Understanding Buyer Hesitation

Why are buyers slow to enter? It is mostly a story of "the wrong kind of supply." The market has too many investment-grade units built during the real estate bubble of the 2010s. Most of these high-density apartments were targeted at investors, so most first-time buyers saw them as inappropriate for their use.

Along with that, fears of apartment construction defects have muddled buyer decisions. Examples like Mascot Towers and Opal Tower have shaken the minds of many potential buyers from entering this market. Many are worried they might end up buying properties with hidden flaws, which may go on to incur heavy losses in the future.

A Closer Look at Market Trends

While in unit markets Melbourne is growing slowly, there are 51 of 65 unit markets suffering in Sydney, according to CoreLogic, that threatens the buyer aspiring to purchase in the region. The median unit price in Epping has dramatically declined; the average unit price here stands at just shy of $800,000, down 18.4% from its peak value recorded back in 2017.

The Legacy of the Booming Investment from 2010

This landscape of post-boom 2010 investment means that far more investment properties have been left to oversaturate the market. This boom fuelled dramatic increases in financing housing loans to investors, peaking in 2015 when investor loans delivered 46 percent of new home financing. This oversaturation has translated into an overcapacity of apartments, particularly in central and middle-ring districts of Sydney and Melbourne.

However, as demand from investors decreased – specifically with the advent of interest-only loan limits in 2017 – many of these units became far less appealing to prospective owner-occupiers. High-density units that have flooded the supply are not suited to the needs of buyers today. What is available has a gap between it and what is wanted.

Indications of Revival

Not all unit markets are in stasis. Indeed, some have begun to reveal signs of recovery, and may offer scope for opportunistic investment. For example, the value of property has risen by 11.9% at Tallawong over the last year, mainly due to the introduction of the North-West Metro line, which has improved access and amenity in the region.

Throughout the forecast period, locations such as Punchbowl, Lakemba and Parkville are going to maintain median unit prices under $600,000. However, these areas have an opportunity for first-home buyers or investors who want to take up the entry points at lower prices in the market.

Prospects in Undervalued Markets

Now, with this recent context, certain investment strategies will be able to assist an investor in purchasing into an undervalued market. The regional play and what to focus your efforts on, will have a lot to do with the total return you will get on your investment.

Research Growing Locations:

Land that is going through development or is being developed can be very valuable. For instance, the addition of more public transport can flip the entire character of a location and spur the property value in that location drastically.

You should understand the buyer's sentiment: This helps by exposing features to look for in the properties, such as sustainable living and energy-efficient homes. Consider the market's sentiment: If a market has outstanding concerns about, say, environmental degradation, then features such as sustainable living and energy-efficient homes will attract most of the potential buyers. Engage local experts:

Use local agents/mortgage brokers who know the heartbeat of the market. 

They can feed you information on which areas are growing and the kinds of property in demand.

Assess attributes of property

Properties in areas friendly to the owner-occupier. Units with two or more bedrooms, outdoor space, or walking distance to the location of local schools and parks that most families or permanent residents look for.

Financial Expense

Buying real estate is a huge financial move that stands to be overwhelming for a person; there are so many financing options. It's advisable to take into account the financial situations before taking the plunge and making the purchase.

Loan alternatives

1. Fixed or Variable Rate:  Choose which you wish to go for, fixed or variable, and explain why. Both have advantages and disadvantages both from the perspective of your financial situation and from the viewpoint of the market conditions.
2. First Home Owner Grants: If you are a first time buyer, also seek to know if you qualify for government grants and other types of assistance. These can greatly affect your purchasing ability.
3. Investment Strategy: Ask yourself if you are buying something to live in or as an investment. You might be looking at negative gearing or a positive cash flow property for that matter.

Converting Apprehension into Opportunity with OM Financials

Are you looking at investing in the unit market but not sure if this is the right time? Do not be too concerned; many are restrained as they continue to sit and wait since the units do not sell for much higher than what they realised at their 2010 highs. Yet this may perhaps be your best chance to come across a property being sold cheaply-if, that is, you are well-informed.

Having the experience of OM Financials, you are supported by great professional mortgage brokers for guidance through the unit market's complexities. We help you navigate the current dynamics of the market, find the best financing opportunities available, and other challenges that come with the effort of purchasing in locations impacted by past investment trends.

Act Now

It is not a good time to hold back and wait for the market conditions. Whether you are an investor or a first-time buyer, now is the time. Contact OM Financials today to discover how you can seize opportunities in this undervalued unit market.

Click the know More ,Book your discovery call now to begin your journey to informed homeownership and financial success!