It’s A Buyers’ Market!

The Royal Commission, this year tasked with deep-diving into the Australian banking system and responsible lending practices, seems to have created a bit of chaos in some areas of home loan lending, particularly shining a light on financial planning and banks tightening their lending criteria even further. One of the most positive things to come out of the exercise was the positive approval rating for mortgage brokers –  finally, official confirmation that mortgage brokers do have the borrower’s financial interests at heart as their prime priority.

However various sections of the media seem to be on a negative sell campaign claiming home values are tumbling in the wake of the Royal Commission findings and placing the fear into buyers and sellers when in fact, current market conditions are prime for purchasing property, with interest rates at record low levels and many bargains still there to be had!

Here’s a challenge – tell me where house values have dropped because I want to buy there! I am yet to have anybody pinpoint where values have actually declined, in fact, they seem to be either at a plateau, or climbing still depending on where you look and what you buy!

Weekend auction clearance rates have definitely dropped off, yet this was always going to happen. It’s a cycle that repeats every few years or so; the last one being around 2013-2014 when the media was screaming values are dropping …and what has happened since then? Values have continued to go up, not down! People who didn’t buy based on the media ‘advice’ at the time now find they require even higher deposits as prices have most definitely increased since then!

The simple reality is people are seeking and buying more affordable, lower-priced properties at present – bargains and properties nobody was considering 6-8 months ago.

If the median value has come down, this does not necessarily mean property values have come down.  Let’s take a look at two groups of real estate as an example….

• Group 1, 10 properties sell for a combined total value of $9.85m makes the median value $985,000 each
• Group 2, 10 properties sell for a combined total value of $8.15m makes the median value $815,000 each

If we have a period where more buyers are seeking properties in Group 1 and that activity outstripped demand for properties in Group 2, then values would be recorded as going up by around 20.85% or vice versa – values would be recorded as coming down by around 17.26%; What is not reported by the scaremongers is that Group 1 are all double storey 4-bedroom homes and Group 2 are all single storey, 3-bedroom homes, so the median value reporting is not comparing apples with apples. If the next group of 10 properties were also 3 bedrooms dwellings and sold for $815,000 each, and we add all 3 groups together, the median value now becomes $871,166 each – are values dropping or is it merely a shift of the median of what is actually selling more????

It is a buyers’-market, buyers should be purchasing property simply because conditions are perfect and those selling are doing so because they have to for one reason or another.

So don’t listen to the negative scaremongers and incorrect value reporting, if you are ready to buy, then go out and buy something!

Peter Vinci

Senior Mortgage Broker – Vinci Financial Services