Is Now a Good Time To Buy An Investment Property?

Is Now a Good Time To Buy An Investment Property?

It has been said so many times now it seems like such a cliché, but Warren Buffett’s famous quote still rings true for me and many other property buyers – ‘Be fearful when others are greedy and greedy when others are fearful.

What does it mean in relation to property? Well, the best buying opportunities come around when the majority are fearful and sitting on the sidelines, as is the case in today’s slowing market.

Now is the best time to buy, but we don’t know how long the ideal conditions will last as the bottom of the market could be just around the corner, after which point the upswing will come again.

With so much media negativity in recent times about the property market, you might be shaking your head and asking why now is the best time to buy. Well, here are 6 great reasons why a slowing market can be great for buyers:

It’s no longer a seller’s market

During the boom between September 2020 and April 2022, the market was clearly in favour of sellers.

There were limited listings and lots of buyers vying for each property on the market, with the competition pushing up prices and seeing vendors achieving record rates.

But since April this year we have seen the market soften and with fewer buyers around it’s now considered to be more of a buyers’ market, with conditions favouring buyers.

This is particularly the case in some areas such as Sydney and Melbourne, which have seen some of the biggest price declines.

Reduced prices

Residential property prices in capital cities have fallen 5.5 per cent or $46,100 since their peak in April this year, according to the latest CoreLogic data. This follows massive growth of 25.5 per cent over the boom period leading to the market peak.

In regional areas values are down 3.6 per cent or $21,700 following growth of 41.6 per cent leading up to the market peak in June this year.

There may be a further softening of prices which is good news for buyers, as it’s an opportunity to get into the market at a lower price before growth returns.

The opportunity to capitalise on future growth

Even though prices have softened and may fall further, there won’t be a crash like some doomsayers have predicted. We could in fact be close to the bottom of the market.

A recent Domain analysis found previous downturns lasted nine months on average, and the rate of price declines is now slowing.

History tells us that home prices do rise over time, and they will rise again following this current downturn.

That means now is the ideal time to buy, so you can get a foothold in the market before capital growth returns.

There are already signs that the fear we have seen in the market following interest rate rises is dissipating, and will likely ease further if we continue to see a slowing in rate rises.

Ultimately, we know that prices will keep rising due to an imbalance between supply and demand in the property market.

There is a significant undersupply of homes, and demand is set to rise due to population growth, especially now international borders have reopened.

It’s also clear that there haven’t been distressed sales or panicked selling, which will also prop up housing values.

There are fewer buyers around

During the height of the boom between September 2020 and April 2022 the market was somewhat frenzied.

Buyers had FOMO and were prepared to pay what seemed like virtually anything to secure a property.

Now the heat has come out of the market that buyer urgency is gone, and in fact, many buyers have retreated to the sidelines to ‘wait and see what will happen in terms of interest rates and property prices.

Home loan commitments fell by 3.4% in August following an 8.5 per cent drop in July, according to ABS figures.

As a result of less competition, active buyers now generally have the luxury of taking their time to research their target locations and do thorough due diligence on properties and pricing before making offers.

The reduced buyer competition is largely responsible for price reductions too – with fewer buyers around to compete for properties it’s less likely prices will be driven up.

Better ability to negotiate

With fewer buyers in the market sellers are more willing to negotiate – not just on price but on conditions too.

Over the boom, sellers would simply take the best possible offer, on the 1st open home, but in the current market, there is greater room to negotiate on price, repairs, rectification work, and settlement periods.

Investment conditions are strong

While prices have slowed, rents are rising, as is often the case, with the latest figures finding rents for both houses and units reached new heights across capital cities at the end of September.

SQM Research Data found there was a 3.4 per cent increase in house rents and a 5 per cent increase In unit rents over the last quarter, with the rises the result of an imbalance between supply and demand.

With the Brisbaneresidential vacancy rate falling to a 16-year low of 0.8% last month, according to SQM Research, rents are likely to rise further.

As prices fall and rents rise yields are on their way up, with Brisbane’s yield for houses now 3.6 per cent and 5.1 per cent for units.

These are all very good indicators for investors, as it means they’ll have no trouble finding tenants and paying their mortgages, and in time they will also benefit from capital growth.

If you are looking to buy in this market and want some guidance, click here to book a time for an obligation-free conversation.