Hot weather, hot air, hot competition and one sizzling property market! The heat and passion of the Sydney real estate market has kicked off for the year of 2020! In my 13 years as a real estate agent I have never experienced it hotter! Last week, on behalf of a client, I was the underbidder on a property which sold for $3 million. The price guide in the first week was $1.8 million. When properties are selling for more than a million dollars over what was anticipated, how do property buyers ensure their emotions don’t get the better of them, prevent being caught up in the HEAT of the moment and losing sight of their goals? This is a conversation I have regularly with clients at different stages through our journey together. It is not only if we miss out on a property, it is also if they have not found their perfect property and are feeling disheartened, or even when the heat of the market makes them feel flippant about spending their hard earned money and we need to be patient and more detached from outside influences.
When a property buyer is affected by the heat of the property market we usually see one of the 3 responses… FLIGHT, FIGHT or FREEZE. What this means and how to negate these situations in relation to the property market are as follows:
The flight response occurs when a buyer makes a comment such as ‘this market is too over heated and I don’t like what my budget offers me, so I am going to do nothing and wait until things die down’. We see the buyer fly out of the market and disengage. Meanwhile prices grow and what their budget buys becomes less.
Remedy: the important thing to remember is that the property market has cycles. Whilst this growth will not last forever, the limited level of stock in the real estate market is set to continue this year and increased demand (due to cheaper money with low interest rate along with a number of other factors) will also fuel increase in property prices. We cannot predict exactly when the market will slow down or when prices will drop, however quality property in sought after locations has historically had a level of protection from most market downturns. We advise our clients on how to identify properties with these qualities.
The fight response is exposed when a buyer gets caught up in heated negotiations and is struggling to secure the property they were hoping for. In a desperate or even aggressive state this vulnerable property buyer can get caught up in the emotions of the heated property market and can jump into a purchasing property which may not meet their short- or long-term goals.
Remedy: there is no more expensive mistake in real estate than paying too much for the wrong property. The change-over cost of selling, (holding) and paying double stamp duty will normally far out weigh any potential increase in the market if a buyer waits to find their perfect property which meets their goals and they will be happy to hold on to for a decent amount of time to realise good capital growth. Sometimes the best option is to take a breath and remain active in the market because the right property will come along. In a market place where stock levels are extremely low, it can take longer to find the right property match. Having access to a large number of off-market property listings, which are not advertised online, is another way we open more doors for our clients to ensure they achieve their property objectives more efficiently.
After the shock or even ‘trauma’ of missing out on a property which ‘they had their hearts set on’, many buyers can go into the FREEZE response. Upon freezing, the focus on the goals of the property purchasing project can be lost and the emotions of the heated market take over. As in the FLIGHT response a hot property market does not wait for buyers to be ready and will continue to grow in their absence. Therefore, it is important for buyers to detach as much as possible from the emotions of missing-out in a negotiation or auction and always keep plan-b in their mind at the beginning and conclusion of the process. Everything happens for a reason. On finding the perfect property, you will realise the blessing of missing out!
If this 101 in property therapy for a hot property market was helpful to you or you would like to discuss your property journey further contact Lauren Goudy or one of the team at Rose & Jones Buyer’s Agents.