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.

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.

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.

Why we recommend property investors engage a managing agent.

I could manage my own investment properties but choose not to. The reason is that tenants have a whole bunch of rights and landlords have a whole bunch of obligations that most are probably not even aware of. So, a good property manager can help keep you out of tribunal (or represent you if necessary) and ensure that your interests are protected at the same time. It’s not just money for jam…

Also, even though I have often lined up my own tenants, I always pass the management onto an agent so that I can keep at arms length. I am busy working in my own area of expertise and don’t want to be bogged down with tenant issues (sometimes there can be plenty).

And talk to your accountant, as management fees should be tax deductable. You can also get all the bills directed to the agent and get one annual statement which you just pass onto your accountant. Simple!

For more information on buying an investment property in Sydney 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.

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.

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

Location, Location, Location - how to choose a suburb to buy in

If you are buying a property to live in, the factors affecting suburb choice are markedly different from those involved in deciding on an investment location.

Some of the key factors in choosing a location for your home include:
· Your local knowledge – are you already familiar with the area? Do you know people who already live there?
· Availability of transport to work – good roads or train/bus links.
· Proximity to good schools – particularly if you are relying on the public education system.
· Lifestyle – what is close by for you to enjoy during your leisure time?
· Affordability – the bottom line…

When advising investors, we encourage them to consider the following:
· Buy as close to the CBD as you can afford – you can usually rely on consistent demand from tenants.
· Good transport links – especially train.
· Walking distance from cafes and shops – tenants need reasons to live there other than just being close to work.

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

Strata levies - low levies can be a false economy

Sometimes when pensioners or investors dominate the ownership of a building or complex we see historical pressure to keep strata levies low. The discretionary portion of the levy is the sinking fund contribution, so when building issues arise, or upgrades are required, there is no money in the pot. So, what happens next? Either the issues are ignored, the building begins to look shabby, or a special levy is struck. And, if you are interested in capital growth, all these outcomes can negatively impact the value of a unit or townhouse.

It is now mandatory for owners’ corporations to undertake a 10 year maintenance plan and levy forecast. Those buildings with low levies will face sharp rises if the recommendations in their report are adopted. Those buildings that have been responsible in their financial management and avoided the temptation to keep levies too low will see much more modest increases.

For more information on buying property: http://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.

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/