7 Tips For Buying Your Next Property

Source:REIV

Market Wrap

A clearance rate of 77 per cent was recorded this weekend compared to 77 per cent last weekend and 77 per cent this weekend last year. There were 573 auctions reported to the REIV, with 441 selling and 132 being passed in, 60 of those on a vendor bid. Eight suburbs have doubled their auction sales in 2016, led by Rosebud West, which recorded an 82 per cent clearance rate from 23 sales so far this year.

The lack of stock was really highlighted this weekend when we compare the number of auctions reported for the same time last year, 968 versus 573. August is traditionally a strong selling month as many vendors try to beat the Spring rush. Howver this year’s auction numbers are nearly 50% down for the same time. 

Which brings me to an inetesting point, yes clearance rates in Melbourne are strong at 77 per cent but from what we are seeing at opens and auctions there is no where near the frenzy of the past 2 years. The Melbourne property is softening and in my opinion prices are holding up on the back of low supply.

Looking forward, reports of stock levels increasing are limited. Unless we see a change very quickly it appears this Spring may be quieter than in terms of transactions. Many businesses associated with real estate have started feeling the pinch of a tighter market. Agents are already talking about the property market consolidating, lower commission rates and lower volumes could become the new norm.  The one shining light in all this downturn will be property prices holding up.

The Reserve Bank met last week and reduced the cash rates to another record low of 1.50 per cent. Banks unfortunately ran their own agenda passing on only 0.13 per cent of the cut, how dissapointing. The Aussie dollar rallied.

Source: Shutterstock

7 Tips For Buying Your Next Property

Today’s article is very much overdue. I feel real estate has become so much more complicated than it should have and is causing headaches for would be buyers.

So I thought I would look at real estate at a basic level and discuss with you what works and what doesn’t work when buying a property.

Firstly and most importantly,

1.     Don’t believe everything you read, hear or are told by a caring friend, relative or so-called expert. For the most part, real estate has been the darling asset recording unprecedented growth in Melbourne and Sydney. In fact why so many people have been and are buying investment property is because of its perceived stability and past growth. The only problem with this premise is that past performance of an asset will not determine its future performance. Too many unscrupulous spruikers are using some very rubbery numbers to sell what I consider to be “B and C Grade” property.

2.     If it’s too good to be true, stay away! Stories of guaranteed rental returns of 6 per cent plus coupled with the promise of strong capital growth and huge tax incentives have unwary consumers piling into “rubbish investments”. Property is simple, the higher the return on an investment the higher the risk. Next time someone offers you a property with a rental return greater than 4% ask them whether they are being paid by the developer of the property they are selling.

3.     Supply and Demand. Scarcity plays a major part in the value of property. Why are new and established units in Melbourne and Brisbane under so much price pressure at the moment? Simple, demand and supply. It is very tempting in my world as a property advisor to put my client into a poor asset just to get paid and move onto the next deal. I seem to be spending more time talking my client’s out of buying properties rather than talking into buying one these days. Great performing investments are very hard to find at the right price and low turnover of stock influences price. Keep an eye out on the supply of certain types of property in the area your are targeting and its surrounding suburbs.

4.     Poor Advice. Every man and his dog seems to be a property advisor at the moment and that’s not the annoying part. What’s getting on my goat is the lack of their experience and unscrupulous behaviour so they can get paid. Unfortunately property advice is unregulated so we have what I term as the “Wild West” in this space. Property advisors with little or no real estate experience gaining the trust of mum and dad investors with only one interest – their own commission, Beware! Make sure you check out your advisors credentials carefully. How much experience have they had in real estate? Do they have Professional Indemnity Insurance and will they refund your money in full if you are not happy?

5.     Stick to What you Know. You will hear property spruikers telling you to buy a house or an apartment in a new estate in Brisbane, Cairns, Darwin or even some mining town in WA based on numbers and nothing else. Let me tell you a secret, good property investment is more than just a few numbers on piece of paper. Things like real estate experience, area knowledge and performance of property over the past 10-20 years count. Analysing local trends and demographics, being familiar and aware of up and coming changes will always give you the upper hand. Whatever happened to buying the worst house or cheapest property in the best street/suburb? As prices become unaffordable in an expensive suburb buyers are likely to look at the next suburb, preferably one that’s near a train station and village style shopping strip with the hipster Barista! Believe it or not your future tenant will appreciate these amenities more than the flashy new apartment which over time will start to deteriorate and cost huge sums of money, known as body corporate levys. Certain banks have blacklisted developments and developers, ever wonder why?

6.     Look for Future Trends. Long term property prices are driven by employment, scarcity, access to infrastructure, wealth and proximity to the CBD. What is also driving property prices is what our future households will look like 10/20/30 years from now. If you want to know where our property market is heading just look at Sydney prices and household/demographic trends for inner and middle suburbs. The number of  Sydney suburbs reaching over the $1million median price mark is on the rise, one bedroom inner city units are fetching  more than $650,000 and renting for over $600 per week. I always look at Sydney and the nearby suburb as a guide to where property prices and rents are heading.

7.     Mitigate Risk. Reduce your risk by buying the right property in the righ location at or below market price. Do Not Speculate and do not borrow beyond your means! The risks far outweigh the benefits. Make sure you have team of advisors around you before you start your search. A good mortgage manager, tax advisor, building inspector, solicitor/conveyancer and of course property advisor. The only time you will find out the true worth of your property is when you sell it.. Then and only then can you determine how well you bought.

What our Clients Are Saying?

We found Peter Sarmas from Street Advocate took the hassle out of finding the right agent to sell our property and ensured a maximum result. By using Peter and his company we avoided the need to come up to speed on the most effective way to sell our property, as Peter has many years of experience to leverage on.

Not only did Peter find the best agent and negotiate a great commission rate for us, his fee was included in this negotiated fee! He kept up to date weekly with all the details, allowing us to focus on other things. We got a fantastic outcome, $130k above the reserve price. For us using Peter again would be a no-brainer.

Karl and Henty Punt, 118 Bridge St, Eltham

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