Buyers want to buy as cheaply as possible. And of course, sellers want as much as possible. Perfectly understandable. When there is broad agreement on values, the solution is often to simply be satisfied that the price is as high (or low) as can be achieved and then strike a deal. There is a general acceptance that a compromise might be necessary but after that, well, that’s as good as it gets.
But what happens when “hope” is introduced? “If I hold on for a little longer, I might get a better price”. When a market is headed in a particular direction, eventually everyone agrees on the reality. But when it changes direction (which it just has), suddenly hope becomes part of the equation. Buyers hope prices will still settle a little lower, whilst sellers suddenly believe the worst is behind them and if they hold on, a better price might be achieved.
Strangely enough, in this changing environment, there will likely be evidence for both camps to cling to. Easier lending and an improved confidence means those with motivation or desire will pay quite a bit more for that one property they want. Other properties will still simply sit until prices are reduced. The Australian economy is still facing significant headwinds and there is a very good reason why interest rates are now dropping again. Retail is now in recession and unemployment is drifting back up. And the property market is likely to become even more segmented. Entry priced properties have likely bottomed. Mid to upper priced properties, not quite yet.
Pricing property is about to get a lot more challenging; unpredictable even. Get prepared for some sales that get surprisingly good prices. Others will still struggle. Whether buying or selling, don’t ignore the evidence that’s not convenient. We are now entering the bumpy bottom of the cycle, which will probably be around for a while.
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