Benefits of buying property counter cyclically

Tuesday, 23rd May 2017

Given the cyclical nature of property markets what are the benefits of buying an investment property in a downturn?

While property markets are cyclical and experience ebbs and flows, many investors will only buy when the market is running hot and retreat or delay an acquisition during a slowdown.

However, is that the best strategy that property investors should utilise?

Although sentiment suffers during a property market slowdown, there are advantages to building your property portfolio when everyone else wants to sit on their hands and take an ‘I’ll-wait-and-see-what-happens’ approach.

So what are the benefits of buying an investment property in a market slowdown?

  1. Fewer buyers. During a downturn many buyers, including property investors and owner occupiers, retreat from the market and wait for a recovery. Those left in the market wanting to make an acquisition will therefore encounter fewer buyers and less competition.
  2. More choice. When property markets cool, the amount of housing stock available typically increases meaning buyers have more options to choose from and are more likely to find a property better suited to their needs.
  3. Better bang for buck. With fewer buyers in the market and more stock available for sale, sellers have to price their properties more competitively and are more likely to discount their asking price. Buyers have a better chance of securing a property for less or can even purchase a superior property that they otherwise couldn’t have been able to afford in a normal market.
  4. More control over contract negotiations. Given the market is weighed in buyer’s favour, buyers have more control over contract negotiations, whether that be for negotiating more favourable settlement periods, rent-back periods with owner-occupiers or early-entry clauses, among others.

While it’s easy to become disheartened when residential property markets slow, there are definite advantages to buying property in a downturn.

Regardless of market conditions, though, investors need to take a long-term view with their investment decisions, keep property investment fundamentals at the fore and buy when they are ready, rather than trying to time the market.