Written by Peter O’Malley, Author of Inside Real Estate
Property prices across many parts of Australia are falling, of that there is now little doubt. The prevailing sentiment would have you believe that falling prices are terrible for all concerned. Admittedly, the net result of those trading in a falling property market is probably to the downside.
Make no mistake though, there are still plenty of people who manage to improve their position in a falling property market. Understanding and accepting where we are in the property cycle is crucial to trading better and smarter.
There are five (5) trading opportunities to those prepared to act in the current market
1) First home buyers -were locked out of the property market during the boom. At one stage, baby boomers wondered if their children would ever be able to buy into the Sydney market. Now is the best buying opportunity for first home buyers since the GFC in 2008. Sure, property prices were lower in 2008 but mortgage rates were significantly higher.
Every percentage point the market softens by means the more first home buyers that are able to climb aboard the property ladder. Whether they choose to do so is a secondary point. Some will, some won’t. The fact is first home buyers now have a choice of whether they do or don’t enter the property market – where as they were locked out during the latter stages of the boom.
The dwellings that appeal most to first home buyers, inner city apartments & houses in new suburban estates are feeling the brunt of this downturn.
2) Smaller mortgage – a lower purchase price means you pay the bank less each month in mortgage repayments. Most property booms are quelled by the RBA raising interest rates. This downturn has been manufactured by tighter credit conditions.
Interest rates are at near record lows and look set to remain there for some time to come. Therefore, hose that qualify for a home loan can buy a home for less than they would have paid 12 months ago & still enjoy record low mortgage rates.
A cheaper house, a smaller mortgage and still cheap money. The major challenge is getting a bank to offer you a mortgage.
3) Wider range of stock – a frustrating symptom of a boom is the tight availability of dwellings on market. The most desirable properties were the most contested too. Many home buyers found themselves securing a property during the boom that felt like a compromise. Winning the bidding war became success in the suitability of the dwelling a secondary consideration. The respective buyers were at least comforted by the fact their new home was going up in value.
Buyers now have a wide range of dwellings on market to choose from. There are some excellent opportunities in the market and the buyer competition is nowhere near as fierce as what it was in the boom. To have a generous selection of quality listings to choose from – in a healthy economy with record low interest rates is a buyers paradise.