The answer to this question is completely dependent on who you talk to as everyone has an opinion.
Damien’s insights for property purchasers
For me, I’m a bit more optimistic about the market as even though we only see a small sample of people and data, early indications are that people still want to buy. In saying that, they are educated on the market, knowing it’s a buyer’s market and looking for a bargain. The days of 5 plus bidders going crazy and pushing the price 30% over reserve is so 2017.
Since January, the majority of our loan applications have been pre-approvals for people looking to purchase this year. Sometimes you get a lull in January, but it hasn’t been the case in 2019 as people have been seeking us out to get advice around buying and having their finance in place. This gives me confidence that the market will come back sooner than maybe some people think, because the buyers are still out there.
For the last weekend in February we had 10 clients go to auction. Most of these were in the inner suburbs of Melbourne with varying price points and all the properties sold under the hammer.
Like I said, it’s only a subsection of overall market data that we see, but from observing our clients I see that they are getting confidence back to purchase. No one is going crazy with their upper limit to purchase, and they are viewing this buying climate as an opportunity if the price is right.
Clearance rates for the final three months of 2018 in Melbourne were 45.8% (CoreLogic, see chart below). Looking at the graph below up until March 2019, there is a sharp incline with the clearance rates being approx. 55%.
Source: Business Insider
So back to the original question if it’s a good time to buy?
If you have a long-term strategy in mind, history tells us the property market doesn’t stay down for long. Therefore, if you can buy at a 10% – 15% discount from the peak of the market in 2017 then you may see good uplift over time. It seems to be all doom and gloom at the moment in the property market no matter what your news source. We’re in for ‘an economic crash’, ‘a debt bomb’, ‘a credit crunch’ or our recent favourite, ‘Bricks and Slaughter’. Yet with interest-only loans resetting, we will see people having to sell and flood the market with undesirable housing stock.
The last big downturn we saw was back in 2008 – 2009 during the GFC. I personally purchased 2 properties in 2008 when no one was buying, believing the market would turn, which it did in 2010. One of the properties which I paid $780,000 in December 2018, I still have today and approximately six months ago it was valued for $1.6Mil by one of the major banks. Note, I had put $100K of renovations into the property which of course helps its uplift, but still it would have doubled in 10 years which is always the goal with property (or sooner).
With the Royal Commission now behind us as of the start of February 2019, it may give people more confidence that they can still get loans and be well looked after. The only other thing that will weigh on people’s mind now is the election and what the Libs or Labour will implement to affect the property market. So, if you are cautious about that, then sit on the sidelines another few months, if not then feel free to start looking now and do your research.
What I say to all clients at the moment is, be patient and picky. There are good opportunities out there which will be good investments and if it was me, I’d engage the help of a buyer’s advocate. I’ve bought a few properties in my time, from apartments to houses, and every time I still use an advocate. It’s not that I don’t know what I’m doing as I have attended thousands of properties and done many auctions, but it’s because buying a property is an emotional purchase and I want to make sure that emotion doesn’t get in the way (or a wife, telling me to spend more over our limit).
The ‘game of homes’ is always risky, fortune favours the brave if you can buy now and hold.
Book a Discovery Chat with one of our expert brokers today to discuss whether 2019 is the right time for you new home or investment.