“Times are bad”, “Now is not the right time to invest”, “Property market is slowing down”, I believed these are the common topic among your peers recently, so am I.
The housing price index has fallen to 4.10% in the first quarter (Q1) of 2015, from 7% in the fourth quarter (Q4) in 2014. This is a significant drop.
Many property purchasers generally buy a property during a hot market, and avoid purchasing in a downturn market. This is because when the market is hot, property prices are climbing sharply and investors will feel that they need to buy a property to avoid missing out and hoping that the price will continue to appreciate further so they can benefit from the capital appreciation.
Conversely, when the market experiences a downturn and property prices stagnate, many investors will abandon their intent to make an acquisition due to the risks and uncertainty involved.
But in fact, i think we should buy at times where most people are not buying.
There are actually many benefits to buying property in a downturn.
Plenty of property choices in the market
In the Buyers’ market, there is plenty of property stock available. You can see more listings in the market which means that you have more choices on your purchase.
Competition is low
During a downturn, many sellers would need to let go of their properties due to reasons like financial difficulties, retrenchment, unable to afford the loan repayments etc. General sentiment out there is pretty bad, so there are less buyers looking at properties. This means that buyers have more properties to choose from and have fewer buyers in the market, hence they will encounter less competition and can secure a property that they might not have been able to in a booming market.
Property Prices Reduce
When supply greater than demand (more properties available in the market), the asking prices will starts to fall. A decreasing number of buyers will force desperate owners to reduce asking prices to a more reasonable price (which applicable to both primary and secondary market) and allow buyer to creatively structure deals to their advantage and gives buyer a better bargaining power.
Developers will be giving more discounts and incentives to attract buyers. So, if the project is right, I believe it is still the right time to invest as generally if you are looking at long term investment, property prices will definitely rises.
More room for negotiation
With less competition, buyers are able to negotiate and seek more favourable terms when purchasing a property. Besides that, when houses are selling at a slow pace, many real estate agents are also struggling. Buyers can get their real estate agents to ask the seller to lower the property price so that the deal gets done, and both the seller and the agent will walk away with a decent profit.
Buyers generally have the advantage in a down market, but this doesn’t mean you should walk into a transaction blindly. One must equip themselves with the right knowledge before buying and should to a throughout research to get to know the price range of the property around the area.
Besides that, there are also many smart investors out there hunting for good property deals, hence it makes sense to get a pre-approved for a mortgage so that you will be able to lock in the deal when the opportunity arises.
While buying property in a cooler market presents advantages, there are also many benefits to purchasing property when market conditions are more favourable. But I always believe that it’s generally better to make acquisition sooner rather than waiting for the “perfect” timing as long as the deal is right for you. If an investor is skilled enough, they won’t have problems buying in a good or a bad market.
Happy investing and keep an eye on the below market value deals out there!
「If this article is useful to you, feel free to buy me a coffee ☕」
Danny KO @ RPC
If this article is useful to you, feel free to buy me a coffee ☕
