Who is buying property during COVID-19?

There is no doubt about it. Buyer’s Agents are finding that a significant portion of their current clients are opting to put their search on hold, but not all clients are doing so. In fact, roughly half of our clients have been clear that their purchase strategy and timeframe stay on course as per their original plan.

There are some commonalities that each respective group share.

The category of buyers who have determined that they’d be more comfortable in putting their search on hold for now include;

• those who are concerned about their job security, (justifiably),
• those who aren’t in a hurry to buy, and feel that they could time the market more optimally in the event that the market drops substantially*, (this is not my view and I’ll elaborate below)
• those who are just…, well… scared. Sometimes it doesn’t need a theory or a firm position on future markets. Humans are exceptionally good at freezing when they don’t have clear visibility on what’s coming next. Even homebuyers who have secure jobs can feel scared.

The interesting contrast is that of the buyers who have opted to continue their search and to actively seek a property to buy. They have a few drivers, namely;

• a motivation to secure their home. Their motivation could be based on a time restriction, (ie. the first home buyer deposit saver scheme, a baby on the way, a notice to vacate, a pending settlement, etc),
• a determination to achieve an investment goal with competition now severely limited,
• a drive to time the market, (which is based on the belief that the conditions we find ourselves in are representative of the market low point),
• an appreciation that, as homebuyers, they are now able to buy in an area they were once precluded financially from buying into,
• a belief that the market bounce-back in the post-COVID-19 period will be very strong and could possibly preclude them from their chosen area and dwelling type.

Interestingly, home-buyers and investors alike are within our ‘active’ pool of buyers and the differentiation is based more on mindset than future use.

When we turn the table around and think about the vendors in our market, the categories get simpler;

1. vendors who are committed and motivated to sell will meet the market. They may have launched their campaign before COVID-19 shutdowns commenced, they may have purchased already and need to sell to meet settlement, or they may be deliberate about their upgrade/downsize plans now,
2. vendors who are bothered by COVID-19, (again, justifiably) and have withdrawn/postponed/pushed-out their sales campaign,
3. vendors who are panic-selling.

The latter is horrid. We can sense it when we receive the call from agents. We can feel the time pressure and the nervousness.

It is proving that almost every new listing is an off-market.

At present, real estate marketing has literally transitioned from being primarily listed online to almost exclusively, agent phone calls.

The reason for this is that just about every new listing is a panic-sale. Vendors who are panicked don’t have time for photos, uploading onto platforms or printed brochures. They are desperate to sell as quickly as possible.

Vendors who can sit tight through COVID-19 will sit tight. Those who are listing their properties in the midst of this now are likely to be panic-sellers or sellers who have recently purchased and need to sell within a tight timeframe.

The fascinating thing about panic-selling in this climate is the overriding effect that supply and demand still has. Strong demand is still overriding low price results when vendors are allowing their agents ample time to bring the buyers through, supply contracts, enable second inspections and facilitate negotiations.

It’s when panicked vendors are applying unreasonable and tight time restrictions on their agents that the price discounting is substantial.

The sharp deals that we’ve been privy to have been the purchases that we’ve done under agent time-pressure. Vendors who offer their property at a 10% discount with an instruction to have it sold within two days will find that the first willing buyer who offers the magic price will happily take the keys, and in the face of very limited competition.

When time is less critical, we are finding that available properties are getting “soaked up” by continued buyer demand.

Those vendors who enable their agents to take their time, identify multiple buyers and run the competitive bidding and negotiating can make the difference between a fast-sale price and a competitive result.

We’ve experienced a mix of purchase results this week, from bargains to underbidder disappointment. The direct correlation was vendor time restriction.

We are working in an environment where listing volumes are diminishing and will continue to do so while COVID-19 continues to grip, and affordability, (for those who are employed and able to still obtain lending) is at it’s highest following the recent rate cuts. Workers who are considered to be employed in the essential services categories are still buying.

The question is: Will the demand continue to meet the supply?

Or will it exceed? Or will demand fall short of supply?

None of us have a crystal ball, but this is a key question to ask when it comes to making decisions about timing the market.