Who uses a buyer’s agent?

Many people think that it is only the rich who engage the services of a buyers’ agent.

Our client statistics show that the reality is vastly different to what you may think.
• 74% have a budget under $1 million.
• 71% are owner occupiers.
• 81% live in Sydney.

The reasons people may choose to use a buyers’ agent include:
• Being time poor
• Recognizing a knowledge deficit
• Appreciation of the benefits of “buying” experience
• Comfortable with outsourcing specialist expertise
• Desire to avoid making a costly mistake
• Need reassurance and confidence to commit to such a monumental investment

Let me ask you this question – if you were to buy $20,000 in shares, would you do so without specialist advice? Your exposure to risk with property is much greater and the asset is not very liquid, to say nothing of the costs of getting in and out of the market. In short, everybody can benefit from using a buyers’ agent.

For more information on buying property in Sydney go to www.gooddeeds.com.au.

Why out-of-towners need expert real estate help.

Here is a little story about buyers from Brisbane and buyers from Melbourne trying to secure property in Sydney’s heady real estate market.

Just before Christmas last year we had a client come to us after finding a property they liked in Rozelle. These buyers had recently moved to Sydney from Brisbane and, although renting in the area, had yet to come up to speed with the local dynamics of this market.

This particular property had ample internal accommodation, double parking and city views, so it was easy to see why it appealed to our clients. HOWEVER, it was on a busy corner, lacked privacy, had limited usable outdoor space and was neither contemporary nor period in style. In short, this was a property that would be difficult to sell in a “normal” property market, particularly as it was of a style that generally does not appeal to Balmain/Rozelle locals.

After evaluating the property, we advised our client that $1.7M was “top dollar”. It had, in fact, just passed in at auction with a vendor bid at that very figure (and two other offers had apparently been made under that figure), however the vendors were hoping to achieve $1.8M. The agent reported to me that the vendors would accept $1.785M and I expect there would have been further room for negotiation if our clients were prepared to pay over $1.7M, however my clients decided to let the property go.

Christmas came and went, then suddenly we hear that the property had sold for $1.8M! A little investigation revealed that the purchasers had a very similar profile to my clients: they were of a similar age, recently moved from Melbourne and also renting in the area. The difference? Our clients had expert advice and avoided paying too much for a property that does not appeal to local buyers. If the Melbourne people had engaged us, they would have saved a minimum $15K – and probably more.

Postscript – our Brisbane people have since purchased a lovely double-fronted weatherboard in Rozelle at a much fairer price! Precisely the sort of property that will be easy for them to sell to a Balmain/Rozelle local when it comes their turn to put it on the market.

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.

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.