When property prices fall, it’s easy to get distracted by the size of the discount.

A suburb is down 10%. A property is asking substantially less than it might have sold for a year ago. It looks cheap.

But that doesn’t tell you whether it’s actually good value.

The first thing I’d want to know is why the price has fallen.

Is there too much stock? Has buyer demand genuinely weakened? Is that type of property oversupplied?

Or is it a good property in a tightly held, desirable suburb where broader uncertainty has simply taken some buyers out of the market?

Those are very different situations.

And right now, I think that distinction matters far more than simply looking for the suburbs where prices have fallen the most.

What’s actually happening behind the numbers?

We spent quite a bit of time looking at this at a recent gathering of our mentoring program members.

One of the interesting patterns was that new listings were beginning to fall, while total listings were rising.

It sounds contradictory, but it makes sense when you look at what sellers are actually doing.

Owners who don’t need to sell can decide not to list at all – or withdraw their property if they can’t achieve the price they want.

Meanwhile, properties that are already on the market are taking longer to sell. Vendors who have committed themselves to selling have to stay there – and at some point, some of them need to reconsider their expectations. 

The latest data reinforces that picture.

Cotality’s September figures show total listings are 18.1% higher than a year ago, while the median time required to sell has stretched from 28 days to 39 days. Vendor discounting across the capital cities has widened to 4.2%, its highest level since January 2023, while capital-city sales volumes were down 5.2% over the year to August.

Clearly, buyers have more room to negotiate in many parts of the market.

But that still doesn’t tell you what you should buy.

The suburb itself may not be the problem

This is where broad market headlines can become misleading.

You don’t buy “the Australian property market”.

You don’t even buy “the Melbourne market” or “the Sydney market”.

You buy one particular property in one particular suburb.

Think about a tightly held, desirable, owner-occupier suburb where good properties are normally difficult to buy.

Confidence weakens. Prices soften. Fewer buyers are prepared to act.

If you own a good property there but don’t particularly need to sell, what are you likely to do?

You wait.

That property doesn’t come onto the market – or you withdraw it and try again later.

If enough discretionary sellers do the same thing, available supply can actually become tighter.

We were already seeing signs of this dynamic in desirable, owner-occupier-dominated suburbs where listings were relatively scarce. Reduced stock can help support those markets and potentially allow them to find a new equilibrium earlier than suburbs carrying a lot more competing supply.

But not every seller has the luxury of waiting.

And that’s where it gets interesting.

What if the vendor still needs to sell?

Take another owner in the same suburb.

They’ve committed to selling.

Perhaps they’ve already bought somewhere else. Their circumstances may have changed. Or they simply have a deadline they need to meet.

The broader market is softer.

There are fewer buyers competing.

But the property itself hasn’t suddenly become undesirable.

Neither has the suburb.

Now you have an unusual combination:

• a desirable, supply-constrained suburb;
• a type of property people genuinely want;
• fewer competing buyers than you would normally face;
• and a vendor who has a real reason to transact.

That is very different from buying into a fundamentally weak market simply because the price has fallen.

We described this to our members as a market imperfection: a temporary mismatch where properties in normally difficult-to-buy suburbs can become more negotiable because broader uncertainty has changed the behaviour of both buyers and sellers.

That’s the situation I’d rather investigate.

The biggest discount can still be the worse deal

Consider two properties.

Property A has fallen 15%.

There are plenty of similar properties for sale nearby. Buyers have lots of alternatives. Selling times are long. Nothing about the property or location is particularly scarce.

Property B hasn’t fallen nearly as much.

But it’s in a tightly held suburb where comparable homes rarely come onto the market. Most owners who don’t need to sell are sitting tight.

One vendor isn’t.

They need a result.

Which is the better deal?

You simply can’t answer that from the percentage fall.

A large fall tells you what happened to the price. It doesn’t tell you why it happened.

And the why matters.

Structural weakness or temporary weakness?

This is the distinction I think investors need to pay attention to.

Structural weakness would concern me.

It might mean too much supply, genuinely weaker demand, the wrong property type or some other issue that won’t simply disappear when sentiment improves.

Temporary weakness can be very different.

The reasons people want to own property in that suburb may still be intact.

Scarcity may still be real.

But buyer hesitation and an individual seller’s circumstances have temporarily shifted the negotiating balance.

That doesn’t automatically make the property a bargain.

It means it may be worth a closer look.

What would I want to know?

Before interpreting any falling price as an opportunity, I’d want answers to some fairly basic questions:

• Is the suburb genuinely desirable and supply constrained?
• Is this particular type of property scarce?
• Are owners who don’t need to sell holding off rather than flooding the market?
• Why is this particular vendor selling?
• How long has the property been on the market?
• What do recent comparable sales tell me it is realistically worth today?
• Can I negotiate enough margin or favourable terms to make the deal attractive without relying on a strong market rebound?

That last question matters.

I don’t want a mediocre deal that only works if the market comes roaring back.

I want to know where the value comes from before I buy.

Scarcity matters even more when you’re creating value

The same thinking applies if you’re renovating, subdividing or developing.

If you’re going to create something and eventually bring it back to market, you need confidence that buyers will actually want the finished product.

We discussed scarcity as an important form of risk management for exactly this reason: choosing areas and property types where the end product remains difficult to replace, and where its value can still be supported by recent comparable sales. 

If you’re producing the same thing as dozens of other sellers, a cheaper purchase price doesn’t solve that problem.

Don’t confuse “cheaper” with “better”

That’s really the point.

Falling prices can expose opportunities.

They can also expose weaknesses that were easier to ignore when everything was rising.

So I wouldn’t start with:

Where have prices fallen the most?

I’d start with:

Why has this particular market softened – and are the reasons I wanted to own there in the first place still intact?

Then I’d look at the individual property.

The vendor.

The price.

The terms.

And whether the numbers make sense today.

Sometimes I’d rather be looking at a suburb that’s fallen less.

Because the aim isn’t to buy the biggest discount.

It’s to buy well.