The property market is falling – where is the opportunity for investors?
Falling property prices can make investors nervous. After all, why buy today if prices might be lower tomorrow?
But property downturns don’t last forever. And history suggests that periods of falling prices can create opportunities for investors who are prepared to look beyond short-term market movements.
There were 269,717 residential properties listed for sale across Australia in August, 12.8% more than a year earlier. Distressed listings were also up 10% year-on-year to 4,510 properties.
That means investors currently have more properties to choose from, while some vendors may be increasingly motivated to negotiate.
Today’s downturn needs some perspective
It is impossible to know exactly when the market will bottom or how far prices will fall. But previous downturns show why it can be risky to assume falling prices will continue indefinitely.
In 2022, several major banks forecast national property price falls of between 15% and 25%. Instead, values declined 7.5% from peak to trough before rebounding 8.1% and reaching a then-record high by late 2023.
There are also reasons the current downturn may prove less severe than some investors fear.
Australia continues to face a persistent housing undersupply, while the cost of building new homes is now 51% higher than at the end of 2019. Both factors could limit how far prices fall this cycle.
That doesn’t mean prices are about to rebound tomorrow. But it does mean today’s weaker conditions need to be viewed in the context of Australia’s longer-term housing shortage and the way property markets have recovered from previous downturns.
So where is the opportunity?
If prices eventually recover, softer conditions can give investors an opportunity to buy while competition is lower.
Higher listings give buyers more scope to compare properties and walk away from those that don’t stack up. Rising distressed listings may also create situations where vendors are particularly motivated to sell, giving investors greater negotiating power.
In some markets, falling purchase prices may also improve rental yields, particularly where rents remain strong.
The opportunity, then, isn’t simply to buy because something has become cheaper. It is to use a period of weaker sentiment to secure a quality property on terms that may be harder to achieve once buyer competition strengthens again.
The property still has to stack up
Of course, a falling market doesn’t turn every property into a good investment.
A discounted property with weak rental demand, limited scarcity or poor long-term growth prospects can remain a poor investment even if the purchase price looks attractive.
That is why underlying asset quality and structural demand still matter.
For investors who take a long-term view, the question isn’t simply whether prices could fall further. It’s whether today’s market is creating an opportunity to secure the right property at a better price before conditions eventually change again.
At Investors Dream, we help investors navigate changing property markets by sourcing and securing high-quality investment properties across Australia with strong capital growth potential and rental yields. Our research-led approach helps time-poor investors make decisions based on long-term property fundamentals rather than short-term market sentiment.