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Should you buy in a real estate downturn?

It’s natural for people to feel apprehensive when markets are on the move and the future is uncertain. But a cooling market shouldn’t hold you back from buying your first home, or the investment you’ve been working toward. In fact, a downturn in property prices can offer real advantages for buyers.

Here are some of the key benefits of buying in a downturn.

Costs trend upward

Even if the overall market is experiencing a downturn, property tends to drift upward over time, and a dip could be a great opportunity to lock down a dream home, or a solid investment.

History shows that the costs of construction are always increasing (both the development of land and the construction costs). The extent of these increases is higher than the amount and rate that people can generally save. If you buy while prices are the lowest, you’re well placed to take advantage of future price growth.

Better choices on offer

When the market is riding through a rough spot, there is typically more housing stock available. This gives buyers more options, and increases their odds finding the right home and location for their needs.

A downturn also represents an ideal opportunity to secure a premium location and quality property that would have been out of reach in a hot market.

Read more: Essential questions to ask your builder

More negotiating power

With more stock on the market there tends to be less competition, which puts the buyer in the driver’s seat. This control gives you the ability to negotiate the best deal possible for you and your situation.

You may be able to negotiate more inclusions or promotions to clinch the deal, and you can act with greater confidence that your business is valuable.

Waiting is a different type of risk

Some may feel that they if the market is in a downturn, they should wait for it to bottom. This too is risky business, as finding the bottom is almost impossible.

Buying a house for the longer-term means buying on the downward slope and selling somewhere in the upwards slope, translates to a solid investment and making money. There is no such thing as the perfect time to buy. 

Read more: Buying new versus buying established

Start paying down debt faster

The quicker you buy a house that is yours, the faster you stop renting and the faster you start paying off the mortgage. You will have peace of mind owning your own home. Over time, even as your mortgage payments stay the same, the value of your money will increase.

A waning market often means low interest rates, which usually translates into mortgage savings. Leverage the low interest rate environment to main gains in paying off your property. When rates and the market tick back up, you’ll be on surer footing.

It makes quality your focus

Ultimately, the quality of your property (both the location and the home itself) is more important the timing of when you buy.

If you’re buying a forever home, its value will grow as you build your life in that right spot for you. Meanwhile, investment-grade properties tend to outperform averages for capital growth.

In market cycles, the only reliable outcome is change. Markets will rise and fall, and the right investment will steer you though the ups and downs. The best time to buy a property is usually sooner rather than later, and a downturn offers particular advantages you can harness.

About the author

Darren Mehl is Chief Operating Officer for Resimax Group and its house of brands. An industry stalwart, he has held senior roles at Metricon and Carlisle Homes. Darren has worked closely in the first home buyer market, delivering initiatives that assist this complex and competitive demographic. A passionate advocate for customer-centric business, Darren is experienced in all facets of property.

Darren Mehl

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