Now is the time for savvy investors to buck the trend, experts say

When is a market downturn a brilliant opportunity rather than a doom-laden disaster? Smart investors can tell the difference, and that’s exactly what sets them apart from the herd, say property strategists.

While we’ve seen home price falls of 5, 10, and even 20 per cent in some suburbs, we should also take note of other market shifts.

“Some of the price corrections are matching some of the worst we have seen in the last 100 years,” says Rethink Group chief executive Scott O’Neill. “But that also means there are pretty big discounts to be had.

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“At the same time, we’re seeing some green shoots starting to pop up, like auction clearance rates rising, discussion about drops in interest rates, and investor activity picking up – exactly the things we’d see prior to markets bouncing back up.”

Certainly, the latest Domain House Price Report showed some significant price drops. In Melbourne, for instance, house prices declined 26.6 per cent in Toorak, 14 per cent in Balwyn and 11.7 per cent in South Yarra. In Sydney, they fell 21.2 per cent in Marsfield, 14.4 per cent in Artarmon and 10 per cent in Parramatta.

But that weakness is precisely the reason that some investors are rushing back into the market.

“All the smart investors are already buying, especially our ultra-high-net-worth clients,” O’Neill says. “We’re seeing others waiting to see if it goes down further.

“Yes, it might go down 1, 2, 3, 4 per cent; it won’t go down another 20 per cent. It’s better to buy and be on the ride back up, rather than waiting, scared, on the sidelines.”

That’s precisely the view of JamesKellie buyer’s agent James Brown. While prices have fallen in response to a tailing off of demand due to this year’s budget changes and interest rate rises, the fundamentals, he points out, remain exactly the same.

“Good areas to be buying in still have low supply and high demand,” he says. “That hasn’t changed. It’s market sentiment that’s dictating many of the short-term market fluctuations, but investors buy for 10 to 20 years, and the short-term changes are irrelevant.

“More sophisticated buyers see this as a good time to jump in as there aren’t so many people bidding and they’re getting some good deals. No one knows when the market will hit the bottom. You only know that [it will go] back up, and if you wait till that happens, you’re already too late.”

Fellow buyers’ agent Leanne Spring of Spring Buyers Agency agrees that when the change comes, it will be very quick, and so many investors risk missing the boat if they don’t climb aboard now.

“As soon as confidence comes back into the market, it will go up again,” she predicts. “There’s just not enough stock in Australia to satisfy demand.

“But it never ceases to amaze me that so many people have been waiting for this moment, dying for the heat to come out of the market, and prices to soften, yet when it comes, they sit on their hands.

“My message to them is: Don’t be a sheep. Everyone gets nervous, but this is the time to act.”