When property prices are moving higher, it seems like everyone is looking to buy. When prices are stagnating everyone is sitting on their hands and waiting.
In reality, both of these two situations demonstrate how investors are looking at the market in the wrong way.
When uncertainty is high and sentiment is falling, that’s the time you need to be active in the market looking for high-quality assets. When everyone is trying to buy at the same time and premiums are rising, that’s when you need to be more cautious.
As we can see, the Westpac-Melbourne Institute Index of Consumer Sentiment fell by 5.6% to 90.4 in May from 95.8 in April. After just a single interest rate rise, people are already starting to sit on their hands and are fearing the worst.
This is really the time savvy investors should be looking to get active and starting to buy when uncertainty is at its peak.
Just remember what happened during the early stages of the pandemic, when sales volumes collapsed and sellers started to firesale their properties. Now two years later, property prices are 20-30 per cent higher in most locations across the country and we can now say with the value of hindsight that when sentiment was at its lowest, was a great buying opportunity.
As has been the case for decades, when sentiment falls and price growth stagnates, that’s normally the time to be looking for high-quality properties. Notice I said, high-quality properties and not just cheap properties. There’s a huge difference between the two and to truly capitalise on uncertainty, you need to know the difference.
When prices fall substantially for a property, it typically means that demand has completely dried up. It’s likely that the property wasn’t that good to begin with and when the market turns, these types of properties get hit the most. We see this normally with large apartment buildings, undesirable properties that might have some problems, risky regional areas or outer suburb locations.
These types of properties and locations can experience sharp falls and just because they might be cheaper than what they were, doesn’t mean they represent good value.
Should a market slow down, it’s critical that you continue to look to buy the best property that you can. These are the ones that tick virtually all the boxes for owner-occupiers and are located in the more affluent blue-chip locations.
We’ve seen over decades that even when markets ease, premium locations rarely fall very far. The most in-demand properties in the best pockets of a blue-chip suburb will still attract multiple buyers and hold their value extremely well.
Trying to buy these properties in a red-hot market is very tough and will require you to pay a significant premium. When uncertainty is high, these properties are still A-grade, the only difference being that the competition is far less.
If you can use periods of uncertainty to purchase A-grade assets, when markets start their next upcycle, you’ll be well-positioned to ride the next wave of capital growth with your high-quality assets that you bought at a very competitive price.
Don’t wait for the media to tell you it’s a good time to buy. By that point, it’s too late. Contact the best buyers agent in Brisbane who knows everything about investment and property.
