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The “Perfect Storm” for Property Investors

Savvy property investors are about to enjoy a rare “perfect storm” of events that is shifting the odds in your favour… but only if you act quickly.

 I think you have maybe 6 – 8 weeks before the storm passes and the market normalises … here are my insights

End of the Sellers’ Market

Keen observers picked up the early stages last weekend - with auction clearance rates tumbling over recent weeks, creating the shift from a seller’s market to a balanced market and heading towards a buyers’ market.

Evidenced by a Drop in Demand

Of the 813 auctions last weekend an unusually high 228 properties were passed in, 106 of those were on the dreaded vendor bid, leaving the seller with little negotiation power.

 So, what has caused this sudden and dramatic shift in the market… and created the “perfect storm” for investors?

 This Perfect Strom

A “perfect storm” usually has at least three elements. Right now, there are five elements effecting property: supply, demand, new laws, access to finance plus the weather, we are now deep into winter where buyers go into hibernation. However, let’s analyse the key four elements , that influence this current unique Perfect Storm scenario.   

 1.       Supply and Demand

Supply is abundant with an unseasonably high 813 properties going under the hammer last weekend but demand plummeted in the key sub-$600,000 market as ‘First Home Buyers (FHB) sat on the sidelines waiting for the stamp duty relief from 1st July for properties up to this price point.**

 So, what happens this weekend when 1 July comes into play?

 2.       First Home Buyers Trap

RHB’s will burst back into the market from tomorrow creating huge demand for anything under $600,000. As these properties under grant cap are snapped up properties further down the ‘price chain’ will be pulled by FHBs up to meet the pent up demand.

 3.       The Winners

The winners again, will be sellers of properties up to $600,000 and losers will be FBBs who pay too much as they settle for lower quality to access the stamp duty savings.  Remember 2010, same thing happened with the FOHG, prices soared as eligible FHBs spent more than the grant, seller’s won.  

 4.       The BIG Losers

The sellers of property above the $600,000 FHB grant cap will be losers. However, where there is a loser there is always a winner. That will be you, the savvy property investor.

 So, how do you exploit this opportunity?

 Buy now

There will be a gap in the market for a short time, so jump on the net, plug in a search for property around $620,000 and start negotiating hard, because in the short term you won’t have much competition!  I reckon you’ve probably got 4 – maybe 8 weeks before the market self-corrects

Under the radar

New laws have just been (quietly) introduced to tighten up under-quoting, this is really hurting agents and sellers because now they have to advertise property at or close to the reserve, that is at higher prices. Agents have a mantra, “Quote ‘em low and watch ‘em go!”.

 Suddenly, properties are going to look expensive but investors in-the-know will raise their search price range in the knowledge that they will be able to buy much closer to that budget. Less informed buyers will miss the opportunity, serving to dampen competition and that means lower sell prices.

 My perception from past experiences is that you probably have another 4 – 8 weeks to exploit this opportunity.

 Finance Crunch

Finally, and importantly, regulator enforced tighter lending policies mean many buyers just can’t access the loans needed to buy property, this is really starting to bite which is evidence in recent ‘softening’ of Melbourne property prices.

 So again, how do you capitalise on this opportunity?

 Exploit this opportunity … like this

First step, give us a call and we will check your ‘real’ borrowing capacity, then you can set a realistic budget for your next purchase.  We will arrange a pre-approval giving you the confidence and financial fire power you need to exploit an investment opportunity investors haven’t seen the likes of since 2013.

 Of course, we are going to be very busy with pre-approvals over the next few weeks, so reality says it might be wise to be first on the list, as the Banks are not making it any easier these days as, particularly the Majors are forced to pull back from investment loans.

 Foot note:  I have set aside a limited number of additional complimentary ‘Portfolio Review’ appointment slots, so if you feel you need to take that action first, again please take action immediately … this will be short ‘opportunity window’.  You will be surprised what you can discover from the review, it is eye-opening.