To buy or not to buy, that is the question.

So, the market is positively boiling and you don’t want to overpay for a property that is going to drop in value once official interest rates hit 7.5% or 8%? So, you decide to sit on your hands and wait until the market drops.

Right strategy? Or costly mistake?

The answer is, like everything in property, not straightforward.

Firstly, the decision to wait really hangs on the timing of the next market slow down. We all know it will happen, but when? Many economists are suggesting that we will experience strong growth for the rest of 2010. If this is the case, then there is no point waiting for prices to gain another 10%+ before easing off a little – get in the market now and enjoy some capital growth!

Or, if the Reserve Bank does decide to rapidly increase interest rates sooner rather than later (though some macro environmental forces seem to be keeping the brakes on its plan to return rates to “normal” levels) , those who buy now may find that they have bought at the peak.

An essential component to this decision making process has to be your time frame. If you are looking to buy a property and renovate for a quick turn-around, then riding the property cycle is extremely risky – but get it right and it could be very profitable. If you are buying an investment for the long term, then as long as you are careful that you buy a quality property and do not get caught up in the current buying frenzy, you should be able to ride out future peaks and troughs in both the sales and the rental markets (assuming of course that you have not borrowed up to the hilt).

Lastly, if you are buying your “20 year home” you might find that suitable properties are few and far between. Your decision whether or not to buy really depends on when you find the right property. If that is now, then pull out all stops and go for it – depending on what you are looking for and where, another may not come up for another 6 or 12 months!

For more information on buying property in Sydney go to www.gooddeeds.com.au.

When not to compete for a property.

Last weekend I saw an auction for a property on a busy road. I was astounded not only at the amount of bidders for this property, but at the crowd of onlookers that the auction attracted. This level of interest from actual buyers and sticky-beaks alike is completely symptomatic of the current strong property market. In a “normal” market or, god forbid, a down market, this auction would be lucky to attract more than one bidder let alone many spectators. During market down times in years gone by we have seen numerous auctions where the selling agent, the vendor, the auctioneer and if they were lucky, one buyer were in attendance.

So, why are people suddenly competing for property on busy roads? Some reasons include a lack of quality stock, fear of being priced out of the market and a general sense of panic amongst buyers. We are also seeing inflated prices being paid for unrenovated properties for the same reasons.

This property sold for $100K over what the agents were quoting. If you are going to compete for a property, make sure that it is a property that will also be desirable to buyers when the market returns to “normal”. Let’s face it, if you are going to pay a premium, you may as well ensure you pay it for a good property, not a bad one.

For more information on buying property in Sydney go to www.gooddeeds.com.au.

Why you can’t rely on property statistics

Anybody who speaks to me about property trends will know that I am very skeptical about the value of statistics when it comes to the Sydney property market.

The main reason for this is that Sydney is NOT a homogenous market and even within suburbs there is a great deal of variability between properties. At best they can provide a starting point for research, however they are prone to mislead the unwary.

Some examples:
• A few years ago Birchgrove registered a 20% drop in values purely because there were no waterfront sales that year. Non waterfronts definitely increased in value and if these properties were analyzed separately I am sure the actual results would have been closer to showing something like a 12% growth.
• Annandale has recently registered a larger than actual increase in median house price due to an unusually high one-off sale over $5M. We recently had a client who had stopped looking in this suburb because they felt they had been priced out of the suburb due to this rapid “growth” in prices. When we showed them actual sales results they could see that Annandale was actually tracking the same as surrounding suburbs.
• Drummoyne units range in value from around $450K for unrenovated red brick 3 storey walk-ups to over $2M for waterfront eastside apartments with Harbour Bridge views - the rental yields at the lower end are vastly superior to those at the higher end, yet they are all bundled into the same statistics for units. Investors may miss out on great opportunities if they rely on yield statistics for this suburb.
• The Alexandria median unit price showed a large jump about a year ago – driven by the completion of large new apartment complexes, not by actual price increases.
• The median house price for Sydney showed an increase last year which was fuelled by first home buyers. Yet, when you break the figures down, the lower end of the market showed a much greater increase than the upper end of the market. So the impact of the first home buyer influx was far greater at their end of the market than the statistics revealed.

The moral of this story? Research into the property market requires much more than devouring statistics and buying suburb reports. You need to understand the individual dynamics of each suburb and area if you are to be confident in making a wise purchase.

For more information on buying property in Sydney go to www.gooddeeds.com.au.