Why 2020 is the WORST time to buy property

It’s a bold statement, but it’s true.

For some of you who are reading along right now, 2020 is absolutely the worst possible time you could consider buying a property.

In fact for these people, moving forward with a real estate purchase this year would have the potential to cripple them financially, not just now but well into the future.

Sounds dramatic, right?

It is… but here’s the truth.

Business Risk ProblemThis statement rings true in 2020.

It was also true last year.

And the year before that.

And in 2015, 2010, 1985, 1972…

The reality of real estate is that…

There is no “best” time or “worst” time to buy property

Here’s why…

It’s likely that you’ve heard me talk about the drivers of property price growth over the years.

There are so many things that determine a property’s price performance and growth trajectory, many of which are well outside of your control, and which also have nothing to do with the property itself.

These include, but are not limited to:

  1. The economy – the performance and state of the broader economy impacts people’s ability to buy and sell property as well as …
  2. Consumer Confidence – when people feel comfortable about their financial situation and their future job prospects are more likely to make big purchases like moving home or buying investment property.
  3. Employment levels – if the community at large is experiencing high levels of unemployment, then fewer people can afford to pay a mortgage, which reduces demand for property
  4. Government policy – aspects to do with tax, depreciation and home ownership grants will work to boost or reduce demand for property, particular new property in recent years, which is where the federal government’s primary agenda has been.
  5. Population growth – or household formation to be more exact as when more people moving into an area equals more demand for housing, whether it’s to buy or rent.
  6. Local Demographics – things like average incomes, average age, household structure, crime rates and employment opportunities.
  7. Supply – The basic economic principle of supply and demand is a fundamental property market driver of price growth.
  8. Availability of credit – property investment is a game of finance with some houses thrown in the middle, but even owner occupier demand is very much driven by the availability of finance and the cost of money, in other words interest rates.

Now, as a result of these factors – which are by no means an exhaustive list, but they give you a general indication of some of the major influences on property prices – we have what’s known as booming or busting property markets.

Sydney and Melbourne, as we know, have recently come out the other side of a prolonged booming period.

Between 2016 and 2018, values soared in these two cities, allowing those who owned property to amass small fortunes along the way.

But it’s important to know that just because “Sydney boomed”, that doesn’t mean that ALL of Sydney boomed.

It means that overall, the majority of properties across the city experienced an increase in value.

However, there are always some areas, pockets, streets and individual houses that perform better or worse than the average.

For example, the value of the apartments in many of the high-rise, Legoland towers around Sydney languished as concerns about structural integrity, following the Opal Towers debacle tarred all new apartments with same brush.

Let me give you a different example

Let’s say a couple owned a property in a sought-after Sydney suburb in 2017.

They had purchased in 12 months earlier for $1.55m.

Home PropertyIt’s right in the middle of a booming property market and sadly, the couple split up.

It’s a messy and contentious divorce, and both parties want to sell the home as quickly as possible so they can move on.

They also don’t want any looky-loo neighbours snooping through their home every weekend, and they don’t have the energy or appetite for a big, public marketing campaign.

So, they engage a real estate to sell the home privately/off market.

It reaches fewer potential buyers and drives less competition, but they secure a buyer within a week.

They sell the property for $1.6m in a hasty settlement and move on.

Had they taken the property to the open market – say, an auction – and a number of would-be buyers fell in love with the property, they could have sold for more money.

But their circumstances dictated a swift sale, so they accepted the price they got and moved on.

It could be the case that one street over, a couple own a very similar property.

AuctionThey are planning to move in with their parents for six months while they build their next property, so they have no deadline or timeline pressures and they’re happy to wait for the right buyer to come along.

They list their home for auction, pay for an expensive but very high profile marketing campaign, and achieve a final sale price of $1.825m.

Two similar homes, two very different outcomes.

Neither is “right” or “wrong”, and this is the infuriating truth of real estate: there are no “definites.”

Just a series of educated guesses and informed choices, which – with the right expert guidance – can lead you towards making profitable decisions for your future.

When it comes to deciding the right time to buy or sell, at the end of the day, it’s our own personal situation as much as external factors that influence the best course of action we should take.

The fact is, any time could be the worst time for you personally to buy a property… or it could be the best time to buy

It truly depends on your own goals, budget, timeline, risk profile and circumstances as to whether 2020 is a good time to buy.

If you’ve just lost your job or your income is insecure in the current economic climate, then yes, this could be a risky time to commit to a mortgage; in fact, you’d struggle to get a loan.

However if you’re financially stable and have a deposit ready to go, then some might argue that with 2% mortgage rates and opportunities to negotiate strongly, 2020 could be the property buying opportunity of a lifetime.

Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on

Metropole

If you’re wondering what will happen to property in 2020–2021 you are not alone.

You can trust the team at Metropole to provide you with direction, guidance and results.

In challenging times like we are currently experiencing you need an advisor who takes a holistic approach to your wealth creation and that’s what you exactly what you get from the multi award winning team at Metropole.

If you’re looking at buying your next home or investment property here’s 4 ways we can help you:

  1. Strategic property advice. – Allow us to build a Strategic Property Plan for you and your family.  Planning is bringing the future into the present so you can do something about it now!  This will give you direction, results and more certainty. Click here to learn more
  2. Buyer’s agency – As Australia’s most trusted buyers’ agents we’ve been involved in over $3Billion worth of transactions creating wealth for our clients and we can do the same for you. Our on the ground teams in Melbourne, Sydney and Brisbane bring you years of experience and perspective – that’s something money just can’t buy. We’ll help you find your next home or an investment grade property.  Click here to learn how we can help you.
  3. Wealth Advisory – We can provide you with strategic tailored financial planning and wealth advice. Click here to learn more about we can help you.
  4. Property Management – Our stress free property management services help you maximise your property returns. Click here to find out why our clients enjoy a vacancy rate considerably below the market average, our tenants stay an average of 3 years and our properties lease
icon-podcast-large

Subscribe & don’t miss a single episode of Michael Yardney’s podcast

Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.

Need help listening to Michael Yardney’s podcast from your phone or tablet?

We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.

icon-email-large

Prefer to subscribe via email?

Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.


Michael Yardney

About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'Why 2020 is the WORST time to buy property' have 4 comments

    Avatar

    July 10, 2020 Madonna

    Hi Michael,
    My daughter and her partner are keen to buy their first home to live in. They have a budget of around 700 and a good deposit. They wish to live close to Brisbane city. My only worry is should they wait until the end of the year. Will prices drop?

    Reply

      Michael Yardney

      July 10, 2020 Michael Yardney

      Madonna, that’s a good budget for Brisbane and we know that currently there is a shortage of A grade homes in Brisbane and that’s unlikely to change as the year goes on.

      My suggestion is if I have a secure income in their finance organised they should take advantage of the opportunity in the Brisbane market is offering a present

      Reply

    Avatar

    July 9, 2020 Keith H Mclachlan

    Great headline, coming from you. I sat up and took notice.
    Your comments on how personal circumstances affect the “buy/sell/hold” decisions of people resonates with me.
    I have just had two realestate experiences with my 23 and 27 year old kids, both of whom are in the process of moving home – one had a 9 month lease liability, and the other in a share house was able to negotiate out with no liability. As a landlord it was interesting to watch how they negotiated their respective exits, the agents behaviours, and the costs involved.
    Conclusion: Property is all about people.

    Reply


Would you like to share your thoughts?

Your email address will not be published.
CAPTCHA Image

*


Copyright © Michael Yardney’s Property Investment Update Important Information
Content Marketing by GridConcepts