The buying & selling in the same market myth.

You often hear it said that you can’t go wrong buying and selling in the same market. But is this true? If you think about it, it can only be true if you are buying and selling in the same price bracket and the same suburb.

Of course you can’t always be in control of the timing when it comes to your need for a home. But in reality, there are a couple of “ideal” principles when buying and selling.

1. Upgrade in a falling market. As prices fall, the gap between the price of your old smaller home and your new larger home will narrow. In a rising market, the gap widens – and you have to fund this gap.

2. Downgrade in a rising market. Likewise, the gap between the price of your redundant family home and your new empty nest will narrow in a falling market – so to maximize your retirement funds you want to buy and sell when your large home is worth its maximum.

It is rare to actually manage a simultaneous transaction – there is usually some lag between the sale and purchase. Be careful that you don’t get caught out in a volatile market. For instance if you buy when the market is rising and the market falls overnight (such as what happened with the GFC in September 2008), then you get caught when you go to sell. Of course, this can work in your favour if the opposite occurs. Riding the property wave is truly a fine art… with more than a bit of luck mixed in.

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

Units versus townhouses – which is best to buy?

In some areas you can find townhouses and units selling for similar prices. Assuming all things are equal (size and dollar wise), I would nearly always err towards the townhouse.

There are less of them around and the complexes are often smaller, so capital growth will probably be better. In addition, a townhouse usually has more outdoor space than a unit. Often the strata levies are considerably lower as smaller complexes generally have less common areas and no expensive facilities like pools and gyms.

Of course, if it is a view you are after, you have a better chance of finding one in a multi-story apartment complex than a townhouse.

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

What opportunities does a slowing market offer buyers?

We are starting to see increased media accounts of slowing housing price growth, falling auction clearance rates and lower borrowing figures. Call me a cynic, but I often see these stories before we see any evidence at “ground level” of a slowing market. However, they often end up being self-fulfilling prophesies. As buyers start to read more negative property stories, they begin to believe them. Add this to a healthy dose of wishful thinking (haven’t we all been wanting prices to drop?) and we begin to see caution creeping into the market.

What happens when buyers are cautious? Usually the first thing we see is a fall in auction clearance rates. People suddenly no longer want to compete for property. We hear the phrase “we’ll just wait and see what happens.” Instead of deciding what they are prepared to pay (then bidding over their limit), the punters wait to see what price the vendor wants and then decide whether that represents value or not. So, if you are the only buyer prepared to bid at an auction, the power is actually in your hands to negotiate a good deal.

If a property is passed in at auction then advertised at a reasonable price, you can still see competition as buyers will react to a well-priced property. However, if it is perceived as being over-priced, buyers will not make offers. Then the property gets a stigma (there must be something wrong with it). Often these turn out to be great buys after spending a long time languishing on the market.

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

Why would an agent quote one price to me and something else to another buyer for the same property?

The language of real estate is ambiguous. This is due mainly to the fact that every buyer interprets information differently. Agents need to make a judgment call on how you are likely to interpret what they say before they say it.

Confused??

How much do you add on to an agent’s price guide? 10%? $50K? $100K? It is a personal thing and varies greatly from buyer to buyer. Usually the amount you add on is a direct result of your experiences in the property market. The agent doesn’t know how much you are going to add on, so he/she is going to quote the lowest figure they can get away with in order to increase the chance that you will think it is within your budget.

Now for the other buyer. The agent may know them better than you. This buyer may have missed out on another property sold by this agent. Maybe the agent has appraised their home and is familiar with their buying requirements. If there is more trust in their relationship the agent can afford to be more honest, hence a different price guide.

So, what is the solution? If you are not dealing with an agent where you have built up a trust relationship, you need to know your market. Do your own research and make up your own mind on the price.

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

Choose property that out-performs the median growth rate.

Many of our investor clients come to us looking to buy in the next “hot spot”. Many others are looking for proven locations with above average median price growth.

However, even in these “safe” suburbs, buyers can go wrong. In every suburb there are properties that perform above and below the median. The trick when buying property, particularly when the purpose is for investment, is to identify the traits that mean a property will at least match the median growth rate for that area.

Local knowledge is essential. For example, corner blocks may be favoured in one suburb and shunned in another. Or buyers in one suburb can be seduced by the charm of weatherboard cottages, yet in another location they are seen as sub-standard homes.

When buying in a sellers’ market, you will find that almost every property generates some level of competition amongst buyers. When the market cools, the only properties that generate buyer competition will be those that are capable of performing at or over their suburbs median growth rate.

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

Are we there yet?? How to tell if the Sydney property market is finally slowing down.

On Saturday 22nd May there was a double page spread in Domain section of the Sydney Morning Herald devoted to the property market slow down. Interesting, as at the coal face, we are yet to see any significant change in buyer demand in our neck of the woods so it felt a bit strange to read about demand dropping when competition for property is still fierce.

But there are signs that the market may be at its peak, or else it will do so soon. Not the least of these are such media reports that the tide has turned. These sorts of news stories (and there have now been a number of them in the past couple of weeks) will have a direct impact on consumer confidence, which is one of the foundations of a sellers’ market.

And talking about consumer confidence, economists have recently reported a 7% drop, the first in ages.

Certainly auction clearance rates – while still respectably high – have dropped since the highs of March. But to put this in context, we need to remember that we have had record auction listings this month.

Selling agents are starting to tell us that they are getting less people through open houses and that there is a small but perceptible drop in buyer activity (i.e.: offers).

Property analysts are recording reduced price growth in the lower end of the market and the expectation is that this will have a follow-on effect (a reversal of the first home buyer led property boom).

Probably the most telling sign is when buyers start doing silly things. Such as making offers way below agent’s price guides and expecting to get a result. Hat’s off to these buyers for giving it a go, but I think they are a premature with their antics.

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

What does it mean if an agent is quoting $1.3M for an auction property?

If I offer $1.3M will they sell it to me prior to auction?

We have heard this question in numerous forms over the years – so many people get confused by Sydney’s auction price quoting system.

The fact they are quoting around $1.3M really means that they really want more than $1.3M. If the property goes to auction and the best offer they get is $1.3M, they might then sell for that price – but they might not. But for a buyer to buy it prior to auction, they need to make an offer that will entice the vendor to sell before the auction – as all vendors hope to get competition that will give them a price over their reserve. (I am not even going to venture into the area that deals with what price the agent put on their vendor’s agency agreement).

Without having done any pricing research on this property, I would think they’d be thinking at least $1.35M to sell prior to auction. But if there are other interested buyers, this figure can climb. For example, recently we had a client interested in a property that was being quoted as $940K+. I spoke with the agent about an offer and was advised that other buyers had indicated around $1.06M (a big jump, I know, and there were comparable sales to justify this). My clients were very keen on this house and decided to offer just over $1.1M. This would have bought it, had there not been at least three other buyers prepared to pay similar money. In the end, we secured it for $1.125M – and believe it or not, there were two other buyers then prepared to pay more!!

I hope this makes sense? It doesn’t make sense to me half the time…

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