It’s no overstatement to say that the property market is sitting in a bizarre place right now. With all the recent shifts in legislation, interest rates and LVRs, it seems even the most schooled economists are scratching their heads on where we’re heading.
So rather than pontificate from the sidelines, I thought I’d head down to the auction room and check out the damage first hand. The experience was eye opening to say the least. I’m not sure it brought me any closer to a solid answer on the state of the market itself, but it certainly lent some valuable insights into the general psychology of certain buyers out there.
Right off the bat I found the auction floor filled with hungry eyed investors lined up like seagulls in the park, waiting eagerly for the auctioneer to throw down his latest piece of bread.
My first impression was, ‘this is good.’ It was encouraging to see that Jacinda’s new tax changes haven’t completely derailed the investor market. But as I looked closer, I couldn’t help but notice one buyer in particular growing wide eyed with each new listing, getting amongst the bidding on a few of them, yet ultimately walking away empty handed.
As he made the long walk back down the isle towards me and I caught a glimpse of his face, my lungs drew in a sharp breath. Like a punch to the midsection, it dawned on me, ‘I’ve met this man before!’ Not on the auction floor but earlier on in the timeline when he was just beginning to search. During that meeting, he confidently told me that he was looking for a ‘good investment’ or ‘something below market price.’ Yet the moment I asked him to quantify this criterion in more concrete terms, he stared back at me glassy eyed.
Of course, he wasn’t the first buyer of this type to turn up at my open homes, but I’d always assumed that a few months of directionless viewings scoping from studios to blocks of flats would be enough to wear down even the most aloof of buyers. The confronting reality that he was still out here months later, floundering away, no closer to securing that elusive ‘good investment’ sent shivers down my spine.
Now, obviously, someone who maintains such a mentality all the way to the auction floor is an extreme example, but I think there is something in this principle that that can serve as a lesson to all of us.
Think of how much time you can waste going to irrelevant open homes on the vague pursuit of getting a ‘feel’ for the market. Yes, you’re always going to want to dip your toes before diving headfirst into the water, but if you’re dipping them into the wrong pool that’s not going to be much help!
If you want to avoid becoming one of these hopeless souls, I suggest pinning down your criteria as early as possible.
Be specific, be ruthless with your non-negotiables and work with the intent to hone them down further with each additional property that you view.
If you’re an investor, ask yourself:
Are you buying for the purpose of long-term equity gains or are you seeking a cashflow investment?
If it’s the latter, what net yield does that property need to be producing to satisfy your criteria?
Or how about we take this to the other side of the spectrum. You’re an Owner occupier with a large dog...
Let’s say you search wide hard, haggling down every buyer that pops up on your newsfeed until you finally find yourself the deal of the century, 200k below CV, the owner is a Brazilian Oligarch who doesn’t care about the money, just wants to sell up and move home. The absolute dream, but there’s just one catch. The building it’s in is not pet friendly.
Unless you’re willing to drop your husky Gordan off at the local SPCA, then that property simply will not work no matter how cheap you get it!
You could have saved yourself all of that time and heartache if you’d just stuck to your non-negotiables from day one!
At the end of the day, neither you or I are likely to end up like those hopeless souls on the auction floor, but you could well end up burning your weekends at a lot of open homes that you don’t need to be at.
Why go through it?
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