: Jan 6, 2023

Thinking of buying properties in a cooling (falling) market? Why not?

Afterall, in a cooling market when not many buyers dares to buy, you can sometimes pick up very good deals.

Here is what you need to know if you are planning to buy.

Our property buyers advocates will show you:

  • Should you buy in a cooling market?

  • How to buy in a falling market?

  • What should you buy?

  • What should you watch for?

  • What types of properties should you buy?

  • What strategy is best for buying in quiet times?

  • What types of properties will sell fast in a cooling market?

In the Property Market What is a Buyers Market?

A property buyers market is when there are more properties being sold than there are property buyers. In a buyers market, there is generally more supply than buyers, and buyers has the upper hand in closing the deal. A buyers' market can also be called a:

  • cooling market

  • falling market

  • consolidating market

Some alarmistic journalist may even call this a bursting property market. In a buyer's market, price rise tend to be rare, and sellers are more realistic with their expectations. Some might even consider reducing the asking price, to entice buyers.

Should you buy Properties in a Buyer's Market?

Short answer: Yes. Buyers can buy in a cooling property market. And it is usually the best time to buy. But, should you buy? Yes, if you can afford it and afford to hold it for a year or two, through the downturn.

In the Melbourne property market, Time in the market is a lot better than timing the market. The only bad time to buy, is to WAIT for the right time, and that includes waiting for the prices to bottom.

Historically, Melbourne property prices are growing at an average of 7% annually. Yes, that include the major downturns like GFC, Covid-19 pandemic, high interest rates, recessions, etc. Property buying and property investments are for the long term. Investors in Australia typically hold on to their investment properties for about 7 to 10 years.

With a growth of around 7% annually, that means house prices will double every 7 to 10 years. Why wait for prices to drop a further 2-5% when you have 100% gain in 10 years time? Yes, you might save a further $50k, but, that's how much buyers advocates like us typically save our buyers anyway.

Buyers waiting for the bottom, have NEVER bought at the bottom.

One other notable fact is, buyers waiting for the bottom, have NEVER bought at the bottom. They are always 3 to 6 months too late. And by then, there will be all other waiting buyers and enough FOMO in the market to push prices a lot higher quickly.

How do you buy Properties in a Buyer's Market?

Buying in a falling (cooling) market is similar to buying in a booming market. Do your due diligence, find the type of properties you want, and buy. In a falling market, you might have more time to do your due diligence, so, you have less of an excuse not to do it properly. Some good properties do sell fast, in a falling market though.

What Properties should you buy in a Buyer's Market?

Anything, really. Anything you need to set yourself up for success. As a buyer, you need to understand that the Melbourne property market is made up of multiple sub markets. While some markets are cooling, some are still hot and rising.

When our buyers advocates analyse properties, we categorise them into 3 grades.

Grade A - those in blue chip areas, good location, tip-top, move in condition.

Grade B - those in lesser locations, and those that are generally in a move-in condition, but can do with some renovations.

Grade C - those in lower socio-economic areas, and need extensive renovations.

While the Grade Bs and Cs might fall, you might be expected to pay above asking price for the Grade As.

You buy properties for only 2 purposes:

  1. Buy what meets your needs

  2. Buy what sets you up for success financially.

Identify your needs, then find a property that fits your home buying or investment plan and strategy needs. Whichever you buy during in a buyer's market, is definitely going to be cheaper simply because there is less buyers competing against you. If you are unsure of what to buy, have a chat with us. Our strategists can help identify your needs, and if you choose to engage our services to help you find and buy that property, you will get an immediate discount.

What should you watch out for in a Buyer's Market?

As with any buying properties in any other times, watch out for property spruikers. Those who claim off-the-plan apartments will give you the riches to let you retire early... They are just feeding themselves with the huge commissions from the developers. They are the ones who will be retiring early, while you are still paying off your depreciating apartments or trying to dispose them.

Buyers should buy apartments only for 1 need: Convenience.

Apartments are usually located centrally, near major amenities. Good public transport, food outlets, grocery stores, etc. Unless you are buying a very exclusive high-end limited edition apartment or penthouse, most mass market apartments are money pit holes.

You need to validate when someone says apartments are high yield, high growth. Information you need to receive from them include:

  1. What are the strata (body corporate or owners corporate) fees?

  2. What are the council rates?

  3. Who supplies the utilities (include gas, electricity, internet/nbn)?

  4. Are you free to choose your own utility supplier?

  5. Does it come with parking?

  6. Where can you guest park?

  7. What are the growth in the apartment block?

  8. What are the recent resale prices of the apartments in the apartment block?

  9. What can you unit be leased for (yes, even if you are buying, you need to know this)?

The notion that apartments are high yield and high growth, can easily be verified when you get answers to the above questions. Include the numbers into your due diligence, and you will find the high strata fees, higher interest rates, high parking costs, high utilities costs will eat into the yield of the apartment, while growth are almost ZERO, if not negative. In most apartments, yields are no better than a house in the suburbs, while, suffering from poor growth, due to the consistent over-supply issue.

For more information around you need to know when buying an apartment, read this.

What types of Properties should you buy in a Buyer's Market?

What you should buy, depends on your home or investment property buying goals. If you prefer something newish, in a move-in condition, go for the Grade As. But, do be prepared to pay more for them. You might even need to pay above market prices, if they are popular.

If you are after the Grade Bs and Cs, you're in luck! Grade Cs deals are readily available now. While prices of these properties were insane in the past couple of years, vendors are very realistic now. Choose a property that fits your investment plan and strategy. Whichever you buy, there is definitely going to be lesser competition.

What strategies are best for buying in a Buyer's Market?

Buy when you can. Not timing the market. This is the strategy we've asked our successful investors to adopt.

Go for the Grade As if you want something to live in, or to lease out for a premium.

Go for the Grade Bs if you want something you can improve, and potentially fetch a higher rent.

Go for the Grade Cs if you are a handy person, and you are prepared to get your hands dirty. Do note though, not all repairs or renovation works can be done by a handyman. You may need to get the relevant council permits and licenced contractors to do certain pieces of work.

Do not time the market. Time in the market is what it needs for the right properties to grow.

Where can you get help to buy in a Buyer's Market?

If you are not sure of where and how to buy in this quiet times, get in touch. Our buyers advocates are available to readily take over your buying headaches.

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