An interesting phenomenon within our capital city markets is for property prices to increase every January.
I call this reoccuring price pump the January effect and it can be explained by a combination of buyer and seller psychology, and the relatively lower supply.
Buyer Psychology Revitalises Demand
The start of the year is a time for new beginnings, and this often includes making major life decisions such as buying a home or investment property. People return from holiday to their routines with renewed vigor and fresh aspirations, which often include property ownership goals.
Additionally, for families with children, the need or desire to settle into a new home in preparation for the new school year can play a part.
It helps that many prospective buyers are on a reduced work schedule and have the time to search online, make enquiries, and attend open homes.
It also helps that the weather is fine, with sunny days increasing a property’s appeal, and making open home attendances more pleasant.
Supply Is Lower
Many sales agents, loan assessors, solicitors and building inspectors tend to take vacation from late December into January, so the consensus is there’s no harm holding back new property listings until the middle of the month. The resulting scarcity of stock is perfectly timed to meet the spike in buyer demand.
Sell Side Psychology = Confidence ++
Like the buyer, sellers and sales agents are fresh from a holiday and full of optimism for the year ahead. This is further buoyed when their January listings are positively received. Open homes have strong attendances and buyers appear enthusiastic and genuine, so sales agents and sellers develop confidence. Price expectation increases, auction reserves are set higher, the motivation to negotiate or discount recedes.
Strong open home attendances and this seller confidence are a feedback loop leaving the unwitting buyer with the impression that the market is running hot, which, coupled with the increased competition, creates a bump in prices- ‘The January Effect’.
Outsmart The January Effect
Now I’ve got a few tips to outsmart The January Effect, and you’re ahead of the game just by being aware it happens.
Beyond that, be up date with price data in your buy area and commit to not paying above the average price per square metre- at least not in January.
It also pays to keep a close eye on listings because the addition of even one or two competing properties can take the puff out of a January sales campaign and present an opportunity to negotiate a lower price.
Most of all you want to maintain good communication with the sales agents. The experienced operators know all about the January effect and they want to identify and deal with the serious buyers who will still be in the game when February rolls around.
Be aware, be informed, don’t rush!
If this is your year to buy and you want to save money, time, and stress, I can help. Please get in touch.