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From data to decisions: How buyers can beat analysis paralysis
Investors and first-time buyers can often be overwhelmed by property information and unsure where to start. Here is the key data they should focus on.
Sitting in the First Property Buyer Show, Smash Property’s Nick Voegt shared the key data that property buyers or investors should consider, ensuring they’re well-informed to make the best decision possible.
Drawing on his experience, Voegt shared his top advice for interpreting crucial data and cutting through information overload when buying property.
Analysis paralysis
According to Voegt, one common issue buyers experience when navigating information is “analysis paralysis”, where they become overwhelmed by the data and options available to them.
“I spent probably literally a good couple of years trying to figure out what I was actually going to do, and what property I’ll buy,” Voegt said.
“During the time it took me to decide, I watched the market slowly start to just creep away from me every year that I was waiting.”
He said that while there is a lot of information to learn from, buyers can overwhelm themselves quickly with a multitude of different options.
“The trick is picking a path and sticking with it rather than trying to shift through the journey the whole time,” Voegt said.
“I ended up just getting so overwhelmed with all the different views on what to do with property from all the experts out there.”
Annual growth rates
Voegt also outlined the key factors that buyers need to consider before making a decision, including growth rates, sales volume, and vendor discounting.
While the annual growth rates are important for buyers to consider, they should also examine the underlying market conditions that led to them.
“A lot of people might look at an area and go, ‘hey, this has got 9 per cent growth. This is a great area to invest [in],’” he said.
“But we need to understand when that growth actually occurred. Has it occurred recently, or has it occurred maybe 10 years ago?”
On the other hand, Voegt said that a suburb with only 3 per cent growth might be overlooked.
Similarly, if suburbs have been stagnant for an extended period, they may be primed for growth.
“So that’s probably a rookie area that I fell into, which is just trying to find a suburb with the highest growth rate and let’s go and invest there,” he said.
Sales volume
In addition to growth, Voegt said buyers need to consider the sales volume, as this figure provides insight into the market’s momentum.
“So, for example, you might have sales volume that has started to decline. Now, obviously, that would mean that the market is starting to cool down a little bit.
“Or you might find that area that has the 3 per cent growth, but the sales volume is starting to pick up month on month. That would indicate that the market is starting to pick up,” he said.
Voegt said that as sales volume increases, demand for the area will also start to rise, thereby affecting property prices.
Vendor discounting
Furthermore, vendor discounting is a significant factor, as it indicates that there is little to no demand for the property.
“So they’re going to have to adjust their price in order to actually move the property, whereas if they don’t have to, or [are] selling over asking, it’s a good indication of a pretty hot market with a lot of demand,” he said.
“So that’s a couple of things that the buyers can look at – not just the growth, but how to actually analyse and what to look at within the market to tell you if it’s a good market or not.”
Know your numbers
Additionally, Voegt cautioned buyers against borrowing more than they can afford, advising them to be firm with their budget and know their numbers.
“Everyone talks about what your finances really look like, what can you sustainably afford to borrow? Not just what the banks will tell you, but what are you comfortable with?” he said.
“That will dictate the market you go into, and it will dictate the price that you’re willing to pay for something.”
Similarly, when it comes to bidding wars with others, buyers should avoid getting caught up in the heat of the market.
He said that buyers should know their price point and be able to withdraw from the bidding once they’ve reached their limit.
“Don’t be afraid to walk away when it gets too much and go to another one because there are lots of other properties out there for you,” Voegt said.
“What’s the number that you walk away at? What are you comfortable with? Maybe you do need to spend a little bit more.
“What’s your buffer really look like if you need to do that? If you were to acquire the property, what would be the lifestyle impact? What’s the mortgage repayment going to be, and are you comfortable paying those?” he said.
Listen to the full episode here.
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