Here is a little story about buyers from Brisbane and buyers from Melbourne trying to secure property in Sydney’s heady real estate market.
The first rule is don’t pay too much in the first place! So don’t fall in love with a property and let good judgement fly out the window. Do your research so that you can understand property values in your chosen area and make sure you pay no more than a fair price. The thing to remember in a buyers market is that there will continue to be opportunities until the market heats up again.
The second rule is to be very selective with the property that you buy and do not let the idea of a “bargain” cloud your vision. Most bargains are heavily discounted because nobody wants them. And nobody wants them because they are sub-standard so getting them at a low price is really a false economy as their rate of capital growth will be lower than that of superior properties. There is a difference between a bargain and being opportunistic, however, and being opportunistic requires fast action, as opposed to a bargain, which has probably sat on the market for some time.
Keep in an accessible price bracket. Find out the median price for the area you are looking to buy in and aim to spend a maximum of 10% over that figure. This way you will ensure that the property you buy will be in the more affordable price bracket when it comes your time to sell. (Unless, of course, you are preparing to do major renovations.). There are more buyers with a budget around the median price range than there are in the top 30th percentile, therefore there is more chance for competition. And it is buyer demand that ultimately drives up prices.
Choose a prime, proven location. You can usually improve a property but you can’t fix a poor location. A desirable street will always attract buyers. So this is the safest way to give you the best chance for capital growth.
If you have a long term plan you can try to pick an up and coming area. This is a riskier strategy, however, because there are no guarantees. Wooloomooloo and Waterloo, for example, are both in an extremely convenient inner city location and bordered by some prime suburbs. Surely they would have to be the next hot spot! However there is a crime element in both suburbs and big things would need to happen in terms of the social mix before the balance is likely to change. But if it does change, you can expect values in these areas to rocket.
Choose the type of property that will appeal to the largest group of buyers. For example, young professionals love the buzz in inner city areas like Surry Hills and family buyers prefer a quieter existence and larger land size in areas like Haberfield. So buy a property that is appropriate to the dominant buyer in the area.
Stay away from high rental yield properties with limited capital growth prospects, like student accommodation. Any property that has a limited market is going to have limited capital growth opportunities. The best option is to go for a property that appeals to owner occupiers and investors alike.
Don’t overcapitalise on renovations. But do make sure you renovate to the required standard in your suburb. Get out and about and see what sort of finishes buyers like. If laminate kitchen benches are the norm, don’t waste money on stone. Conversely if top brand kitchen appliances are a must, don’t scrimp and go no-name. The trick is to keep your personality out of the equation, keep it neutral (without being bland) so as to appeal to the widest group of buyers.
Finally, don’t rush your purchase. Time is on your side in a buyers market. If a vendor has unrealistic price expectations, ride it out and wait until they are read to accept what the property is worth. Maybe you will get it for even less as the longer their property sits on the market the more the perceived value drops in buyers’ minds. If the property you are looking at falls short of your criteria, don’t feel pressured to make compromises. You can afford to wait for a better property.
Published:- 26 October, 2011
Please note: Good Deeds buyers tips are intended to be of a general nature. Please contact us for advice that is specific to your individual circumstances. You may also need to get advice from other professionals such as an accountant, mortgage broker, financial planner or solicitor.