The Growing Challenge of Missing Out on Property

I was recently asked the following question:

” I’m keen to know your thoughts on whether it is access to finance or unaffordability causing people to lose out on property? “

My Answer:

Neither access to finance nor unaffordability alone is the primary cause of people losing out on property. A significant factor is buyers paying over and above market values, which inflates property prices and skews the market. This trend has several implications:

1. Market Distortion: When buyers consistently pay more than the market value, it creates an artificial inflation of property prices. This distortion makes it difficult to establish a true market value, leading to overvalued properties.

2. Increased Competition: Overpaying can fuel a competitive environment where buyers feel pressured to offer more to secure a property, further driving up prices and creating a cycle that excludes many potential buyers.

3. Affordability Crisis: As prices rise due to overbidding, properties become less affordable for average buyers, particularly first-time homebuyers and those with limited budgets. This exacerbates the affordability crisis and widens the gap between those who can and cannot afford to buy.

4. Financing Challenges: Higher property prices mean that buyers need larger loans, which can be challenging to obtain. Lenders may be hesitant to finance properties that are overvalued, leading to stricter lending criteria and making it harder for buyers to secure financing.

5. Economic Impact: Overpaying for properties can lead to a bubble, where prices are unsustainable in the long term. If the market corrects, those who bought at inflated prices may find themselves with properties worth less than their purchase price, potentially leading to financial instability and increased default rates.

As a buyer’s agent, we buy property every day and it’s crucial to advise clients on the importance of thorough market research and valuation. Encouraging buyers, especially those who come to us saying that they keep missing out on property, to make informed decisions based on market data, rather than emotional bidding, can help maintain a balanced and sustainable property market.