There seems to be a misconception that ALL currently listed properties will sell at a heavily discounted rate due to the COVID-19 pandemic. While this may be the case in some instances that are underpinned by a vendor's personal necessity to sell, in my experience over the past six weeks, it is certainly the exception and not the rule.
While buyers may be negotiating harder for discounts during this time, sales agents still appear to be acting in the best interest of their vendors and aiming to achieve advertised prices.
This being the case, in some locations, we have observed a sense of panic around agent listings and the lack of new stock coming on to the market - due to the COVID-19 pandemic and the economic uncertainty around it. This may inadvertently push agents to seek to transact on the properties they have listed with more haste.
While COVID conditions favour the buyer, monthly transactions are drastically down
Generally, it would seem that the current conditions favour the buyer. Due to reduced competition in the market, once in the negotiation stage, most vendors are reluctant to let a potential buyer go.
Across the buyers agent sector, however, transactions have dropped off drastically. While in most cases, clients haven't walked away completely, the vast majority have put a big pause button on things due to the high level of uncertainty.
Insulating against downside risk
In the current market, negotiating hard is a critical risk mitigation strategy required to help insulate investors from any downside risk of a short-term decline in property prices in the months ahead.
Conducting increased due diligence before purchasing a tenanted investment is also a definite must. Questions including, what industry is the tenant working in and have they notified the agent of financial hardship need to be asked.
For vacant or owner-occupied properties, negotiating longer settlement periods with early access will allow a property manager to list the rental online pre-settlement or provide vendor leaseback options for owner-occupied sellers
Two approaches in unprecedented times
The COVID-19 pandemic is something we have never seen before and hopefully never will again. The uncertainty around the economic flow on effects, specifically in relation to the property market, has caused the vast majority of buyers to sit on the sideline and adopt a ‘wait and see’ approach.
In saying this, there have been some bullish buyers that are testing the market and coming away with significant discounts.
One such opportunistic investor is professional buyer Jay Anderson who reports on increased activity over recent weeks.
A unique moment in time
For investors who have stability and security around their income, now is a very unique time to be buying property.
In the current market, buyers not only have negotiating power, but also in many instances are able to get the ‘'pick of the bunch'.
What I mean by that is that you can look at the available properties for sale, find the property you like and go and buy it.
This is in vast contrast to just a few months ago where that same property would have had 40-50 people at the open home, 100 people at an auction with 10-15 registered bidders and an end result of the property selling for above the on paper appraisal.
Recent purchases speak for themselves
Inner-city suburb of Sydney - unrenovated terrace:
Asking $1.7M, Appraised at $1.65M, secured at $1.5M with early access to commence renovations (pre-settlement)
Major Regional Centre QLD - medical centre:
Asking $1.5M, appraised at $1.475M, secured at $1.1M (Net income $104,504)
Urban Region of SE QLD - cashflow positive investment property:
Asking $480,000, Appraised at $470,000 secured at $415,000