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.

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.

Why use a buyer’s agent?

Of course you can buy property without assistance, but the vendor is represented so why shouldn’t you be?

We can demystify “agent speak” and give you clear guidance.
It’s hard to know what to believe and what not to. Believe it or not, selling agents don’t know when to believe buyers either. We can cut through all this confusion and be your credible source of information.

Give yourself a competitive edge in a sellers’ market.
We know what tactics to use and how to time offers to minimize the risk of competing with other buyers.

We can recognize potential in a property that you can’t.
Buyers these days are used to seeing well presented property and often can’t see a diamond in the rough. Our experience allows us to quickly see opportunities that aren’t obvious – this is where people make money in property.

We can recognize a lemon when you can’t.
We have been involved in buying and selling property though good markets and bad. At the moment, everything is selling, however the market will return to normal and we can help you avoid purchasing a property that would be difficult to sell in a buyers’ market.

Finally, we give you the confidence that your final decision is the right one and that you are paying the right price.

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

Real estate buying stages.

Trying to buy a property in a sellers’ market is no walk in the park. We meet buyers at all stages of the purchase cycle – do you recognize yourself in this list?

1. Optimism – this is fun, you are excited, and nice to selling agents
2. Disappointment – first auction goes 20% over what you thought it would sell for
3. Disbelief – at what people continue to pay
4. Anger – at selling agents for under-quoting, at other buyers for over-paying
5. Resentment – you pack up your toys and stop playing for a while
6. Resignation – that the market is continuing to rise despite your lack of participation, you still want to buy after all
7. Desperation – you try to talk yourself into anything just to get into the property ladder and get your Saturdays (and sanity) back
8. Wisdom – learn from your mistakes and/or get expert help!

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

Is the Sydney property market about to turn?

Frustrated buyers are waiting for the market to slow down and after this week’s interest rate rise (the 6th since September 2009) we are asking the question – what will be the tipping point?

We are seeing a few indications that the property market may be starting to cool.

• Firstly, an article in last Saturday’s Sydney Morning Herald said that there are a record number of auction listings this month. More listings means that buyers have more choice and more choice usually means less competition, which in turn means lower prices.

• I went to another Westpac briefing yesterday and they are seeing the first stages of a drop in consumer sentiment. If buyers are not confident in their own financial security they will begin to act with more caution.

• Anecdotal evidence from agents selling property in outer areas of Sydney is that things have cooled in the lower price bracket. Since the first home buyer segment lead the current real estate charge it only stands to reason that it should also lead a slow-down.

Having said all this, we are heading into a winter market, where low stock levels traditionally result in heightened buyer demand and continued price growth. So the tipping point may be delayed until spring is upon us.

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

Common mistakes by real estate buyers.

Many of our clients come to us after a string of disastrous attempts to navigate the property market themselves. Here are some examples of common mistakes that we come across.

• Giving the selling agent too much information. Putting you at a disadvantage when negotiating.
• Not giving the selling agent enough information. How many people have missed out on a property because the agent did not know they were interested? The art is in knowing what to say and when.
• Panic in a rising market and buy foolishly. As Louis Christopher said last week, “Remember lemons are very hard to sell in bad markets." But we see plenty of them selling at the moment.
• Panic in a rising market and don’t buy at all. Of course the market will level off at some stage, but how much will prices rise before that happens?
• Keep increasing their offer without a counter-offer from the vendor. This is not the way to negotiate with an unrealistic vendor.
• Leave too much time between getting an offer accepted and being ready to exchange contracts. And leaving the door open for another buyer to snap it up.
• Allow the auctioneer to create a rhythm. Before you know it you have bid over your limit.
• Let the fact that other people are bidding confirm what the property is “worth”. Instead of doing your own research.
• Believe what the agent is quoting for a property. Buyers largely determine what property sells for in this market and there aren’t many that tell the agent what they are prepared to spend.

There are many pitfalls for the unwary and the weary. And it is so easy to get caught up in the general frenzy and lose sight of what represents value for you.

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

When are prices going to drop?

It seems now that most economists agree that the sellers’ market is here to stay for a while – but why and for how long? This week I went to a property briefing presented by Westpac and gained a greater understanding of the economics of real estate.

One key underlying factor in residential property in Australia is consumer confidence. In a consumer sentiment survey conducted by Westpac in January, 80% of respondents said that they thought house prices would rise this year. Bottom line, if you think house prices are going to rise you won’t feel nervous about buying now, but you will feel nervous about prices going up while you take your time hunting for the perfect home.

Why are consumers so confident? Our trusty Westpac economist pointed out the following market drivers:
• Population growth (migrants and babies are on the increase),
• Under-supply of dwellings (housing approvals have been lower than needed to support this population growth since 2004),
• Affordability (according to economic measures, affordability is not an issue in Australia – despite how you feel every month when you make your mortgage payment!),
• Our current stimulatory environment and the Reserve Bank’s reaction to local and international economic forces (the plan is apparently to remove the stimuli - such as emergency interest rate levels – gradually so as not to impact on consumer confidence).

In short, it looks like we are going to see continued property price growth throughout 2010 – at least until we consumers start lacking in confidence…

For more information on the Sydney propertyt market, go to www.gooddeeds.com.au.

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.

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.

Buying off the plan or brand new

When buying a brand new apartment or townhouse the thought of being the first to live in a property can be pretty tempting. But what are the pitfalls?

History is the often the best predictor of future performance when it comes to property values. So it will be hard to gauge which properties and developments are likely to offer the best growth.

Here’s what else you can’t tell with a brand new building:
• Quality of the build (the faults will not have yet revealed themselves)
• Quality of finishes and the way they will wear
• Natural light (unless it is complete)
• Future warranty claims and possible legal battles
• How the building will be accepted/regarded by buyers in the long run
• How tightly held the building will be
• What percentage of apartments the developer will hold onto and whether they will flood the market in 5 years time

You may find you get better value in a nearby building which is only a few years old…

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

Image courtesy of freefoto.com

Property Buyer Prep List

In a competitive market (which it is shaping up to be this year) you need to be ready to act quickly once you see a property that you would like to buy. Get yourself ready to buy in 2010 with this handy checklist.

Deposit

Make sure you have access to enough cash for a minimum 10% deposit and to cover other costs such as stamp duty and legal fees. You may also need to cover mortgage insurance.

Get a cheque book or put the funds into an account which will allow you to transfer large sums of money overnight.

Deposit bonds are an option, however they can be very limiting.

Finance

Get your finance pre-approved and get your lender to put this in writing. An approval in principal is not enough.

Also find out whether you will need a bank valuation before you can exchange contracts.

Legal Advice

Choose a solicitor who specializes in property or a conveyancer before you find a property you like.

Real estate agents can give recommendations or use these links:

The Law Society of NSW http://www.lawsociety.com.au/community/findingalawyer/findalawyersearch/index.htm

Australian Institute of Conveyancers NSW Division
http://aicnsw.com.au/aicnsw_cms

Building & Pest Inspection

If you are purchasing a torrens title property (and even strata in some instances) you will need to get a building and pest inspection.

Ask around (friends and real estate agents) for referrals and keep some numbers handy – you will need to engage them at short notice once you find a property.


If you would like more information on buying property in Sydney go to www.gooddeeds.com.au.

Image courtesy of www.freefoto.com.

Why use a buyer’s agent?

This is a question many people ask, and here are just a few reasons:

Have someone on your side representing your interests.
After all, the vendors have the selling agents looking after them! Using a buyer’s agent is a great way to level the playing field. You wouldn’t represent yourself at court, would you?

We can save you money.
The ways that we can save you money are many and varied. Obviously, we are experienced negotiators and bidders, but we are also able to develop strategies for every property we purchase that minimize competition and therefore lessen the price our clients will need to pay.

Our local knowledge helps you avoid hidden pitfalls.
Many streets or areas are shunned by locals yet appear to be utterly normal to the uninitiated. Because we specialize in Sydney’s Inner West and Inner East, we have developed the knowledge that allows our clients to avoid making costly mistakes when purchasing a property.

For more information on how a buyers agent might help you go to www.gooddeeds.com.au.

A rising market is not the time to upgrade!!

Look at this scenario…

This time last year, you believed your house was worth $700,000. Now, prices in your suburb are reported to have increased by 10%, which makes your home now worth $770,000. You have just had a promotion and are keen to climb the property ladder. The trouble is that your next house, having been worth $1,000,000 a year ago, is now also worth 10% more - $1,100,000*. So, if you upgrade now, you’ll be $30,000 worse off than you would have been last year, plus the extra stamp duty. You will be better off when the market finally slows down…

* assuming you are looking in the same area or one with comparable sales growth.

If you would like more information on buying property in Sydney go to www.gooddeeds.com.au

Image courtesy of Luigi Diamanti http://www.freedigitalphotos.net/images/view_photog.php?photogid=879

A rising market – time to downsize!!

Look at this scenario…

This time last year, you believed your house was worth $2,000,000. Now, prices in your suburb are reported to have gained 10%, which makes your home now worth $2,200,000. You have just decided to retire and take on some consultancy work. The good news is that your next house, which would have fetched $1,000,000 a year ago, is only worth $100K* more than it was back then – now $1,100,000. So, if you downsize now, you’ll be $100,000 better off than you would have been last year and certainly better off than if you wait for interest rate rises to take effect and price growth to slow again. Time to jump!!

* all things being equal, which may not be the case if you are looking in a completely different area.

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

Image courtesy of Michal Marcol http://www.freedigitalphotos.net/images/view_photog.php?photogid=371

Gazumping is legal.

In a competitive market many buyers find themselves either trying to gazump or being gazumped. And with many people, the moral code is that gazumping is fine if you are the one doing the gazumping but unethical if you are the losing party!

If a property you are keen on has already had an offer accepted but contracts have not yet exchanged, then you are free to submit an offer. But it has to be a serious offer designed to entice the vendors to reneg on their previous agreement – don’t just add a couple of thousand dollars to the price.

One of three things are then likely to happen:
1. The vendor decides to honour the original agreement (even at a lower price)
2. The vendor gives the other buyer first right of refusal at the higher price you have offered
3. They accept your offer

If they accept your offer you’d better exchange contracts quickly to avoid being gazumped…

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

Do the opposite of what everybody else is doing – part 2

A common refrain at this time of year from weary buyers is “it’s getting close to Xmas, there’s no good property around, I think I’ll stop looking now and wait till next year.” Yet we encourage you to resist this urge to stop looking for a property at precisely the time so many other buyers are giving up.

There are 4 weeks of new auction campaigns yet to commence. In addition to less competition from other buyers, there will be some pretty motivated vendors who decide to list before Xmas – so don’t give up as some good buying opportunities may arise!

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

Fellas, don’t let the women to do all the house hunting!

This is a common scenario we come across: two people are buying a property together and one does all the legwork while the other takes on the role of devil’s advocate. This is often, though not always, the woman in a heterosexual relationship - we have also come across other partnerships suffering from this same imbalance.

Does this sound familiar? After some lengthy research and time spent inspecting numerous properties, she has educated herself about the market – enough to identify a property that she thinks they should buy. Then he takes take a look, says he doesn’t like it, dismisses it quickly, showing no appreciation for all the hard work that has got her to that point. Then she has to go through the whole process again as he becomes educated about the market and what they can buy for their money. By that time, prices have gone up and they can no longer afford what they originally wanted!

If you aren’t going to engage a professional to do the work for you, you really need to spend equal time in the property hunt and have a clear idea of what you want and what compromises you are prepared to make.

For more information on getting help to buy property: www.gooddeeds.com.au

What type of property buyer are you?

A sellers market often polarizes buyers. We often come across those who are fixated on prices as they were 6 months ago and will never pay market value. And the market keeps moving and they keep getting left behind. The other end of the continuum is the buyer who panics and pays far too much for a property which is often not that great and doesn’t really suit their needs.

Both buyers miss out. Buyer A keeps missing out and ruing the “one that got away” instead of actually getting onto the property ladder. Buyer B gets stuck with an overpriced dud property and gets left behind when it comes to capital growth.

For more information on buying real estate in Sydney look at www.gooddeeds.com.au