In a recent discussion in the Buyers’ Agents Chapter Committee meeting, the committee members raised the question, “Where are all the buyers?”.
And it was a good question to raise.
The market is experiencing a downturn: house prices are dropping and Sydney recently recorded clearance rates under 50 per cent for the third month in a row.
These conditions aren’t great for vendors – but they are perfect for buyers.
But, as the Buyers’ Agents Chapter Committee members rightly raised, where are they?
We chatted to Chapter Chair, Rich Harvey* of propertybuyer, to find out why buyers aren’t biting and what agents can do about it.
REINSW: It’s a buyer’s market. In your experience are buyer’s taking advantage of the changing market conditions?
Rich Harvey: Not to the full extent. Buyers are still nervous about the market falling further so they end up siting on their hands doing nothing.
However, it is a good time for home buyers to consider getting into the market, upsizing or downsizing while the market takes a breather.
Because vendors are more inclined to negotiate in a falling market, buyers can generally get a better price and have more time to make decisions.
REI: We know there are challenges for vendors in a falling market, but what should buyers be aware of?
RH: Buyers must remember that prices in high-demand and well-established areas will nearly always hold up well, even in a market downturn. One of the biggest challenges for buyers is not to over-pay in this market.
REI: How can agents combat nervousness in the market?
RH: Agents – especially buyers’ agents – can help educate their clients on the long-term market perspective and show the history of price growth/movements over each 10 year period.
As agents, we aren’t emotionally invested in the purchase, so we can provide a realistic appraisal of a property’s value in this changing market.
We must give our clients confidence to move forward with a purchase, knowing they have completed extensive research on the property. We can help our clients understand local market drivers and how the property is likely to perform in the future. This information is useful for buyers, but also helpful for clients looking to sell and re-buy. It helps assuage their worries about selling their property in a slowing market.
REI: That’s a nice segue into our next question: do you think buyers are nervous because they believe they won’t get a good price when they sell their properties?
RH: Yes – it’s a natural reaction to be cautious in a market that is correcting. However, it is far better to sell and buy in a declining market than sell and buy in a rising market. This is because vendors can be priced out of the market when they become buyers if they wait too long when prices are high. In a slowing market, what the vendor may “lose” in their sale price, they more than make up for in the “savings” when they buy.
They also have the benefit of time and don’t feel the pressure to make immediate decisions – which is what often happens in a booming market.
REI: How can agents help get buyers over the line?
RH: An agent’s role is not to pressure the client, but to simply educate and encourage them to make the best decision for their situation.
We should never pressure clients to act, but we must present all options.
One strategy buyers’ agents often employ is to present clients with a bench-marking report that shows all the most recent sales in their target area. This gives them a point of reference and comparison when making offers.
We also show clients the level of turnover (volume of sales per annum) in a suburb and indicate that good quality properties don’t necessarily come up every week. Hunting down off-market opportunities is also helpful to give clients more options.
REI: OK, in a nutshell, what should agents do when buyers aren’t buying?
Take a holiday. No seriously agents should be helping clients at every stage of the property cycle.
Do some spring cleaning, call past clients and get prepared for the next property phase.
*Rich Harvey was awarded Buyers' Agent of the Year and his business, propertybuyer, took out Buyers' Agency of the Year at the recent REINSW Awards for Excellence