The importance of saying no…

After four straight years of strong performance, heady auction results and highly competitive buying conditions, Melbourne’s market pace has finally slowed down to a more balanced market.

What felt like the run-that-would-never-stop has been tackled by APRA (our prudential regulator) and our auction clearance still sits above 60%; technically not quite a buyer’s market, but softer than the seller’s market we became familiar with after the market rebounded in 2013.

What this change represents for buyers is opportunity.

Balancing this opportunity with risk is particularly important though, and financially our lenders are certainly covering off some of the risk-mitigation out of deference to APRA’s enforced measures and the bad press associated with the Banking Royal Commission.

Buyers need to adjust their expectations now as the market is changing. Good properties aren’t all selling immediately, motivated vendors are reducing asking prices to levels that can be perceived by some as bargain-buying, and imperfect properties are remaining on the market for far longer. 

And so they should.

Unlike the seller’s market conditions that created a ‘Fear of Missing Out’ among desperate buyers, this market gives way to enabling a greater level of scrutiny.

I met a couple who were torn between pursuing an auction property or letting it pass due to the emotional tug it placed on their hearts. While it was is renovated, stylish and unique, it is also completely unsuited to their own needs. Offering a floor plan with an inadequate number of bedrooms and no scope to increase or extend, I was quite pragmatic about the fact that it was a “NO”.

“Nothing about this property is workable for you.”

They canvased the idea of renting it out and possibly one day moving into it. They challenged me about how they could create a 2m wide space behind the kitchen for a bedroom. They even went to the auction to watch it pass in.

Interestingly, the property (as trendy as it is) is still for sale, weeks later. The floor plan is very unique and the property is certainly not suited to the mainstream market. It will find it’s buyer, but the buyers most likely won’t be home-finders with a young family. And when the time comes to sell it again, the new vendors will likely face the same selling issues.

It wasn’t just the appeal of the property that gripped this couple after the auction.  It was the dreaded feeling of missing out on a bargain. But as I said, “Bargain or no bargain, it’s not going to work for you. What is the point of spending a million dollars for a product that won’t work for you?”

Buying a property is a serious proposition and it deserves serious scrutiny.

The things that we tell clients during our strategy session are always important; in any market. Avoiding purchasing on train lines or major roads, carefully considering whether a south-facing house can have other means of capturing northern light, streets offering limited parking, difficult floor plans that can’t be rectified, zoning or overlays that preclude the intended use, neighbouring industrial/commercial sites, cemeteries, the list goes on…. These are all issues that may be forgiven by the current resident but when markets tighten they are the first to be scrutinised.  

Anyone can pick a property.

It’s the things that we say no to that make the difference between a good property and an average one.