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.

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.

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.

When not to compete for a property.

Last weekend I saw an auction for a property on a busy road. I was astounded not only at the amount of bidders for this property, but at the crowd of onlookers that the auction attracted. This level of interest from actual buyers and sticky-beaks alike is completely symptomatic of the current strong property market. In a “normal” market or, god forbid, a down market, this auction would be lucky to attract more than one bidder let alone many spectators. During market down times in years gone by we have seen numerous auctions where the selling agent, the vendor, the auctioneer and if they were lucky, one buyer were in attendance.

So, why are people suddenly competing for property on busy roads? Some reasons include a lack of quality stock, fear of being priced out of the market and a general sense of panic amongst buyers. We are also seeing inflated prices being paid for unrenovated properties for the same reasons.

This property sold for $100K over what the agents were quoting. If you are going to compete for a property, make sure that it is a property that will also be desirable to buyers when the market returns to “normal”. Let’s face it, if you are going to pay a premium, you may as well ensure you pay it for a good property, not a bad one.

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

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

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.

Can a buyers’ agent save you money?

We are often asked this question. The best answer, we believe, is an actual example. Here are some of the ways in which our clients have benefited (or could have saved) from engaging our services:

Apartment 1 – the agent gave us information about the vendor’s circumstances and had we acted on it we could have got the property for $500K. It subsequently sold a week later for $515K. $15,000 potential saving.

Apartment 2 – we were advised by the agent prior to auction that reserve was going to be $510K, and that we possibly could pick it up for $505K. Passed in and sold 3 days later for $521K. Minimum $11,000 potential saving.

House 1 – passed in at auction in December for $1.355M. The agent had been quoting @$1.3M and we felt that it would probably achieve that. The under-bidder was at $1.35M, so this had been a competitive auction and the vendors regretted not accepting the highest bid. In the three months after the auction, Xmas had come and gone, the market had destabilized at this price level, and the property was tainted from having been on the market so long. Through protracted negotiations with the agent we held firm and secured the property at $1.255M. A saving of $100,000.

House 2 – our client came to us after her offer of $727K on a property that was being quoted as “early $700,000s” was rejected. She did not know whether to believe what the agent was saying and was prepared to pay $780K for the property prior to auction. This property uniquely suited her needs and she was prepared to pay a premium for it. After many discussions with the selling agent and assessing the competitive situation, our advice was to wait till auction. Our client was so keen on this house she instructed us to bid up to $827K!! We secured it for $745K, a saving of $35,000 over what she would have paid if left to her own devices and $82,000 less than what she was prepared to pay.

House 3 – similar circumstances to the property above. Our clients were about to make an pre-auction offer and were considering the figure of $807K. Once they engaged our services, we advised them to wait for the auction. Their instructions were to go to $813K if necessary. We secured it for $780K, a saving of $27,000 over what they would have paid without our advice and $33,000 less than they were prepared to pay.

Apartment 3 – Our clients had found a property that they were desperate to buy, and it was in a price bracket that was definitely a buyers’ market. However they agent had suddenly procured another buyer and this was putting pressure on them to pay more than they needed to. Our advice on offer strategy was carefully planned and we secured the property for $2,500,000, which was $50,000 less than the premium they had been prepared to pay. Our clients admitted that without our guidance, they would have succumbed to pressure and fear of losing the property and increased their offer, possibly even over the amount that they had felt comfortable paying.

For more examples, contact us via http://www.gooddeeds.com.au/