This spring will be a great time to buy

This spring will be a great time to buy
This spring will be a great time to buy

A sharp lift in supply and the opportunity to lock in rates for an extended period means this spring will be a great time to buy.  

There’s a certain rhythm and flow to Melbourne’s social, sporting and cultural life and this is reflected in our residential property market.

Activity levels, auction clearance rates and price growth are influenced by what pre-occupies vendors and purchasers at various times of the year.  

These factors are so deeply ingrained that you can pretty much set your calendar by them.

The trick is to understand that the behaviour of vendors and purchasers is influenced by different things, so the two groups don’t move in synch. This means there are better times of the year to buy, and better times to sell—but they’re the opposite of what you may think.  

Melbourne’s property market calendar kicks off in January–February, when people have time to down tools, take stock and set goals for the coming year.

During this time, many Melburnians make a New Year’s resolution to upgrade or downsize their family home, or to buy an investment property. They begin entering the market in large numbers, hoping to get their purchase out of the way relatively quickly and avoid months of disheartening house-hunting.  

When they start searching, they find that there isn’t much to choose from. This is because would-be vendors are pre-occupied with re-establishing back-to-school and work routines.

They’re reluctant to take on the added burden of preparing and presenting their home for sale.

The resulting mismatch between purchaser and vendor behaviour creates an undersupply of property relative to demand.  

From March through to May, vendors are well into the swing of the year and are ready to put their homes on the market. The level of supply increases and becomes pretty much even with the level of demand from purchasers who couldn’t find what they wanted earlier in the year.  

Then comes winter.

From June to August, the level of demand stays consistent as purchasers continue their search.

However, the level of supply drops significantly, because vendors stay out of the market in the mistaken belief that people don’t want to buy in winter. In the inner and middle suburbs, where auctions make up a substantial proportion of property transactions, supply can fall by as much as 50%.

Buyers who have been in the market since early in the year become increasingly frustrated.

When an opportunity presents itself from amongst the limited choices available, they are inclined to pay more to secure a property they really like, or to buy a home they’re not overly keen on, simply because they’re tired of looking.  

As a consequence, property prices rise—meaning that vendors who are savvy enough to go against the wider convention and put their homes on the market during winter stand a good chance of achieving a strong result.  

Once spring rolls around, the behaviour of purchasers and vendors shifts again, and so does the balance between supply and demand.

With warmer weather and the ability to show off blooming gardens, vendors believe more buyers will be searching. They reason that it’s a better time to sell, so the level of supply increases.

In reality, demand from buyers doesn’t increase significantly. Yes, some purchasers begin searching in the warmer weather. However, many are pre-occupied by their children’s school exams, major sporting events and the like, so most enter the market at the beginning of the year.  

At this point, supply and demand become more evenly matched once again, and price growth tends to moderate. In the coming weeks auction levels will increase dramatically and we will see some weekends where over 1,000 properties go under the hammer.  

Purchasers will not only have the luxury of choice this spring but they will also be able to lock in their interest rate at incredibly low levels.

Spring is only four weeks away so now is the time to get prepared so you are in a position to move when the right opportunity when it presents it’s self.  

MARK ARMSTRONG is a director of ratemyagent.com.au, Australia’s number one real estate agent rating website.

This article was originally published on Property Observer in July 2013.

 

 

Mark Armstrong

Mark Armstrong

Mark Armstrong is a director of ratemyagent.com.au, Australia's number one real estate agent rating website.

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