‘Waiting for a fire sale’: Is it a good time to buy a house yet?

It should be a buyer’s market, so why are property buyers holding back?

Even though buyers face less competition and enjoy more affordable prices during a downturn, some find that the uncertain conditions magnify the risks of short-term loss and induce anxiety, making it seem less attractive to buy.

Buyer activity is at its lowest level since September 2020 on ABS lending finance figures, as borrowing capacity falls due to the Reserve Bank’s cash rate increases and market sentiment shifts.

Home values have fallen 12.1 per cent over the past year in Sydney, and 9 per cent in Melbourne, 8.6 per cent in Brisbane and 12.9 per cent in Hobart, although Perth is still 1.9 per cent higher on CoreLogic figures.

The depth of the falls, and a recent pick-up in auction clearance rates, have left economists debating whether prices have further to drop or whether the bottom of the market could be in sight.

The Property Bureau buyers’ advocate Alastair Mairs said he was fielding regular calls from agents looking for buyers in the weak property market.

Mairs said some buyers were trying to catch the bottom of the market to get the cheapest possible price.

“I think very often buyers don’t realise it’s the bottom of the market until it’s passed,” he said. “Everyone’s waiting for a fire sale.”

He thought he was struggling to find people willing to buy a home because of a general unease about where the Reserve Bank might shift the cash rate.

“They also want somebody else to jump first,” he said. “They take comfort in competition which is the strangest thing.”

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Agents were struggling to find buyers for some properties during this most recent downturn. Photo: Simon Schluter

RMIT auction expert Dr Peyman Khezr said one reason buyers hesitated was because they were trying to game the market.

“They may expect house prices to decline further, so they may just wait further to get better prices in future,” he said.

Khezr said the RBA was a more important factor, however.

“The most important reason is the expectation of the future of rates,” he said. “[They’re thinking:] ‘I need to know how much this is going to cost me three months from now’.

“They’re essentially in some ways risk-averse to the future events and try to hold on to see what’s happening to rates.”

Clinical psychologist Arthur Stabolidis said the answer could be a bit more obvious — buying in a falling market can be “anxiety provoking”.

“Because it’s such a big purchase … the last thing you want to happen is to buy a property for $1 million then it’s worth slightly less, that would create a bit of anxiety,” he said.

Stabolidis said that even though property prices trended up over the long term, it wasn’t always easy for property owners to keep that in mind.

“A lot of people struggle with that long-term thinking,” he said. “If you look at people in general, one of the biggest problems we have is people take a short view over a long-term gain.

“It’s anxiety provoking to fork out money and even have that risk in a year it might go down. Even in ten years when it might go up.”

Khezr agreed buyers were worried about taking a risk with such a large sum of money.

“Even if these discussions are exaggerated and the situation is unlikely, because this is such a big transaction in your life they will take less risk on average,” he said. “The ambiguity of our future is different from uncertainty.

“If you flip a coin you know it’s 50-50. But the difference is that with rates it’s ambiguous, we don’t know what will happen.

“That ambiguity will translate to huge risk aversion. That means: ‘let’s not act crazy. Let’s not place offers above our capacity’.”

Mairs said the interest rates-driven downturn was also inspiring some anxiety, because buyers could cop huge repayment hikes and end up in “mortgage prison” if rates kept rising and prices falling.

“They’re afraid of overpaying,” he said. “Particularly because of what’s happening in the short term.

“More so than usually because of the interest rates.”

Stabolidis said he thought it was possible buyers were worried the housing market could decline further than economists have predicted. Most had forecast peak-to-trough declines of up to 20 per cent across the country.

“People are sitting there wondering, ‘oh is it going to pop’,” he said. “[Buyers think] ‘if it’s on the way up I might feel better about buying but if it’s on the way down, how low could it go?’.

“There’s more uncertainty on the way down than on the way up.”

Article source: Queensland Property Investor