Demand is high in Australia right now for property, which has understandably led to shortages in supply. With less inventory on the market, competition is fierce. Those in hotspots are particularly feeling the squeeze, especially in Sydney where records are being broken on a regular basis. Those who grew up in the city are increasingly seeing their odds of buying in their desired area dwindle away.
Since the beginning of the year, experts have seen the property market explode with the help of well-financed buyers and affordable credit. Healthy savings and low-interest rates have translated to soaring property prices as buyers try to edge each other out. We’ll look at what’s happening in the market and how buyers can best navigate it.
The big topic of discussion has been the practice of underquoting. If prices are routinely selling by 20% over the quoted price, particularly at auctions, is there something untoward going on here?
Experts have weighed in to say that it’s not illegal or immoral activity so much as it is a consistently overperforming market. Official complaints are low in this regard, leaving the state of the market as the only other culprit. With consumer confidence so high and inventory so low, Australians are seeing perfect storm conditions creating a very hot market.
It should be noted that price setters do have the ability to correct as they go. For instance, adjusting the price during a four-week auction campaign based on buyer feedback. The real problem is that buyers are waiting to reveal their real intentions until the last minute in many cases.
Agents have been somewhat blindsided in this regard. If buyers are holding onto their trump card until the last moment, it can lead to confusion about where the market actually stands. It explains many of the agents’ shock at rampant price increases from week to week.
There should be some degree of balance in the near future, as this trend can only continue for so long before price-setters can get a better idea of a property’s true worth. Still, the immediate effects have led buyers to start looking to locations like Wollongong as alternatives.
There’s also a boom fatigue effect going on where buyers put their plans on hold to see if the market falls. They’ll watch to see sales prices only (as opposed to listing prices) before trying again. Unsurprisingly, this is occurring with more first-home buyers.
If they have the capacity, they’re buying now, but otherwise the extra 20% (or more) price hike by the time the deal closes is just too high. Property experts have cautioned buyers to reassess where they’re looking, what kind of property they want, and just how much they’re able to afford. What they aren’t encouraging buyers to do though is walk away. Even as prices continue to rise, there’s no telling when things will change. Buyers shouldn’t have to wait indefinitely to move.
Buyers may feel powerless right now, but the truth is that there are strategies that can make the process easier.
Knowing what you can afford is critical. When you’re pre-approved, it means the lender has seen all of your financial information and made an informed decision about how much to lend. While it’s not guaranteed until you find a property, have it valued and move to formal approval, it’s a good way to show sellers that you’re serious about the property and have the funds ready to move. This kind of preparation also helps you keep your emotions in check, so you don’t offer more on a property than you’re prepared to give. A good starting point is to try one of our loan calculators.
A buyer’s agent is working exclusively on behalf of the home buyer, whereas a real estate agent may have conflicting interests as they are hired to represent the owner. A buyer’s agent will help buyers find homes and lend their expertise when it comes to bidding on properties and settling the terms of the offer. This kind of negotiating power in your corner can be exactly what you need to level the playing field in such a hot market. (Shore Financial can help you find a buyer’s agent who will put your needs first.)
There’s no need to consider yourself priced out of the market before you’ve done all your homework. There’s a reason why people are getting frustrated, and it’s often because they don’t have an expert on their team who can help them set the right expectations.
The Sydney mortgage brokers at Shore Financial are here to help you buy the residential property of your dreams. To learn more about how you can navigate such an explosive market, contact Shore Financial today to help simplify the mortgage process.