When’s the best time to buy property?
One of the questions I’m repeatedly asked as a buyers agent is “When is the best time to buy a property?” The short answer is “when you can afford it”… but let’s dig a little deeper to find some more clues.By RICH HARVEY
Property cycles
The property market moves in cycles and the market in Perth is typically at a different stage of the cycle to Sydney. Property markets rise and fall due to the effect of interest rates, population growth, migration, employment markets and consumer confidence – just to name a few.
Prices rise quickly in a rising market then level off before we hit the declining market stages and the cycle repeats itself. There are no precise rules around the timing of each property cycle as the economic conditions of each decade are often unique. Some investors espouse the rule that property doubles every seven to 10 years, but such a blanket cliché brings false hope.
The smart investor needs to identify where their local market currently sits in the property cycle and consider the effect this will have on buyer and vendor expectation of price. If we’re in a rising market (i.e. a sellers’ market), then there’s likely to be little price discounting, more auctions, multiple offers on the same property and lower days on market (i.e. properties will sell quickly after public listing). If we’re in a declining market (i.e. a buyers’ market), then we would most likely see properties taking much longer to sell, larger discounting and fewer offers on properties.
Time in the market vs timing the market
The longer you hold your property investment the more equity you gain (provided you have done your due diligence and purchased in a growth area). Trying to pick the peaks and troughs of markets is difficult. But buying when there’s pessimism and negative media can present excellent opportunities from motivated vendors. I try to do both – buy when the market is down and buy continuously in different areas.
Opportunity cost
The Achilles heel of the investor is typically procrastination. The opportunity cost of not taking action and investing in property is always seen a decade later. Just think about the prices houses in your own suburb were selling for 10 years ago (and don’t you wish you had bought more?).
Here are my tips on the best times to buy:
• After auction – Vendors are typically “ripe” for negotiation immediately after an auction campaign. They’ve spent money on advertising, tested the market and received feedback from their sales agent. Vendors are usually more motivated at this point.
• Winter – during the cooler winter months, there are usually less buyers around. Braving the cold and getting out to open homes can mean you pick up something with less competition.
• End of financial year – some vendors may sell their property prior to the end of the financial year to minimise their tax. You might find the price is more negotiable from these vendors.
• Christmas and Easter – deadlines bring decisions forward. I have noticed that vendors like to get a result before the two main holiday periods each year. The vendors just want to know they can move on, enjoy their holidays and know the sale is confirmed.
When you really consider it, property investing is about buying time, not real estate. Property prices move in cycles, and over time the property market goes up in value (in the right areas). Investing with a long-term perspective means you’re not trying to beat the short-term swings of the market.
Opportunities to buy well are available whatever stage of the cycle we’re in – but easier in a buyers’ market!
Rich Harvey is a buyers agent, economist and CEO of propertybuyer ®. Rich was awarded the 2009 national “Buyers Agent of the Year”, the “Award for Excellence” 2004-2008 by the REINSW and the 2007 National Telstra Business Award. Find your next property faster: http://www.propertybuyer.com.au
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