Buyers, are you ready to pounce?

With our last official auction Saturday of 2018 behind us and dismal auction clearance rates yet again echoing our tough market conditions, is it time to take advantage and buy?

In typical fashion, we will hit Christmas and have leftovers. Buyers who are happy to push past the Christmas sales and holiday planning will mop up the left overs and by mid January, we’ll likely see a complete shift in our supply and demand ratio. 

However this year is a bit different. We will have a lot of left overs.

Unlike past years where it could be argued that the AAA-grade stock all sold aggressively under the hammer only to leave B-grade options on the table, we have some good quality property still sitting on our Christmas dining table.

The first glimpses of auction activity are scheduled for 2nd and 9th February. No doubt these vendors will have a degree of nervousness, having seen the impact of low demand and high supply this last quarter of 2018. But if they find that stock numbers are lighter early next year, they could well enjoy a healthier amount of buyer interest reflected by the supply and demand ratio. The question for speculative buyers is always “how do I time the bottom of the market?”

Everyone would love to do it, obviously, but is there a chance that we’re actually there now?

Nobody has a crystal ball, but the combination of the Banking Royal Commission, our difficult credit crunch incited by APRA, and the sheer volume of stock all snowballing to a stockpile as auctions continually passed in all certainly made for favourable buying conditions this quarter.

Reading through the weekly auction results is a valuable exercise for any prospective buyer and this week’s auction results showed up some interesting opportunities. Some which, in any other type of market would have been snapped up early or sold under the hammer.

Take 58 Hutton St Thornbury for example. This suburb has given buyers a window of opportunity over the last few months. Ordinarily priced out of locations this close to the CBD, we’ve helped a number of excited buyers secure property in the inner ring recently. Hutton St is a great location with train, tram and the buzz of High St all within easy walk. Sure, the house needs loads of work but a pass in figure of $800,000 doesn’t even represent the land value; a generous 372sqm.

For buyers who are thinking of taking advantage in the near future, there are some exercises that they can do to enhance their chances of buying well.

Firstly, they need to remember that not all bargains are good bargains. Buying below market value can feel exciting but if the property is a B grade asset, are they actually doing their portfolio an injustice?

Secondly, they need to closely observe market forces down to micro detail. Macro market reports exist everywhere, but knowing which pockets, which streets, which orientation, which floor plan in (for example) Thornbury, are good gives the buyer a valuable head start. Then tracking other recent sales, stock levels, agent updates and neighbouring suburb market movements is essential.

Lastly, and MOST importantly is finance.

For anyone who hasn’t applied for housing credit in the past year, now is not the time to be lackadaisical about it. Gone are the days of the mortgage brokers requesting payslips and allocating an estimated living expenses amount to your expenditure based on the size of your household. Those liveability indices are no longer acceptable where lenders are concerned. The assessors are going through months’ of bank statements and credit card expenses and now require every single expense to be recorded and allocated in the loan application. From gym memberships to telco bills, downloads to good times, birthday presents to holidays and everything in between, banks are counting it all. 

For those who really want to put themselves ahead of the pack, finding a good quality broker and getting the application right will make the most significant difference to how successful 2019 could be. And if buyers are concerned about their spending habits adversely impacting their ability to obtain credit, now is the time to reign it in with the spending. A three month period that shows good spending patterns, responsible use of credit cards, limited discretionary spending and a demonstrated savings history will give most borrowers a much better foot in the door.

If you are planning to borrow next year, start planning and acting now.

Photo credit: Netflix, Spotify, Fernwood, Myki, REA and and Pounce by Seth Casteel