There is a national event that occurs roughly every three years which seems to stop property stakeholders in their tracks. This event is the Federal Election.
Despite our relatively stable democratic political system, vendors and purchasers seem subdued into purchase paralysis whenever a polling date is announced as market activity slows noticeably during an election campaign.
I have been in business during several election cycles and what I have learned is that in spite of a slowdown, elections can deliver prime opportunities to those buyers willing to stand by the strength of their property convictions.
Let me tell you about a great example from our last Federal Election which illustrates this point.
Case Study – A Winning Pre-Election Buy
Approaching the May 2019 Federal Election, the Australian Labor Party, led by Bill Shorten, was in a seemingly strong position. The governing Liberal-National Coalition, with Scott Morrison as Prime Minister and leader, looked to be in all sorts of strife in the polls.
So certain was Labor of victory that on the eve of the election Chris Bowen published a now infamous photo on social media of himself, Tanya Plibersek, Bill Shorten, Jim Chalmers and Penny Wong in Mr. Shorten’s office with the caption “We’re ready”.
It was during this campaign that I had some clients, Damian and Sarah who were looking to buy a property for their growing family in the inner city.
I found Damian and Sarah an excellent option. It was a 1980s-era solid brick home providing three-bedrooms, two bathrooms and single-garage accommodation on a rare 300 square metre site in Newtown. Dated, the property only needed a cosmetic renovation to transform into a modern family home.
The vendors were an older couple who had recently bought on the South Coast and were keen to downsize. As the election approached, so did the settlement date on their new home.
The sellers were not keen on an auction process, instead opting for a private treaty sale with an asking price of $2.3 million. But there appeared to be little interest. Demand had dried up with few people willing to purchase. Buyers feared a Labor government would implement anti-property owner legislation such as changes to negative gearing and land tax.
In fact, Domain published an article at the time which showed Australian property sale numbers reached a two-decade low in the lead up to the 2019 Federal Election.
But unlike other buyers, Damian and Sarah had no qualms. They were happy to buy even as others were frozen with doubts. I was confident of being able to negotiate a purchase nowhere near the asking price – which, by the way, had begun to steadily drop as the seller’s settlement date loomed ever nearer and desperation set in.
“If I could secure a purchase price closer to the $1.9m mark, would you be keen?” I asked my clients. “Hell yeah!” Damian and Sarah told me.
Cue my negotiations and just days before polling day, I organised Damian and Sarah to sign a contract to buy the home for just $1.83 million!
But here is the sting in the tail for the sellers – Labor did not win that election. The Coalition was voted back in. And as for that property? The next week following the election, a property on a similar sized block in inferior condition and with no parking sold in the same part of Newtown for $2.3 million!
Damian and Sarah effectively made at least $500,000 by buying in a market when no one else would.
Lessons from Elections Past
What can be learned from this story?
Firstly, my clients demonstrated a strength of conviction. They listened to my advice knowing how much they were willing to pay and that they were the only serious contender. They also knew that the sellers were under increasing pressure. They acted boldly on that conviction despite what everyone else thought at the time. Other buyers saw the purchase as a gamble because they believed once Labor was in power, the property market would collapse under the weight of anti-owner legislation and taxation.
Secondly, my clients considered the long game. The property was a good quality purchase in a blue chip location with excellent long-term upside. So, the best time to buy was when all others were fearful. We knew the home would ride out any downturn.
Thirdly, this case study underscores the fact that there is no such thing as a ‘certain win’ in politics. Damian and Sarah were happy to take the chance to buy well knowing that one thing is more certain than a Labor or Coalition win at the next election and that is rising Sydney property prices.
Some might argue this year’s election is different.
Labor has learned a few things from their last loss and is staying away from announcing major policy changes when it comes to property ownership. There has been no mention of changes to negative gearing by Anthony Albanese as Labor perhaps now recognises the aspirations of working-class Aussies who want the chance to invest in real estate.
The biggest lesson for all property buyers is to keep your focus. Do not become distracted by the election or by anything else for that matter because while everyone else is waiting for a result or an outcome before they act, you could be snapping up a bargain in the meantime.
If you want proof, just ask my clients Damian and Sarah.