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.

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.

How to decide how much to pay for a property.

As real estate agents, we have a requirement under the Property Stock & Station Agents Act to undertake a thorough analysis when determining what purchase price we recommend a client pays.

There are a lengthy list of factors we take into consideration in order to comply with the Act. Some of which are:
• A detailed analysis of recent sales
• Assessment of the factors that may affect the price people are willing to pay for this property in the current market.
• Is it a property that will attract buyer interest if you need to sell it in a flat market?
• Is there an obvious way that you can add value?

However, there are also factors that are individual to every buyer. For instance:
• How long have you been looking for? Is this the only property that you have found in 12 months that suits your requirements?
• What is your timeframe – own it for 5 years then upgrade, or is this your 20 year home?
• Are you an investor or an owner occupier?

Sometimes you need to pay a premium for a property that is going to suit your needs better than anything else that is likely to come onto the market in the near future.

Sometimes, however, it is folly to pay a premium for a property that is highly likely to drop in value when the market levels off. Knowledge is power and the more you know about the suburb you are buying in, the better decision you will make.

For more information on buying property in Sydney 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.

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

Can you still buy something close to Sydney's CBD for under $500,000?

Last month RPData released a report listing median house and unit prices in Sydney. Surprisingly, there are two suburbs within a 10km radius of the CBD where you can still buy a house for less than $500K – Sydenham & Tempe. You just have to put up with a bit of aircraft noise…

You have a lot more options if you are wanting to buy an apartment. Due to an abundance of 1 bedders and studios, the City of Sydney Council area has the highest number of suburbs (20 in total) where unit prices are under the $500K mark. A further four suburbs can be found within the North Sydney local government area (LGA) and two each in Leichhardt and Woollahra LGAs.

The opportunities are diminishing, however as property values continue to rise, so how much longer we will have the chance to buy anything under $500,000 close to the CBD is anyone’s guess… Only yesterday, an article in the Sydney Morning Herald predicted further rises – and the median house price for Sydney is now $607,000, with the median unit price still under the half million mark at $457,000.

Click on this link to read that article: http://www.smh.com.au/business/house-prices-to-rise-further-but-theyre-worth-it-says-rba-20091125-jrta.html?autostart=1

For more information on buying property in Sydney: http://www.gooddeeds.com.au/

Apartment values growing faster than houses

In September this year RPData released national property growth figures that showed unit growth had caught up to that of houses around the beginning of 2008. They maintained a level growth rate for several months and since the middle of last year apartments have consistently exceeded the rate of growth of houses.

“The equivalent level of capital growth associated with units is a relatively new phenomenon. Over the last ten years houses have outperformed units by about two percent per annum” stated the RPData report.

Traditionally we have seen the capital growth rate of houses in inner city areas clearly exceeding the rate of growth of apartments. There are many reasons for this, possibly the main one being that houses have a land component and are a limited resource, whereas many new apartments have been built, particularly in rezoned industrial areas such as Pyrmont, Alexandria and along the Parramatta River including Concord, Abbotsford, Rhodes and Meadowbank. So why the sudden surge in values?

The RPData report cites some possible reasons. One idea put forward is housing affordability – the national average price for units is around $100,000 less than it is for houses. Other reasons they suggest include an increase in downsizing baby boomers, professionals in their 20s and 30s wanting to live closer to work and the rise in overseas students creating a whole new market. Certainly the first home buyer benefits, which were increased late last year, has seen unprecedented levels of buyer activity in the apartment sector of the market.

Sydney is one of those modern cities where the dream of owning your own home is alive and well. Young families look to move out of apartments into a house with some land soon after (or in anticipation of) having their first child. So the traditional apartment dwellers have been polarized between the young and childless and the empty nester – with some perennial professionals and gays thrown in for good measure. This is in stark contrast to older European cities such as Paris, London or Rome, where families live in apartments and make great use of local parks and community areas.

For more information on property buying, see our website: www.gooddeeds.com.au.

Some helpful statistics.

We are always being asked what are the best suburbs to buy in. If you are buying for investment you usually need a combination of yield and capital growth (not taking into account depreciation and other aspects). Recently we compiled this list of top investment suburbs from the Australian Property Monitors database.

Units - we reviewed all Sydney suburbs within a rough 15km radius of the CBD and selected all those with a rental yield of 5% or more and a 3 year average positive capital growth rate of 5% and above. 17 suburbs fulfilled this criteria and a further 12 had yields over 5% and a 3 year average positive capital growth rate of under 5%.

Here are the top 5: Chippendale, Alexandria, Kogarah, Arncliffe, Waterloo

Houses – we reviewed all Sydney suburbs within a rough 10km radius of the CBD and selected all those with a rental yield of 4% or more and a 3 year average positive capital growth rate of over 5%. Note – there are no suburbs within 10-15km radius of the CBD that have this combination of yield and cap growth. 16 suburbs fulfilled this criteria.

Here are the top 5: Chippendale, Alexandria, Lane Cove North, Darlington, Camperdown

If you'd like to see the yields and growth stats for these suburbs, contact me through http://www.gooddeeds.com.au/