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.

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.

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.

What to expect in real estate this spring.

Traditionally September heralds the start of the spring selling season where the warm weather and blooming gardens inspire people to sell their houses. After the winter listings drought, real estate agents gear up for the year’s busiest period and hope to power on uninterrupted until collapsing in an exhausted heap on Christmas Eve.

Will 2009 be any different? Not according to the selling agents we have been speaking to. Buyers will be able to expect more choice and, hopefully, less of the competition which has seen weekly auction clearance rates exceed 90% in some parts of Sydney.

Many experts are saying that the first home buyer segment of the market will die down and be replaced by investors entering the market. Our enquiry levels certainly support this forecast.

A recent Residex report said that “housing finance results released by the Bureau of Statistics, [showed] that most of the growth in lending is coming from existing home owners on the move. While investor activity is still weak overall, we expect it to increase later this year and increasingly take over the running from first home buyers.”

The report went on further to say that “investors are returning to a housing market which has withstood the traumas of the last two years far better than commodities, property trusts, shares or term deposits. Despite the doom and gloom merchants, the housing market did not crash or even lose any real value.”

In the meantime, the roll-on effect from the first home buyer boom means that the most competitive segments of the market now seem to be 2nd and 3rd home buyers with budgets from $750,000 up to around $1.3 million. Let’s see if the expected high number of spring listings will materialize and dampen the general enthusiasm this year.

For more information go to our website: www.gooddeeds.com.au

Strata reports - often a long list of repairs is a good sign

When you read a strata report that documents a litany of building issues it can be easy to be scared off a property. And sometimes it is a warning of impending inconvenience and cost. However, it can also indicate a pro-active strata manager and an owner’s corporation that cares about maintaining their investment. In addition to the list of problems, look for a concerted and continued effort to address the issues. And keep an eye out for potential special levies. This is a sign that there has not been sufficient sinking fund levies in the past to cover these expected repairs.

For more information on how to avoid pitfalls when buying property: www.gooddeeds.com.au

A shameless plug… why use a buyer’s agent?

Here are just a few reasons:

You don’t sacrifice your weekends and family time.
Searching for a home can become all-encompassing and takes over your life!

We have access to unadvertised listings.
Though, to be honest, motivated vendors are those who pay for advertising. Unmotivated vendors want more than their property is worth – however your perfect property might just be owned by such a vendor and this could be the only way you are going to find it…

Selling agents often give us information that they won’t share with the average buyer.
Our lack of emotional involvement means we won’t have a “knee-jerk” reaction. Also, selling agents know that a buyer’s agent understands the sales process and therefore comfortably share information that can give our clients a distinct advantage over buyers who represent themselves.

If you'd like to know more, go to www.gooddeeds.com.au.

Don’t panic!

This is the time of year when new listings all but dry up. Many vendors, particularly those with properties lacking natural light, think that spring is the best season to put their property on the market. So as the weather cools, selling agents and buyers alike start to despair…

This is not to say that your dream home won’t come on the market in winter (smart vendors will be listing their properties now!). But the biggest mistake to make is to panic and pay far too much for a property or, worse still, buy something that really isn’t ideal. Take heart, take a breath and wait it out until spring – but don’t completely give up the hunt in case the perfect property does happen to turn up!

The magic question – what will happen to the market after September?

Ahhhh, if only I had a crystal ball…

For those who haven’t heard, the Federal Government has announced that it will phase out the First Home Buyer Boost, starting with a 50% reduction to $3500 after September 30th 2009 and ending completely on December 31st 2009.

From my observations of recent buyer behaviour, I believe the bonus has motivated many people who were simply thinking of buying to actually get out and buy. However, a lot of first home buyers I speak to are happy to wait till after the bonus starts to shrink before they buy. So I am not sure we will see a sudden decline of buyers out there after September.

On the bright side for buyers, there is usually a lot more property available as vendors often decide to list their properties in spring. Increased stock levels usually have a dampening effect on price growth.

Even if the first home buyer segment of the market grinds to a halt, the flow-on effect will continue for some time as many of those sellers are now buyers upgrading to their second home, and so on.

Overall, it is hard to speculate as there are so many other factors in play at the moment, for instance, low interest rates, talk of recession and job insecurity… Just try to get two economists to agree on the property market outlook!