You can analyse as much statistical data as you like, and in many cases twist it to argue any point you want to make, but ask the average home buyer if they’re finding it any easier to purchase property, and I doubt the answer would be an out and out yes.
Bear in mind a home buyer is not like an investor. An investor can pick and choose the areas they search in. They don’t have to warm to the ‘feel’ of a home. They can be walking distance from any café, not their favoured one. They can purchase close to any good school, not the one their children attend. Investors don’t need to buy until a good opportunity presents itself – and for this reason – they can step in and out of the market at will whilst targeting those ‘need to sell vendors’. In such cases, there are often multiple properties that tick the right boxes and we’re currently in a perfect market atmosphere to take advantage of them
However home buyers rarely have such a luxury. When home buyers purchase property it often follows months of searching through limited suburbs of choice for a property with the particular idiosyncrasies to suit individual tastes. More often than not, when a home buyer finds their ‘dream home’, there are half a dozen other people who have targeted it as well and a vendor who is less than willing to compromise.
If we do a rough breakdown of the dominate players currently in our market place, they fallinto two main camps. Around 30% are investors (who can step in and out of the market as they see fit) and 60% Home Buyers. Most investors target apartments close to the CBD which are both low maintenance, and easy to tenant. However the dominate demographic of home buyers are either young couples looking for a family home, or current owner occupiers looking to upgrade. They also tend to fall in the 600-800K price range – (or in the case of upgraders – the $1Mil + price point.)
On top of this we have a largely a discretionary market. Most vendors don’t ‘need’ to sell – especially if they can’t get their price – they’re happy to sit and wait for better times, and this has an effect on how much further we can expect prices to drop. Indeed, if there was really a wide spread belief of a housing ‘crash’ – or houses irreconcilably slipping on a downward slope, vendor’s would be settling for any number they could get, and this is simply not happening
It’s OK releasing reports of high numbers of stock on market which give the impression of ‘over supply’, but without a break down of where and what type of stock this bumper crop represents, it’s impossible to draw conclusions about its effect on our current home buyer demographic. In fact, with simple reasoning, it’s fair to conclude if turnover is down, and prices are not falling at a rate to signify underlying economic concern outside of cautionary sentiment, it’s more likely that those homescurrently representing the largest supply in the market place are simply not suiting the major current ‘home buyer’ demographic.
This comes as no surprise when you consider the major bulk of development has been concentrated on going ‘up’ rather than ‘out’. In Melbourne for example, there has been approval of more than 20,000 high rise apartments over the last two years – most being situated in the CBD. Whether these developments will be completed is debateable, however it points to an abundance of accommodation which islargely aimed at the investment/rentalmarket (particularly overseas investors).
In fact, a recent ANZ report entitled ‘Australian Property Research – Growing pains for the Inner-Melbourne apartment market’ the ANZ bank warned of impending volumes of high rise accommodation which could top around 5000 to 7000 by 2013. Such is the concern over the short term potential of these types of developments; it can be extremely hard to get finance without a very low LVR. (Check with individual lenders if this is a concern)
Whilst most buyers have been forced to accept apartment living if they want to stay in inner city ring suburbs, given the choice, Australian’s have always preferred larger floor space. In fact Australian houses lead the world in growth per capita, and in this respect, the Australian dream is far from dead!Furthermore, whilst apartments tend to appeal to young single home buyers – particularly first home buyers – they do not fulfil the needs of the largest ‘current’ home buying demographic actively shopping in the marketplace.
Detached family accommodation close to schools and transport is in anything but oversupply, and considering on top of this the cost of new homes is set to increase, supply is not accumulating fast enough to meet demand. Therefore, it doesn’t matter how much stock is on the market, if that stock doesn’t suit home buyer’s needs, it can hardly be called a ‘buyer’s market’ and in the current climate, wouldprobably be better termed an ‘investor market’.
Catherine Cashmore is a senior property adviser and buyer advocate for JPP Buyer Advocates – the largest dedicated buyer advocacy in Melbourne. With extensive experience in all matters regarding real estate, JPP successfully purchase and negotiate over $100Mil worth of property each year for their clients.www.jpp.com.au
