It’s a bold statement, but it’s true.
For some of you who are reading along right now, 2020 is absolutely the worst possible time you could consider buying a property.
In fact for these people, moving forward with a real estate purchase this year would have the potential to cripple them financially, not just now but well into the future.
Sounds dramatic, right?
It is… but here’s the truth.
This statement rings true in 2020.
It was also true last year.
And the year before that.
And in 2015, 2010, 1985, 1972…
The reality of real estate is that….
There is no “best” time or “worst” time to buy property.
It’s likely that you’ve heard me talk about the drivers of property price growth over the years.
There are so many things that determine a property’s price performance and growth trajectory, many of which are well outside of your control, and which also have nothing to do with the property itself.
These include, but are not limited to:
1. The economy – the performance and state of the broader economy impacts people’s ability to buy and sell property as well as …
2. Consumer confidence – when people feel comfortable about their financial situation and their future job prospects are more likely to make big purchases like moving home or buying investment property.
3. Employment levels – if the community at large is experiencing high levels of unemployment, then fewer people can afford to pay a mortgage, which reduces demand for property
4. Government policy – aspects to do with tax, depreciation and home ownership grants will work to boost or reduce demand for property, particular new property in recent years, which is where the federal government’s primary agenda has been.
5. Population growth – or household formation to be more exact as when more people moving into an area equals more demand for housing, whether it’s to buy or rent.
6. Local demographics – things like average incomes, average age, household structure, crime rates and employment opportunities.
7. Supply - The basic economic principle of supply and demand is a fundamental property market driver of price growth.
8. Availability of credit – property investment is a game of finance with some houses thrown in the middle, but even owner occupier demand is very much driven by the availability of finance and the cost of money, in other words interest rates.
Now, as a result of these factors – which are by no means an exhaustive list, but they give you a general indication of some of the major influences on property prices – we have what’s known as booming or busting property markets.
Sydney and Melbourne, as we know, have recently come out the other side of a prolonged booming period.
Between 2016 and 2018, values soared in these two cities, allowing those who owned property to amass small fortunes along the way.
But it’s important to know that just because “Sydney boomed”, that doesn't mean that ALL of Sydney boomed.
It means that overall, the majority of properties across the city experienced an increase in value.
However, there are always some areas, pockets, streets and individual houses that perform better or worse than the average.
For example, the value of the apartments in many of the high-rise, Legoland towers around Sydney languished as concerns about structural integrity, following the Opal Towers debacle tarred all new apartments with same brush.
Let me give you a different example.
Let’s say a couple owned a property in a sought-after Sydney suburb in 2017.
They had purchased in 12 months earlier for $1.55m.
It’s right in the middle of a booming property market and sadly, the couple split up.
It’s a messy and contentious divorce, and both parties want to sell the home as quickly as possible so they can move on.
They also don’t want any looky-loo neighbours snooping through their home every weekend, and they don’t have the energy or appetite for a big, public marketing campaign.
So, they engage a real estate to sell the home privately/off market.
It reaches fewer potential buyers and drives less competition, but they secure a buyer within a week. They sell the property for $1.6m in a hasty settlement and move on.
Had they taken the property to the open market – say, an auction – and a number of would-be buyers fell in love with the property, they could have sold for more money.
But their circumstances dictated a swift sale, so they accepted the price they got and moved on.
It could be the case that one street over, a couple own a very similar property.
They are planning to move in with their parents for six months while they build their next property, so they have no deadline or timeline pressures and they’re happy to wait for the right buyer to come along.
They list their home for auction, pay for an expensive but very high profile marketing campaign, and achieve a final sale price of $1.825m.
Two similar homes, two very different outcomes.
Neither is “right” or “wrong”, and this is the infuriating truth of real estate: there are no “definites.”
Just a series of educated guesses and informed choices, which – with the right expert guidance – can lead you towards making profitable decisions for your future.
When it comes to deciding the right time to buy or sell, at the end of the day, it’s our own personal situation as much as external factors that influence the best course of action we should take.
The fact is, any time could be the worst time for you personally to buy a property... or it could be the best time to buy.
It truly depends on your own goals, budget, timeline, risk profile and circumstances as to whether 2020 is a good time to buy.
If you've just lost your job or your income is insecure in the current economic climate, then yes, this could be a risky time to commit to a mortgage; in fact, you’d struggle to get a loan.
However if you're financially stable and have a deposit ready to go, then some might argue that with 2% mortgage rates and opportunities to negotiate strongly, 2020 could be the property buying opportunity of a lifetime.
Michael Yardney is CEO of Metropole Property Strategists, which creates wealth for its clients through independent, unbiased property advice and advocacy. He is a best-selling author, one of Australia’s leading experts in wealth creation through property and writes the Property Update blog.
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