Understanding Buyer Motivation
There’s more to buying strategy than the old real estate clichés of ‘buying the worst house on the best street’ and ‘location, location, location’. When purchasing a home, prospective buyers employ a variety of motivations that go well beyond location, price point and that ‘million-dollar view’ touted by the agent. Whether you’re a vendor hoping to achieve a stellar price – or a purchaser wanting to invest in the best possible asset – it’s important to understand the impact of individual motivation when transacting property. In the latest Murphy Jacobs Property Advocates blog, Director Paul Murphy unpacks buyer motivation and why (when it comes to the real estate market) buying with logic should always overrule emotion.
Emotion vs Logic
It’s easy to fall head over heels for a property. For first-home buyers, a home is a place to raise a family, feel at ease and create memories. In 2013, The Commonwealth Bank of Australia conducted a survey to reveal 44% of Australian buyers paid more for a property simply because they ‘liked it.’ That’s a big premium for a little nostalgia! When it comes to investing, letting your emotions dictate your decision to purchase can ultimately impact negatively on your budget, long-term investment goals and future market position. It’s important to elect to purchase property based on fair market gain rather than warm and fuzzy feelings about walk-in wardrobe or water features. When it comes to the property market, there is an appropriate price to pay for any home based on your budget, goals, demand and potential. It’s when buyers bid with their emotions that things can swiftly go awry.
Investors Vs Owner Occupiers
Owner occupiers’ dominant motivation is to win the day and win the home. They are directly influenced by concern surrounding lack of supply, and often can’t bear to ‘lose’ again at auction. They are buying a place to make their own and to call home. If this sounds like you, take a step back from Vogue Living and Pinterest and consider your position. Whether you’re an investment buyer or an owner-occupier, acquiring property should always be based on a foundation of analysis and accurate historic data. Before you get carried away with a floorplan, it’s important to ask yourself questions like, “Will it attract tenants – and if so, what kind of tenants?” and “Will it enjoy capital growth in the long term?”.
Timing also plays a critical role in how and when buyers decide to seal the deal. For first-time buyers, acting impulsively or being overly cautious can jeopardise their purchase. As for investors, trying to ‘time the market’ can result in decelerating an investment’s return, or failing to invest in quality real estate. If you are a speculative investor, it is best to look to a property advocate when acquiring real estate – helping you to buy well, sell in peak and reap your reward.
Buying A Lifestyle
Sometimes the motivation to purchase goes beyond the home itself – it’s about buying a lifestyle. For a buyer who values for an active lifestyle, a home near the beach, golf course or tennis court could be ideal. For families, a house located in a desirable school zone could be a prize. Other buyer motivations can relate to upsizing, downsizing, relocating for work or moving to be closer to their parents and family. While such factors can be mightily motivating in the moment, it still doesn’t let buyers off the hook when it comes to market knowledge. Historic and current data, resale value and long-term investment goals must be considered. Before signing on the dotted line, consult with an advocate to ensure your acquisition will be a successful one.
Whether you’re buying your first investment or adding to a robust portfolio, separating emotion from logic is an important part of good decision making. Our experienced advocates know how to navigate the most complex of markets, giving you the best chance of success. Ready to invest? Contact Director Paul Murphy from Murphy Jacobs Property Advocates today.