CASE STUDY: Here’s Why Our Property Market Will Not Drop 20%

Have you seen some of the headlines recently with regards to property prices?

Some headlines have suggested our property market could drop anywhere from 20% – 40%!!.

Admittedly, rather than opting for a balanced viewpoint, the media elected to take the word of the usual doom merchants.

But it certainly made me think twice and wonder if it could actually happen.

You see there are always areas that continue to be very volatile and it is certainly possible in these inferior locations.

It was different this time as the “gurus” were also mentioning many of the better locations also.

Right on cue however, our team received a reality check.

Here is what happened;

The Background

Recently, Josh from our Brisbane team managed to find a development site for a client, off market in a higher owner occupier, investment grade location.

We source these off market opportunities through our networks and we had worked with this agent previously.

You see in these challenging times, sales agents tend to reach out to us a great deal more, as we have buyers ready to go and have a level of trust with the agents.

With less buyers around currently and without Open Homes occurring, it also restricts the number of buyers an Agent has access to.

From our knowledge of the area and recent purchasers and sales, we thought anything up to $700,000 would be a great buying opportunity.

Without the competition and with some textbook negotiating, we landed on $686,000 and promptly signed off for our ecstatic client.

Fast Forward 2 Weeks

Two weeks later an almost identical type of property hit the market a couple streets away.

Josh looked to pursue this for another client.

To his astonishment, the agent was asking for offers over $559,000 (!!) – more than $100k less than what we paid and no it was not a misprint.

Having paid $686,000 for an almost identical property a few streets away, Josh was able to quickly inspect and then crunch his numbers.

While the site was identical overall, the property was inferior and in this case the client was looking to land bank initially, so we allowed approx. $30,000 for improvements.

We quickly submitted an offer of $651,000,a bit less than what we previously paid and crossed our fingers.

We are not usually too far away on these multiple offer situations and with less buyers etc around, we may snag an even better price!

I will let the result speak for itself – via a text message direct from the Sales Agent;

I can tell you on a good weekend, in peak market conditions, anything more than 7-10 offers is an amazing result!

The Result

The result was a cash offer, just below $700,000.

In my opinion – The market has spoken and prices will not be going anywhere.

Here was a market with less than favourable conditions, less buyers around and poor sentiment, surrounded by doom and gloom.

Even the asking price was considerably less than market value, but strong demand pushed it well above and beyond that value.

Here had been an opportunity that all the bargain hunters and doomsayers could have hung their hat on.

Put simply, it didn’t eventuate.

To Conclude

Yes, there have been many headlines predicting property prices may drop sharply.

I feel this is a very broad statement and as we regularly point out, there is not just one property market.

Even within states and suburbs, certain areas or streets can even perform differently.

It is also why we stick to Known, Proven and Trusted locations.

In short, we follow or investment fundamentals where there is always high demand but very short supply.

It removes a great deal of volatility, while these locations and properties always have a level demand or buyers – even in down times.

In the current market with many home buyers and investors dropping out of the market, demand can not be sustained for average or poor locations and properties and prices will inevitably fall.

However, as this example shows, regardless of market conditions, great properties in great locations will always have an underlying level of demand.

While people make predictions of what may happen, it was very interesting to experience what is actually occurring from ground level.

Prices are going nowhere.

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from Property UpdateProperty Update https://propertyupdate.com.au/case-study-heres-why-our-property-market-will-not-drop-20/