The property market is running hot right now and there’s no sign of things cooling down. Some property experts are even going so far as to call it a “ferocious market”.
This shouldn’t put you off buying a new home or investment property if now is the time that is right for you to buy. Buying in this kind of market just means you need to be on your game and know what you’re doing.
What is a hot market?
This is when demand exceeds supply. This puts prices up and decreases “time on the market” for many properties. It’s kind of like feeding time at the zoo. Everyone wants in, but there’s only so much to go around – so it becomes a bit like a frenzy and sensibilities (and budgets) are often forgotten.
Low interest rates are fuelling this as is a strong sense of FOMO, where people are fearful of never being able to get into the housing market if they don’t buy now.
So how do you buy property in a hot market?
The most important thing is to not get caught up in the frenzy – which is easier said than done for many of us.
Here are some strategies to help you buy without losing your head.
- Clarity. Be really clear on what you can afford, your borrowing capacity, what you want to buy and what you’re willing to spend to get it. Your mortgage broker can help determine what you can afford and your borrowing capacity. You will need to decide what you want to buy and where, but the hardest thing to determine right now is the value of a property. You can’t compare to properties that sold 3 months ago because the market has changed incredibly in that period. Experts are quoting 6 weeks as the maximum period for comparing. But the biggest decider on value right now is how many people also want to buy it and how much they’re willing to pay. Don’t get caught up in a bidding war that will take you over your budget.
- Flexibility. If you’re having trouble buying exactly what you want right now, are you willing to widen your search area or slightly change the specs for the house you want? Could you buy a property to renovate? Are you willing to take on a small project, large project or no project at all? Think outside the square a little and you might really like what you see and the opportunities that open up for you.
- Engage help. If you must buy now, this is the perfect time to hire a buyer’s agent. They’re professionals and they know what they’re doing. They will negotiate for you without the emotion, they will do their best to get the property you want at the right price. It’s not guaranteed, but it’s a good way to remove yourself if you’re too involved. You can also speak to local real estate agents to see if you can buy “off-market” before a property released to the public. Chances are slim of this happening at the moment due to the demand, but it’s always worth a try!
- Be ready to act. This is imperative right now. Have your finances in order. Get pre-approval on your loan. If it comes down to just two of you fighting it out for a property and one has finance ready to go and the other doesn’t, nine times out of ten the person with finance will win. Take the time to have this in place.
- Sweeten the deal. If you’re deep into negotiation, think about ways you can sweeten the deal without having to go over budget. Would an extended or shorter settlement period work? Could you offer to rent the property back to them if they’re yet to buy their next home so they don’t have to rush? Find out what they need and figure out if you can give it to them.
- Does it have to be now? Do you really need to buy a property now or are you caught up in the hype and suffering from FOMO? No one has a crystal ball to predict what’s going to happen in the market over the next 3, 6 or 12 months. We just don’t know. Things might settle down. Things might keep skyrocketing. Either way, it’s a risk to act now or to wait. You may pay too much now, or you may have to pay more later. The key is to run your own race, not get dragged into someone else’s. If you don’t have to buy a property now, it’s a good time to watch and see what’s happening. Stay aware and be ready if an opportunity presents itself. But run your own race.
If we can help with finance or referrals to buyer’s agents, conveyancers, building inspectors, financial planners, accountants or anyone else who can help you secure your next home, please get in touch.
Keep your eye on the prize and, importantly, keep your mind on your budget.