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.

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.

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.

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.

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/