Host of Relocation Relocation Australia, Veronica Morgan, gives her tips on auction strategies, keeping a toe in a capital city market and slow property markets.
Keeping a toe in a capital city market
This is particularly important for tree and sea changers who are moving out of a capital city.
Even within a city there are different market dynamics in different areas and we see the peaks and troughs are more pronounced the further you move away from the CBD. So when you are moving away from the city, the capital you invest in property is even more at risk of long periods of market lows.
In order to preserve some capital in a market with more secure capital growth prospects, it is often a good idea to purchase a second property in a capital city.
How do you determine value in a slow regional market?
In a capital city the main reason a property does not sell quickly is due to price. Even if there is a major fault with the property, there is usually someone who will buy it at the right price. Waiting around for “the right buyer” in a capital city usually simply results in the property falling in value as it gets stale and buyers start to wonder what is wrong with it.
However, in regional markets such as the area north of Cairns, where we were searching for Karl & Rae, property takes a lot longer to sell and there is often no option but for vendors and agents to wait for that “right buyer.
You certainly don’t want to be in a position where you have to sell in these markets, because stressed vendors have to discount heavily if they want a quick sale. Owners who are not under pressure to sell are able to take their time and wait out a slow market.
As one agent put it: a buyers market is where the buyer holds all the cards, where they have loads of choice and don’t have an emotional desire to buy any particular property. A sellers market is where the seller can choose whether or not to accept any offers that come their way.
It all comes down to where the power lies. Who has the strongest need? The seller to sell or the buyer to buy?
So you can see how it can still be difficult to buy in a buyers market. Even in a soft regional market there can be such a thing as a sellers market – where the seller can hold out for as long as they like for a price they are happy with. And if they happen to own a property with some sort of uniqueness, such as a beachfront house, then their patience is more likely to be rewarded as buyers are more likely to get emotionally attached.
A strong opening bid can often work wonders – but you need to be sure of market values and very brave to go through with it. We refer to this strategy as a “slam dunk”.
If buyers are nervous about the market they are going to seek reassurance from other buyers bidding. A knock out bid can be quite useful in these circumstances, as long as you know exactly what the property is worth and are comfortable with what you are prepared to pay.
Timid bidding just leaves the door open for other timid buyers to have a crack.
But bidding strong can have some drawbacks. You may manage to scare off other buyers but you may also encourage the vendor to be unduly high in their price expectations. Also, you could find yourself locking horns with a competitive bidder who just likes to compete for the heck of it and win at all costs. So you have to tread carefully.
Good auctioneers these days are trained to deal with hecklers and arrogant bidders, so the best way to put your stamp on an auction is to be charming and unpredictable.
Most of the time it is true that those with the deepest pockets will end up buying the property but it is not always the case and if you can take control of the auction, or at least disrupt the flow, you can have an impact on the overall outcome.
In the unlikely event that all bidders have the same limit, it becomes a race to the finish, as the first one there will get to buy the property.
Finally, there is no point bidding unless a) you have decided that you really want to buy the property and b) you know in advance what the property is worth to you and what price you are prepared to pay. But we see plenty of people bidding who have no clue how to answer either of these questions…