Buyer fatigue and adjusting expectations
Fatigue has become evident across the market as competitive conditions ratchet up pressure on those who wish to purchase properties. A typically exciting event has turned into a rapid conditioning process in adjusting expectations to meet market conditions. This results in selecting the most palatable compromise, which could include a refocus on a property search in different areas, adjusting expectations about features that are ‘needs’ rather than ‘wants’, increasing budgets or a combination of all. A challenge for would-be purchasers is the value of their dollar rapidly depreciating in line with rising prices.
Low stock levels across the established market are driving incredibly strong preliminary auction clearance rates. CoreLogic reported on Saturday 13 March, Canberra achieved a preliminary auction clearance rate of 95% from 80 reported results. Robust competition among bidders at auctions has caused suburb records to tumble across Canberra. Some of these records are being broken by new builds of an exceptionally high standard, however, there are many instances where the suburb records are broken by well-maintained older homes.
First home buyers are finding market conditions challenging, especially when competing against investors and upgraders with equity in other assets, who can pay aggressive prices. I believe one solution for buyers finding the established market too challenging is to adjust their criteria and consider off-plan properties.
Purchasing off the plan
Off-plan properties need to be sold at ‘wholesale’ prices to deliver sales volume within short timeframes for developers to commence construction. Finance is not required until settlement, which can take 12-24-plus months, providing time for purchasers to keep saving to increase their deposits. The overall benefit in a rising market is the ability to ‘lock in’ a purchase price at today’s value and participate in a robust growth cycle of increasing property values, without the burden of having to pay any holding costs.
A common misconception among off-plan buyers is by continuing to rent during the construction phase, they are paying someone else’s mortgage. Whilst this perspective is understandable, it fails to take into account the no holding costs in relation to their off-plan purchase.
Being able to participate in the market by paying as little as 5% deposit with no ongoing holding costs until the property is built and ready for settlement is, I believe, very undervalued as a strategy to get into the property market. A small window remains for eligible buyers to receive the $15,000 HomeBuilder Grant if they act quickly and commit to a compliant project with eligibility criteria. Taking advantage of government incentives, including stamp duty concessions, can help buyers own properties more suitable to their long-term requirements, should they be open to waiting a little longer.
With Sam Dodimead, local property professional and host of Canberra Property Podcast where you can get to know the consultants contributing toward delivery of new buildings. Stream from wherever you listen to podcasts.
Read the market wrap from last week here.
Find property listings at Canberra Daily Real Estate.
Editor’s note: Sam Dodimead is the listing agent for a number of developments where off-plan purchases can be made.
