The slowing of Australian residential property markets, triggered mainly by tighter lending criteria, now calls for a more flexible approach to the terms on which property is sold.
Uncertainty is a key factor in dissuading vendors and purchasers of property from making good lifestyle decisions and now the biggest of the uncertainties is the time it will take to either buy or sell a property in the current real estate climate.
Throughout the property boom we have recently experienced, sellers of property had little concern about bidding for a new home before they sold their own, knowing that there were plenty of buyers for their current home and that even if they didn’t sell in the usual time frame, bridging finance would be readily available at low cost.
This is no longer the case. Quality property is still selling well…but not all property. Some property is taking longer to sell and vendor expectations have needed to be adjusted to reflect the changed conditions. Bridging finance has become more difficult to obtain.
And so we are now seeing a very different environment….
Sellers have become more reluctant to buy before they sell in a market where there are fewer buyers for their current home. They are also concerned that if they sell before they buy, they may not find a suitable property to move into within a reasonable time frame.
Buyers have become more reluctant to purchase prior to selling when there is uncertainty on how much their current home is actually worth, how long it well take to sell their home at a reasonable price, and fearing that bridging finance may not be available to them.
The common denominator in all of this is “time”. If buyers and sellers had more time to satisfy their transactional needs, more property would become available, more buyers would re-enter the residential property market and therefore more property transactions would result.
The simple solution is for vendors to offer longer settlement periods than the 60/90/120 days to which we are accustomed. A settlement offered at 6 months from the date of sale, with the right of the parties to settle earlier if mutually agreed, would significantly alleviate the pressures we are now experiencing. Vendors would have more time to source their next property after they have sold and purchasers would have more time to sell their homes once they have purchased. With these pressures reduced, people’s needs could be better met.
Last weekend Bidpro purchased a property in Kew on behalf of a client and negotiated a 5 months settlement to enable the purchasers to organise the sale of their current home. The vendors had not yet purchased a home as they had no certainty in relation to achieving a sale on the day, no certainty on the price they would achieve and no certainty of a likely settlement date. The longer term settlement in this instance is a clear “win-win” as it now enables both parties to achieve their objectives with greater certainty, in a timely manner and without the risk of making hasty decisions.
We believe that even in stronger market conditions, longer settlements will become a more accepted practice. They will be especially relevant to the downsizer/retiree market where vendors are selling their family home to move to something smaller such as an apartment that may not be ready for occupation for some time. Longer settlement periods can often be the difference between making the right move and not moving at all. They can also avoid having to make two moves…and no-one really wants to do that.
If you need “time”, never be afraid to ask for it.