Over the last 20 -30 odd years that we’ve been involved in the NZ Property market, both investing in and trading various types of residential property we’ve seen the various market cycles come and go, the up’s the downs and a few years of going sideways in the middle.
At the different stages of the market, a few things obviously change. I.e. in the rising market, we have seen the last few years and particularly the absolute frenzied market over the two-year Covid period when borrowing became insanely cheap and buyers were climbing over each other competing for the limited supply of properties for sale.
These times are clearly what we call a ‘seller’s market’. In these times, someone wanting to sell a property merely has to list it on the market, within a week (maybe two) the agent presents them with multiple offers, all trying to outdo each other and the vendor ends up selling for, in most cases, a fair amount more than they expected. Too easy, if you are a seller.
But, if you were a buyer in a market like that, it’s nothing short of a nightmare. You are competing with so many other buyers, many of them not working to the same set of buying rules as you. Buyers who are getting emotional about the purchase, buyers who have likely missed out on securing several over properties, and they don’t want to miss out again, so they go all in, plus some!
This is exactly how and why we have seen the crazy prices being paid in that post-Covid, super-low interest rate environment of 2020/2021. The fear of missing out (FOMO) was so real for many people.
But the people that have been around the block a few times, and have been in the property market for at least a couple of cycles weren’t too concerned about missing out, quite the opposite in fact!
We were sitting back watching and having a quiet chuckle to ourselves over the madness we were watching unfold, the ridiculous prices some were paying, that no matter which way you looked at it simply didn’t make any sense, it just didn’t stack up and was completely unsustainable.
It makes absolutely no sense whatsoever to compete with so many overzealous buyers in this way, and we knew that the ‘drug-fueled’ party would come to an end at some point. For the sake of clarity, by ‘drug fueled’ I mean the temporary and artificial stimulus of the lowest interest rates in history and the hysteria that was induced.
So we sat back and we waited. What were we waiting for? The charge in the market that was always going to come.
The change when that seller’s market turns into a ‘buyers market’, Ok what’s a buyers market then?
A ‘buyers market’ is pretty much the exact opposite of the ‘seller’s market’. A buyers market comes about when the tide has turned, market sentiment has made a 180-degree turn from where it was.
A buyers market is where there are now a far lesser number of buyers around wanting to purchase property, however, there’s a much larger amount more property owners wanting to sell. The number of properties listed for sale dramatically increases.
Once we are in a ‘buyers market’, the vendors trying to sell their property are now finding it a whole lot harder to sell, in fact, in many cases, they struggle to even get an offer, let alone multiple offers. The frenzied buyers with a bad dose of FOMO over the last few years have vanished with a Poof! As if they were in one of David Copperfield’s magic shows.
From a buyer’s point of view, in a buyers market, the few buyers that are around are very picky, there are lots of properties to choose from and there is next to no competition. Unlike the last few years of the seller’s market, it’s now much easier to get our offers accepted.
Vendors are now willing to accept our conditional offers (they generally would only accept cash-unconditional offers in the booming market). As buyers we can now start to call the shots, the balance of power has shifted from the vendor and agent to us the buyer.
If you have been keeping an eye on various property listings, you will have noticed a change in marketing methods now, moving away from the tenders, auctions, and deadline sales that have been so common over the last few years, instead, being marketed via Price by Negotiation (PBN), some listings have gone to an asking price already.
If you have had properties saved to your watch list on the likes of Trademe property, you may have even had notifications come through advising a change of the market method as well as advising a reduction of the asking price.
Many vendors of course are still in denial, not wanting to accept that the market has indeed changed. Their price expectations may well still be based on sales of comparable properties that were sold last year. This market has had some big changes since then, and that now seems such a long time ago and no longer relevant.
Some sellers may not yet be ready to accept that they are simply not going to get the price they had hoped for. But if they want to sell, they are going to have to accept this ….. eventually.
For some sellers this can take a little time, as the months tick by, they will slowly but surely get ‘conditioned’. Conditioned by the market, lack of offers, or very low-level offers, conditioned by the bad news stories in the media, and conditioned by their chosen real estate agent, who likely ‘brought the listing’ in the first place by giving the vendor an unrealistic price expectation.
Of course, if these sellers happen to have a deadline, a time that they need to have the property sold by, then the closer they get to that deadline, the more motivated they become to make a sale.
THIS is what we call a ‘buyers market’, it’s a time in the market that counter-cyclic investors greatly look forward to.
During our time in the property market, in previous buyers markets, depressed or sideways property markets, when there are far more motivated sellers struggling to sell their properties and far fewer buyers around to buy them, we have found these stages of the cycle present some fantastic opportunities to secure great properties at much more realistic prices, in some cases we can get some absolute bargains.
Whether you are looking to purchase properties to hold in your own investment portfolio, or secure a great deal at a great price and then trade it on to another counter-cyclic buyer looking to pick up a bargain, it doesn’t matter, the opportunities will be there like we haven’t seen for quite a few years.
The market that we are heading into now, and will very likely be in for a few years, will present the best buying opportunities we have seen since the period post-GFC. In the few years following the downturn after the 2008 GFC, we were extremely busy picking up some great deals, the number of fantastic buying opportunities was unreal.
Remember that classic quote of Warren Buffett’s …
It’s the mantra of the counter-cyclic-minded investor.
The floodgate of opportunities is just starting to crack open, before long there will be a torrent of them!!
Are you ready for them? What strategies will you use to make the most of these opportunities?
If you are keen to get amongst it and make the most of what is in our opinion the best time in the property market, but you need a helping hand and some guidance on how best to do this, then reach out and let’s have a chat to see if we are a good fit to help you move forward.
We work with Property Investors looking to maximize their investing results in today’s environment via our ‘e-Coaching Plus’ Property Investment Coaching programme.
Or if you are wanting to learn how to ‘Trade Property and Profit’ without needing any of your own funds or without borrowing, then our ‘Boost Property Trading’ programme might be perfect for you – (Check out our brand new free training session on our game-changing Property Trading strategy).
To have a chat with myself or my colleague Shane, ask some questions and see if we are a good fit to help you take advantage of the best buying opportunities seen for a decade, schedule a time for a chat here.
Clint (counter-cyclic) Taylor