Buying Property in a Shifting Market.

Property prices have been on a tear over the past six months, particularly in places like the Eastern Suburbs of Sydney, however, we’re now starting to see the first signs that things are starting to cool off.

Auction clearance rates have been slowly trending lower, while we’re seeing the number of groups through home opens is also down on where they were only a few months ago.

The run-up in house prices came on the back of a sharp drop in interest rates as well as a number of stimulus measures put up by both Federal and State Governments.

Many aspiring homebuyers or upgraders used this opportunity to pick up a property and coupled with tight supply, house prices surged higher, having risen 13.8% in Sydney alone this year, according to CoreLogic.

Now that the market is starting to cool, homebuyers face a slightly different equation. While there is still demand for quality properties, the runaway seller’s market might be shifting towards something more neutral or even a buyers market in some areas.

What that means is that vendors wanting to sell their property now that they’ve seen other homes in their respective suburbs being well received and obtaining high prices might need to slightly adjust their expectations.

In fact, properties that might have peaked a few months ago, could very well now be selling for $200,000-$300,000 less, given demand has started to shift.

For homebuyers wanting to pay as little as possible, this slight difference in expectation can make things tricky when trying to negotiate a purchase price in a shifting market.

Traditionally, when prices start to ease off after a strong run, homebuyers invariably want to wait to buy the very bottom of the dip.

If prices have risen say 25%, when demand cools, those prices might very well fall back 5-10%. Homebuyers believe that they will wait until the very bottom of the market to buy and save themselves a few hundred thousand dollars.

Unfortunately, the reality of the situation is not that simple.

By enlarge, when the mainstream media begins to report that house prices are getting hot again, it’s undoubtedly too late and you’ve already missed the bottom of the market. That’s the point that most people will try and jump back into the market.

Instead of sitting on your hands and trying to pick the bottom of the market, you’re likely far better off being proactive and negotiating with the vendor to try and reach a fair price on your dream home.

As the market shifts, you’ll be in a much stronger position to negotiate and you’ll also likely be able to locate a far better quality home than you otherwise would have been able to at the peak of the market.

Trying to find a middle ground with a vendor when prices have fallen $200,000-$300,000, will put you in a stronger position because when demand picks up again, prices will quickly return to those previous high levels.

If you’re in a shifting marketplace and there is a gap between what you’re willing to pay and what the vendor wants, if it’s your dream property and it ticks many boxes, then try and bridge that gap. By trying to save a few thousand dollars, you’ll likely miss out on your dream home and the odds are you won’t be able to pick the bottom of the market anyway.