There’s been plenty of discussion in recent months about the increase of foreign buyers pushing up Australian real estate prices in established areas after the Federal Government relaxed the regulations last year.
Just last week we bought a great property with magical views over middle harbour for $1.6million. The vendor bought it in 2003 for $1.55million. Ok, yes we bought about 100k below what we feel was fair money for the property (not easy to do in such a strong market). However the question that came to mind was how much did the vendor overpay by 7 years ago?
People probably get sick of hearing me say that prospective buyers must research the market. Well this time I will let independent property analysts Residex explain just how important it is to understand current market values.
An article in The Sunday Telegraph recently reported that “a quarter of Sydney homeowners who bought and sold their properties during the past five years lost money” and that these losses were attributed to a combination of factors namely “poorly informed buyers and over-the-top valuations”
I read an interesting article the other day by property analysts, RP Data, which showed that Sydney properties located in the premium postcodes had a significant increase in values above and beyond less prestigious areas. The report showed a significant variation in the growth of values across the different price points over the last five years.
In the last calendar year alone RP Data’s research showed that “ (Sydney’s) top 20% of postcodes have recorded a value growth of 12.5% with the middle market recording 11.8% growth and the lower end seeing growth of 9.1% during 2009”.
Don’t go overboard with the current low interest rates. Whilst rates are at 49-year lows, remember that they won’t stay at these levels for the long term.
Borrowing to your maximum at this (or any) time is a recipe for disaster. Save a significant deposit – no less than 20% - and budget to make repayments at 2% above the current rates.
Better still, pay your mortgage at this higher rate from the start and build up a buffer that you can use if times get tough financially down the track.
With our busy lifestyles it’s easy to take short cuts to speed up the process. In real estate I’m finding more and more buyers are relying heavily on internet searches to find their new home or investment property. While the real estate internet sites are a good starting point they cannot replace physical inspections.
It looks like the NSW state government is set to repeat the mistakes of the federal government with additional incentives for newly constructed property. We’ve already seen what the federal government’s enhanced first home buyers grant has done to the lower end of the market which has essentially increased the asking and eventual sale prices of properties. In Sydney, I have seen first home buyers paying $20,000, $30,000 and even $40,000 more than they would be if the grants weren't on offer.
It seems as though everyone wants to know where the next property ‘hot spot’ is going to be where prices are expected to jump giving buyers a financial windfall in the near future. Don't get caught up in the hot spot myth. There is no substitute for thorough research before you buy.
Sure there is no harm in checking out an area if it’s named as a hot spot. If it turns out to be a sound investment then go for it however the majority I have checked out have turned out to be average at best and others could have been better selected by throwing a dart at a map from 20 paces!
I believe this sale demonstrates how buyers can easily be influenced by asking prices in any market. The developer was looking for $13.1m for this property and achieved a $12 million dollar sale.
