Current Market Insights
The Current Market Insights Podcast is brought to you by Harris Partners Real Estate.
Understanding the property market can be a challenging thing, with highs and lows, twists and turns. The media and agents tend to spread the news they want you to hear, with the advice they want you to follow.
Current Market Insights is an unbiased look into what is happening, what tips you can use to buy, sell, or rent, and that you wont find anywhere else.
Current Market Insights
Episode 76: The Indifferent Buyer and Market Psychology
Hosts Ciaran O'Brien and Peter O'Malley explore the rise of the indifferent buyer in today’s property market and how emotional decision-making can lead to costly mistakes. Peter provides key insights on navigating market dynamics, understanding buyer psychology, and making informed purchasing decisions.
We discuss the risks of impulsive buying out of frustration, the advantage for creative and flexible buyers, and how interest rates continue to shape affordability. With a focus on long-term value, we highlight the importance of unique property features and practical strategies for approaching property searches rationally.
As always if there is a specific topic you would like for us to cover, please reach out and let us know!
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Speaker 2:Welcome to the Current Market Insights podcast brought to you by Harris Partners Real Estate. Each episode we chat with real estate author and industry leader, peter O'Malley, to discuss the current property market conditions and provide insights to assist you on your property journey.
Speaker 3:Hello and welcome to another edition of Current Market Insights. I'm your host, kieran O'Brien, and with me, as every other week, is Mr Peter O'Malley. Peter, hello.
Speaker 1:Hi, kieran, great to be with you.
Speaker 3:Always great to be with you, peter. I want to chat to you this week about buyers. I think it's my favourite topic, to be honest, in all the things we talk about, I love helping buyers where we can, because I know you certainly helped me when I was buying my place some time ago. Last week we spoke a lot about what's happening in the market, the uncertainty around interest rates, et cetera, and one of the things that we did talk about was the auction clearance rate and the overall sales volumes and also the types of buyers that were in the market at the moment.
Speaker 3:And for the first time, I think, since we've started the podcast, you talked about a different type of buyer. You know you always mention the more traditional ones. You know the young family, the first home buyers, the investors, etc. But last week you talked about what you know, the person you labeled as the indifferent buyer, and I thought, off the back of that, it might be a good opportunity to talk about for buyers that are indifferent. Perhaps they're just new or, you know, inexperienced in the market, people who have been trying to buy for a little while but can't, etc. Etc. To buy for a little while but can't, et cetera, et cetera. What is the best approach and what tools and advice can you provide to any buyer out there to make sure that they can make a decision about what is the right property for them and then act accordingly, so as not to either miss out or make a pretty horrible error?
Speaker 1:Well, the more you want something, the less likely you are to be prepared to miss it, right.
Speaker 3:Oh, exactly.
Speaker 1:So everyone knows the old adage about negotiation the power rests with the person that's prepared to walk away. Yeah, when we spoke last week about the indifferent or the discretionary buyer, that was something that we've seen in the new year. Where prices are, they're off their peak, but they're still very high in sydney, right? Yeah, of course, they're 40, 40, 50 percent above any other capital city in australia. Yes, interest rate cuts, uh, you know, are coming this year. Um, but are they going to be? You know, are they going to cut so deeply that they're going to stimulate the housing market? Probably not. Vendors are asking for prices in many instances, that they paid in 2021, when mortgage rates were two percent or 2.2 percent or 1.99, and buyers who are having to pay a mortgage rate of around 6% are saying that's not quite worth it for me.
Speaker 3:No, thank you, sir. Yeah.
Speaker 1:Thanks for the opportunity, but no thanks. So these are the dynamics in the current property market and that's why stock levels will play such a big role in how the market performs in the next six months, because the less stock that's on the market, the more the vendors can say to the buyers well, if you don't buy this, what are you going to buy? And the more stock that is on the market, the more the buyers can say to the vendors and the vendors agent that's my offer and if you don't want it, I'll buy the one down the down the road or around the corner. Very simplistic description of the property market, kieran, but that's essentially how it operates in the short term.
Speaker 3:Okay. So with that in mind, the buyers, you know at the moment, as you're suggesting, they may actually be in a pretty good position because, you know, as numbers do start to rise in terms of listing volume, they have that flexibility and, in some ways, that time to be able to actually step through and make a logical, reasoned decision about a purchase. One of the things you've written about in the past and you know on this topic is that buyers in some circumstances can end up getting frustrated with the property market and the property process and, as a result, just lash out and buy something so they can either get onto the ladder or just. You know, I hear people say all the time I'm so thankful I never have to go to another open home. You know, just avoid the cycle, given that the market is a bit uncertain at the moment those traditional barriers, I guess, or mistakes that buyers make, would you say that they're maybe not as huge an issue at the moment as they could be or have been.
Speaker 1:I think there's always buyers in every market that are frustrated and fed up and then buy a property nearly out of spite or nearly out of a desire to just finish off the process. And they'll often do it having just missed out on a property that they believe they should have purchased, whether the agent underquoted and they missed out on it on the day because they didn't think it would go that high, or someone pipped them at the post, or they're playing real estate poker with the real estate agent saying, well, I don't reckon they do have another buyer, so I'm not going to increase my offer. And then, before they know it, they've been told the property sold. And then all of that combines to make them a frustrated and fed up buyer with the process and they go out and buy either the wrong property or the right property at too high a price.
Speaker 3:Yeah, I must admit I saw, pardon me, I saw just last week some commentary online from a person who'd said exactly that. Actually we you know the negotiating with the agent over the property we loved. It told us there was another buyer. We thought he was bluffing, the whole process is a sham, etc. Etc. Only to find out 24 hours later we'd missed the property. And now we're heartbroken. What do we do? And all the advice was well, if you find the right one, you should buy it. So, given that's the commentary online from a bunch of non-real estate strangers, do you think that's a reasonable bit of advice that if you are a buyer, irregardless of market, if you find the property that you think is perfect for what you need at that time and that place, that it's worth just taking action?
Speaker 1:Yeah, if you are a buyer. So let's go back when you said that buyers have kind of got the advantage out there at the moment. They do in some markets and they do in some niches of the market, if you like. There are people who are buying at the moment, who are buying at the moment, who are listening at the moment and buying at the moment, that will hear this discussion that we're having and then they'll try to buy a property on the weekend and they'll find themselves in a multi-buyer situation. So even in a flat market, good properties still attract good number of buyers. Even in a booming market, poor properties can still sit on the market for a long time to find the right buyer. So whilst we're giving generic advice here that the auction clearance rate is stubbornly stuck below 50% in Sydney and has been for quite some time, that's just generic or broad, broad based assessment of how the market's going. You as a buyer need to know how the market is performing in your price category. If you are one of those discretionary buyers that will move for the right property at the right price at the right time, all kudos to you for being in that situation, because the hardest thing to negotiate against. Whether you're selling cars, houses, computers or or holiday packages is the indifferent buyer. I'll only buy if it's good and compelling value.
Speaker 1:So a lot of agent, a lot of buyers aim to project that persona to real estate agents but can't quite pull it off because they're actually emotionally engaged in a subject property and they're saying we don't care if we miss it. Similar to your internet example. There we called the agents bluff. We don't think there is another buyer. Oops, there was another buyer. Furthermore, the property sold. Now we've missed out on the home of our dreams. Whatever can we do? Well, the only answer there is don't, don't, don't play. You know, don't, don't play that game on the next property, which might come up next Saturday or might not come up until 2026 yeah, certainly.
Speaker 3:Uh, well, that that's the perfect example, I think, of where, potentially, as per your experiences and what you've written about in the past, those buyers could go out next week in a flurry of anger and purchase an apartment that they don't really love because they've you know, they've missed out, they're feeling slighted and they just want to get off the rat wheel and get into the property market, which is obviously a major risk. I wanted to ask a bit of a question of you on this topic. Given that the financial environment is quite tough, let's say, compared to two or three years ago, interest rates are high and borrowing power is down do you think that there's a scenario at the moment where lots of buyers who would ideally like to buy are just quite genuinely financed out from being able to purchase where they need to?
Speaker 1:Oh, their budgets are. Yeah, their budgets are capped. The banks have been pretty tough on that point and it felt like they got tougher on it late last year. That's right.
Speaker 3:Okay. So do you think that, as a result of that and I know we touched on this previously, but do you think we've reached a bit of a point where, actually, the prices are above, where the generalised borrowing power is, where people just can't physically come up anymore because the banks aren't allowing them to?
Speaker 1:Well, you're talking about locals there, but there's a lot of people that buy real estate in Sydney, for example, that earn US dollars, so they've copped a pretty substantial pay rise in the last 12 months. As an example, there's expats that are working overseas, that are buying remotely their first Australian property so that they can come back to it, and whether they're even against the pound. Now the Aussie dollars dropped 10 percent against the you know, the against the english pound. Um, so that's a big issue where, yeah, the local buyers who are an essential worker, for example, with largely a fixed income, trying to buy you know a certain type of property and saying, well, based on what the properties I want to buy sell for and what the banks will lend me, I can no longer. I and my social group can no longer afford to buy such a property, but they keep selling them.
Speaker 1:Who's buying these sorts of properties? It's baby boomers downsizing. It's expats pumping money back home. It's internationals that are arriving here with you know, know, the Singapore dollar is $1.16 against the Aussie. I remember going to Singapore on 85 cents yeah you know.
Speaker 1:so if you're if you're working in Singapore, for example, at the moment and earning a good pay packet Australian property's fallen in value in your eyes. Domain said that the inner west dropped 5% in the last quarter of last year. So if you're earning a currency that's going up against the Aussie dollar and you're buying in the inner west that dropped 5% last quarter, it's an even bigger drop for you. You don't have the same view about Sydney property that you've just articulated. These are all the dynamics, and exciting dynamics that make a market go round.
Speaker 3:Yeah, look, absolutely Really interesting topic, peter. As a final wrap-up, then, I wanted to get your thoughts just for our buyers out there that are listening, that are in that category. You know they're local buyers, they're fixed income workers, whether that's essential services, teachers, whatever it might be. For those people that are having now to consider alternative locations for where they should buy, but obviously have, you know, work commitments or school or whatever it might be, in different locations, what do you think is one? You know one or two kind of features or assets or, I guess, elements of a location that would be a good consideration for someone that's having to shift their focus away. Let's say, uh, you know, arbitrarily, someone's always considered the inner west is where they want to be and that's where the social circle was, but now, because of dynamics and whatever else, they're having to go further afield. What are the key things that they should be looking for? Uh, in a suburb, do you think, to make it reasonably good value long term?
Speaker 1:uh, to justify, I guess, the the move yeah, look, um, as best you can it's not as easy as said than done but as best you can avoid generic product um, try, try and get something.
Speaker 1:Try and get something, uh, unique or special. I don't want to flat out say buy a house over an apartment, because that rules out townhouses, which offer great value for money in comparison to houses in a lot of suburbs, and not everyone can afford a house, even if they downgrade their suburb. But if you are buying an apartment, try and buy an apartment with a unique or redeeming feature, whether it's an art deco apartment of which they're not building anymore's say, an apartment in a good location that has parking where other apartments might not have parking, for an example, a never to be built out view, for example. You know, be really, really careful which I know buyers are doing at the moment with build quality and strata issues. You know that you may finally secure yourself a property and the dream home becomes the nightmare scenario as strata issues take hold and build issues and water ingress and all those sorts of horrible issues that everyone's hearing about the city you city overwhelm your purchase.
Speaker 1:So that's in terms of long-term viability. There's some things there to keep you in mind, but keep in mind that even if you buy in a nice suburb, the dream home can easily become a nightmare mortgage if you overextend yourself. Absolutely yeah, and I have no doubt I don't speak with any specifics here, but I have no doubt, for example, kieran, that there would be I'm not saying a lot, but there'd be people in the eastern suburbs of Sydney that are suffering severe mortgage stress at the moment.
Speaker 3:I absolutely guaranteed.
Speaker 1:I, you know, anecdotally, had a conversation with someone in banking in, I'm going to say slightly inner west, but you know slightly west, inner west, who said that, based on the sales price out there and the mortgage values, they know for a fact that a huge proportion of people are begging, borrowing and stealing from family and friends to stay afloat because they need relief and they've overextended massively to get into the market, so they're probably earning phenomenal incomes, but and I don't take any joy out of hearing that anyone is under mortgage stress I have great empathy for people that are in that situation because they've bought in 2021 with a mortgage rate of 2% and the RBA governor of the day saying, hey, interest rates won't even move for the next three years and all they've copped in the last three years is rate hikes. Anyone who's in that situation has every right to be aggrieved.
Speaker 3:I feel like you're talking to me, Peter.
Speaker 1:Well, I'm probably talking to a lot of people. That's the point, right. So when you're saying, where should I buy? Well, I think the best property is the one you can afford, first and foremost. The next best property is one that doesn't have structural building issues. If it's an apartment and same for a house, for that matter Then the third criteria that you should be looking for is something redeeming or appealing about it that will be appealing and redeeming about that property in 20 years time. So when you're purchasing a property, you ask yourself hypothetically if I do own this property in 2045, how will it have performed in the last 20 years?
Speaker 3:Yeah, I think that's a really good point of view, peter, and you know if I could make a final comment, it's. You know, emotion is important when looking at property, most certainly, but you have to understand that something that's emotional to you may not be to the next person that needs to buy it from you.
Speaker 3:So you've got to make sure you use your brains and your wits as well to buy something as you say, with a redeeming quality that will still be there to the next family or the next businessman, or the next downsizer or whatever it might be.
Speaker 1:Well said, well said.
Speaker 3:As always, Peter, look really great topic and I certainly hope there's some buyers out there that gain some value from this and can use it to get themselves into the property market. Thanks so much for coming in. Thanks, Kieran, and thanks to everyone for listening to Current Market Insights. We look forward to speaking with you next time.
Speaker 2:Thanks for joining us on the Current Market Insights podcast brought to you by Harris Partners Real Estate, the podcast providing real estate insights you won't find anywhere else.
