People who have ever looked for a property to lease or buy may remember the honeymoon phase filled with hope of initially finding the perfect one. It would be located within an ideal suburb, have every feature on the check list and be within budget. Once found, negotiating terms would be nothing more than a formality.
Open homes become an eclectic melting pot of discovery for those embarking on their journey to find a property. Market dynamics have created significant buying demand meaning there are plenty of different types of buyers looking. I’ve found they fall into three main categories: the cashed up buyers who have just sold and are on a deadline to move; people who’ve spent varying amounts of time researching the market in anticipation of making their decision soon; and a contingent of people who, for various reasons, are unable or unwilling to comprehend market conditions.
Those in the first two groups have a genuine chance of transacting even though it may involve some compromise. But the third? They are an interesting group who self-identify very quickly.
For some, it has been decades since they had to contemplate buying and are shocked by a lack of perceived suitable housing options for their next stage in life. Ironically, this shock only exists on the buy side, as they are confident in the value of their own home on the sell side. Others have simply lost their grip on reality and have hope agents can pull the ideal property out of thin air, priced perfectly (generally a steep discount to market value) and sold exclusively to them without competition.
I believe multiple market forces will imminently deliver savage blows to these buyers, led by ACT’s rapidly declining rate of unemployment, likely reduction in borrowing costs, scrapping of responsible lending legislation improving access to credit and exceptionally low listing volumes.
Since June 2020, ACT and Federal Government stimulus has been flowing into the economy. Property specific stimulus focussed on reducing transaction costs and offered a $25,000 cash grant, paid post-settlement for specific new property purchases. Some entrepreneurial property developers took the opportunity to match the grant either post-settlement or upfront towards a purchaser’s deposit. In practical terms this meant a purchaser’s contribution towards their deposit of a $700,000 property reduced from $35,000 to just $10,000 with the developer paying the balance. Developers making these offers have generally done so with far broader application than required to receive the Government’s HomeBuilder Grant; a fantastic example of how private sector businesses have used their balance sheets to plug holes in public policy.
Positive buyer sentiment is increasingly progressing towards complete urgency which has pushed up property values. It appears increasingly likely market forces will generate higher rates of price inflation, conversely, harshly penalising decision delay.
With Sam Dodimead, local property professional and host of Canberra Property Podcast where you can get to know the consultants contributing toward deliver of new buildings. Stream from wherever you listen to podcasts.
For more:
- Window closing to sell in 2020: Weekly market wrap with Sam Dodimead
- Multi-unit sites snapped up at Ginninderry auction
- WorkSafe puts construction industry on notice again
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