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4 benefits of buying a property in a downturn

Wednesday, 7th Jan 2015

herd mentality

Many investors are inclined to adopt a pack mentality when buying an investment property, but what are the benefits of going against the herd?

When the market is hot, and property prices are climbing sharply, many investors will feel the need to buy a property to avoid missing out.

Conversely, when the market experiences a downturn, and property prices stagnate, many investors will shy away and abandon their intent to make an acquisition.

This herd mentality simply comes down to human nature.

However, if you’re looking to purchase a property next time the property market softens, it might be wise to continue unabated because there are many benefits to buying in a downturn.

Four reasons to buy in a soft property market.

  1. Increased housing stock – generally during a downturn there will be more listings on the market, which means buyers will have a much wider choice. Subsequently, buyers are more likely to find a more appropriate and better dwelling.
  1. Less competition – given that most property investors follow the herd mentality, during a downturn buyers will encounter less competition and can secure a property that they might not have been able to in a booming market.
  1. Secure properties for less – reduced competition means buyers can purchase properties at a lower price or even below asking price. Furthermore, in a cooler market buyers are less likely to have to outbid others.
  1. More control in contract negotiations – with less competition in the market buyers can have more control in contract negotiations and ensure contracts are weighed in their favour.

While buying property in a cooler market presents advantages, there are also many benefits to purchasing property when conditions are more favourable.

However, when purchasing property to create long-term wealth, it’s generally best to make acquisitions sooner rather than waiting for the ‘perfect’ environment.