Wow! So many broken records in such a short time.
This week the Reserve Bank dropped the official interest rate to a record low of 2%. This is on the back of a record Sydney auction clearance rate of 89% only last weekend. The previous record of 88.2% held its position for only a couple of weeks after breaking the last record in March. And THAT record was a double whammy for property buyers, as 87.5% clearance rate coincided with a record number of properties being offered for auction on the weekend before Easter. On the back of all this market activity, Sydney’s median house price reached $914,056 in the March quarter and there is speculation of it breaking through the million dollar barrier by the end of the year.
In a nutshell, more property is changing hands than ever before, in less time and for more money. And the experts are saying that there is no sign of a downturn until mid 2016. No wonder house hunters are panicking – particularly first home buyers.
The median price rose roughly 15% per annum in each of the previous two years and if this were to keep up (and I am not suggesting it can!) property would be doubling in value every 5 years. Certainly if the market keeps growing at this pace for the next twelve months, those who buy now will be pretty happy with themselves for getting in “early”.
It certainly appears that anybody who can afford to buy a property is actively looking to buy something – anything! And anybody who can’t afford to buy a property is talking about how the market is overheated and we are in for a crash.
In my view, neither the optimists nor the pessimists will be proven right. We certainly see some crazy prices being paid for some pretty ordinary property at the moment. And it is my firm held view that a lot of these buyers will find it difficult to recoup their purchase price if forced to sell at the end of 2016. I also believe that other people, who buy sensibly, will be sitting pretty when the market softens (or goes back to normal, depending on your point of view).
We are active within a 10km radius of Sydney’s CBD and within that area I believe that quality property, bought at the right price, will hold it’s own in a market downturn.
When I mean quality property I am talking about less than 10% of what is available to buy at any one time. You need to be very choosy and ask yourself a couple of key questions:
- Is this a property I would like to buy in a buyer’s market? For instance, in the current market you might talk yourself into buying on a main road. I pretty much guarantee that you wouldn’t think twice about it in a soft market.
- Is this a property that other buyers are likely to fight over? You don’t want to buy something that nobody else would want. You want to choose something that will hold maximum buyer appeal regardless of market conditions.
- If you are buying to occupy rather than invest, you need to be honest about how well the property suits your needs into the longer term.
Then you need to put a great deal of thought into the right price to pay.
- Forget the agent’s price guide and make your own assessment of value based on what you have seen while house hunting.
- Realistically compare this property to others that have recently sold.
- Set your maximum limit BEFORE you enter into negotiations or go to bid on a property.
- Don’t bother with low offers or bids, go in strong and aim to knock out your competition but STAY WITHIN YOUR LIMIT!
- Be prepared to walk away because there will always be another property.
Good luck and take heart – we just had a record month of our own: the most amount of property we have ever purchased prior to auction in one month. And we followed the principles outlined above and now have some very relieved clients.
First published:- 7th May, 2o15
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.