When markets soften, the pricing playbook most buyers rely on quietly stops working. Comparable sales from three months ago may now sit above today's true value. Price guides start reflecting vendors’ aspirations instead of market reality. And automated valuation estimates, which always look backwards, lag even further behind.
That uncertainty is exactly why so many buyers freeze during a period of softening real estate activity. The challenge is that in markets like the one we have right now, different properties react at different speeds.
So how do you work out what a property is actually worth in a slowing market, so you don't overpay for the wrong one or underbid on the right one? Here are my thoughts.
The latest numbers from Cotality paint a sobering picture for sellers in several of the major markets our business operates in.
National dwelling values fell 0.4 per cent in June, the largest monthly decline since December 2022, with combined capital city values down 1.3 per cent over the June quarter.
Sydney led the retreat, with values falling 1.2 per cent in June and 3.2 per cent over the quarter, leaving the harbour city around 3.7 per cent below its January peak. Melbourne values dropped 1.0 per cent for the month and 2.6 per cent over the quarter. Brisbane, meanwhile, is still rising, but the pace has cooled markedly. Values edged up just 0.3 per cent in June, with quarterly growth easing to 1.3 per cent, even though annual growth remains a remarkable 17.4 per cent.
There's no denying we're at an inflection point where purchasers are gaining the upper hand. The problem during these periods is that buyers and sellers don't magically readjust their price expectations in unison. Some move faster than others to face reality, and that lag creates a gap between what vendors are asking and what buyers are actually willing to pay. Reading that gap correctly is where deals are won and lost.
As such, we often see buyers relying on old sales evidence from stronger market conditions when assessing value. Do that in the wrong location or price point, and you'll find yourself far too bullish, overpaying for a property in a secondary position. The flipside is true too. A prime home genuinely brought to market at a reasonable asking price gets ignored by some buyers trying to play hardball with their offers, and they miss out when a savvier purchaser steps in.
Remember, quality properties still attract strong interest in a soft market, just not as much as they do at the peak. And with listing and transaction volumes lower during softer times, the good ones are scarcer than the headlines suggest.
Different property types, in terms of the fundamentals that drive capital gains, perform differently in changing markets. Unfortunately, those shifts only come into focus once the market changes are well established. The opportunity lies in buying when the changes are just starting, but you won't see that unless you're working every day in those markets like we do.
For example, it's often said you get one window of opportunity every seven to ten years to sell your second-class property. These are homes on main roads, next to undesirable land uses like petrol stations, and the like. It's only when markets are at their very peak, when competition drives demand and prices higher, that these properties achieve a premium. But when markets turn down, their value drops first and fastest. Buyers simply stop looking at them. If you're unaware of when that happens, you can easily overpay for a total dud that will languish at a reduced value for years to come.
On the flipside, property with great fundamentals does something really interesting. It leads the charge when prices are rising and commands premiums at the peak. But when markets soften, buyers remain interested. In fact, softer conditions tend to turn the finite pool of buyer attention towards quality. The trap is that less knowledgeable buyers overplay their confidence and try to hardball a lowball offer, not realising there are others in the market still willing to pay a fair price for a great home. The end result is they miss out on what could have been an excellent purchase.
Here's the part many buyers overlook, though. A softening market actually hands you a safety margin. Skilled negotiators like experienced buyers’ agents know how to secure real estate for a price that’s now below its peak. Doing this well builds in a buffer against further movement. In fact, buying quality in a soft market, at a sensibly negotiated price, is one of the lowest-risk moves you can make.
One more wrinkle to factor in if you’re going it alone in the current market. Despite the softer conditions, it can still be hard to track down a good property, because many vendors simply hold off selling until conditions improve. That's where our deep agent relationships come into their own, giving our clients access to off-market opportunities that never reach the portals.
In truth, the only way to be well-versed in what to do when markets soften is to operate daily in specialist property sectors, which is exactly what specialist independent buyers' agents do.
You see, we're right across what's happening day by day on the ground. While most everyday buyers are relying on data that's weeks or months old, our live transaction evidence, drawn from deals we're negotiating right now, tells us what buyers are actually paying today. That intel means our clients get the first signals of a turning market, well before they show up in anyone's dashboard.
We combine that on-the-ground intelligence with decades of expertise and experience. We can quickly see when sentiment is shifting. More importantly, we know which properties will be most impacted and which will prove resilient. That puts our clients in the best possible position to make realistic offers on the right home, and to secure it at a price that makes sense.
If you'd like help pricing property with confidence in today's shifting market, speak to my team at Propertybuyer. We'll help you buy well,whatever the market is doing.
Give us a call on 1300 655 615 to start a conversation about your next property purchase, or click here to send us your enquiry today.
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