I am working with some clients at the moment that were initially looking to sell their current home and upgrade to a larger home to match their growing family.  They didn't have not had any luck selling their home (at the price they felt it was worth) so were feeling dismayed about not being able to move in to a larger home. 

With the drop in interest rates and taking in to account what they could rent their current home for in the current market, it turned out they are able to buy the larger new home and still hold the current home.  They are now really excited at the prospect of bing able to buy a great home that they couldn't have afforded before due to its price coming down and holding their current property to sell in a few years time when the market picks up.

They did their sums and are turning the current financial doom and gloom in to an opportunity.

For aussie expats wondering when the best time to buy property in Australia is need to look at the factors that relate to them. 

1. The aussie dollar is around 63c (Fri 21 Nov 2008) to the US dollar.  That makes moving money in to Australia cheap.
2. Interest rates are falling which makes the cost of borrowings cheaper
3. The demand for core* rental properties in Sydney is very tight and putting upward pressure on rents.
4. A large percentage of buyers will be more influenced by their friends, colleagues and the media then actually looking at their own circumstances and doing the sums.  

The perfect scenario is the aussie expat, being paid in US dollars being able to buy a property that should be self funding fairly quickly due to the drop in interest rates and the increase in rents coupled with driving a good purchase price due to lack of competition caused by fear.

Of course this is not everyone.  There are the people who are concerned about job security (even then the figures may stack up) and the people who are already so laden with debt that lenders will not go near you.

*core rental properties refer to properties that are in high demand. For example 2 bedroom properties within 10km of the CBD and close to transport/facilities. Some suburbs such as Mosman have a large expat community so homes are also in high demand.

Over the past 12 months, we have seen, and are still seeing serious global financial issues being played out.  This current global crisis is affecting property prices in many parts of the world.  Some analysts are predicting the same thing will happen in Australia.

One of the main difference between the property market in Sydney and the global property market is the principal of supply and demand.  In a strange way, we can thank the government for keeping immigration levels high and new housing levels low.  This, in effect, has created a major short supply of housing.  This shortage of housing will, more than likely, keep the prices solid.  We are also starting to see a return of the Australian Expat, who will also need housing.

Australians have a huge love of property.  People will do anything to hold on to their homes.  The holidays may go, upgrading the car may be put off but homes will be absolute last resort. 

It is actually a good thing that selling property is a lengthy process.  It stops panick selling like we are witnessing in the stock market. 

An article appearing in the Australian today discussed the fact that the new Premier is facing a budget blowout.  Stamp duty on Sydney real estate has fallen significantly.  "A major factor behind the revenue shortfall appeared to be the fact that sales of property in the state - which includes the most expensive real estate in the country -- have slowed, hence eating in to revenues from stamp duty on property sales".

The interesting thing about this is that stamp duty flows from properties that are sold irrespective of the price they sell for.  Stamp duty has fallen due to the lack of properties being sold not from the price they are being sold for. 

There is still fear in the market but not a lot of forced sales.  The fear is keeping both sellers and buyers away and creating some buying opportunities for those willing to do their research.  If homeowners had to sell, we would have more property on the market, like in the US, and the Stamp duty to the NSW government would continute to flow.  

Over the past 8 months, we have been exposed to a barrage of media coverage about the “global credit crunch” and the impact this has had on the UK and US property markets.  We are also being told over and over again that the Australian Real Estate market will be affected as well. 

So far, we have seen a nervous market that is based on “what could/will/might happen”.  This is more media and fear driven than cold hard stats. 

According to statistical information from SQM research, the vacancy rates in Sydney’s Inner areas are actually increasing:

Vacancy rates in Sydney’s

• Eastern Suburbs           5.4%
• Lower North Shore       7.2%
• Inner West                  3.6%
• Northern Beaches         3.4%

SQM research’s statistics are based on online rental listings and data from the Australian Bureau of Statistics. 

One of the reasons for this increase seems to be based on people deciding the rent their property rather than sell.  This is creating an abundance of properties seeking over $600 per week – not really the true investor’s end of town. For tenant’s wanting to rent properties under $600 per week, the vacancy rates are significantly lower.

Could this be the start of the investor boom in Australia?

Over the past 12 months rents have increased.  12 months ago, I was using an average rental return of 3.5% on a Sydney property, now I am using 5% (adjusted on a suburb and type of property basis) and this increase is not due to property prices falling.  Rents can only increase if demand allows it to.  It does not matter what the level of a mortgage is.  If it did, landlords would be doubling the rent to cover this cost.  

The combination of Generation Y leaving home, strong migration patterns and a weak building sector is intensifying demand. The shortage of affordable accommodation will no doubt add to the growing number of displaced renters who cannot afford to live in well located areas.

The high interest rates and negative media coverage of the property market has dampened buyer demand and with it has been a slight fall in property prices.  The RBA is talking of reducing the interest rate next month.  This will make the investment property market more attractive as the cost to hold a property will fall.  The window of great investment property bargains is possibly about to close. 

JUNE 2008 – Sydney Property Brief

A bit of history

In the last 18 months, the sentiment surrounding the property market in Sydney’s Eastern suburbs and Lower North shore has been on a bit of a roller coaster.  The last big property cycle ended at the end of 2002.  Between then and early 2007, the market was relatively flat.  By early 2007, all factors were pointed towards to start of the next property cycle, interest rates were low, rentals were increasing, and vacancy rates were extremely low.  Supply of new homes was not even close to sufficient to match demand.  A lot of global funds were flowing in to the property market from expats earning big dollars…..we all know what happened next.

By the end of 2007, vendors were listing their homes and achieving high prices on their properties.  The number of buyers well and truly out numbered the number of available homes.

What is happening now…..

Over the past 5 months, we have been affected by the sub-prime crisis in the US, interest rate rises, stock market crash, petrol price rises and the uncertainty of company bonuses.

From the buyers’ perception, many people are holding off “to see what happens”.  Potential buyers are concerned that prices will fall so they are nervous about buying at the moment.  From the sellers’ perception, with a reduced number of buyers vying for their property, they are reluctant to put their home on the market. 

In the markets I work in, namely the Eastern Suburbs and Lower North Shore, I have noticed a significant reduction in the number of homes that are being successfully sold through an auction campaign.  For example if I compare the auction clearance rate in the six months to November 2007 with the six months to May, in Mosman the rate has gone from 63% to 45%; Woollahra has gone from 67% to 45%; and Bondi has gone from 86% to 55%.  This is just one indicator that the demand has dropped significantly.

I am now starting to see significantly more quiet listings, having more conversations with agents about vendors understanding the current market and adjusting their price expectations i.e. reducing their prices. 

With many future buyers sitting tight and not competing for a property, it is a great opportunity to buy a great home at a great price.  Will it get better, from a buying perspective?  It might.  Although what most people will do is wait until everyone else is looking at buying and follow everyone else i.e. once again competing for properties when the market in an upward phase.

It is a very different environment to 6 months ago and a different strategy is required to secure the right home at a good price.

If you, as a buyer have time on your side, why wouldn’t you be actively looking at the market at the moment?  Generally, it is difficult to pick the exact moment when the property is at its peak or trough.  As we are not in a growth cycle, buyers do have time.  If it was that easy, it certainly wouldn’t stay there for long.  We do know however, every 10-15 year's, the property market becomes a Buyer's market, we believe that we are entering this cycle and the next 12 - 36 months will be just that. There are a lot of similarities between the current climate and the recession in the early 90’s.

The Global market volatility will affect every segment of the market – it’s unavoidable, some of course more so than others.  People do not seem to be concerned about the interest rate hikes; they are more concerned about their erosion of wealth through their exposure to the equity market.  This is starting to impact the Eastern suburbs and Lower North Shore and will affect properties above the $3million mark.  Vendors are being forced to sell as margin calls continue.  Some are trying to sell off holiday homes but are competing with too many others also trying the sell off their holiday homes.  Just look at Palm Beach, auction clearance rates are at 9%; the median price has fallen 37%; and days on market has increased from 101 days to 195 days.  They’re pretty scary stats for those hoping to sell off these properties to shore up their position.

It is important now more than ever to really understand what is happening and how it is impacting on prices.  I am coming across great opportunities that can be capitalised on now.  These opportunities won’t stay around for ever but the right strategies need to be in place to make the most of these.

Represented buyers will have better access to these opportunities and will be confident in the pricing to be able to move forward. 

Two of the main differences between Sydney and the rest of the world is that property prices have not been going through the roof over the past few years and Sydney has a major shortage of property. With these two factors, it is probably the best time to buy.  Of course, when I talk, I am talking about the inner areas such as Eastern Suburbs, Lower North Shore, Upper North and Inner West. The mortgage belt is a different kettle of fish altogether.  

 Over the past few weeks, I have noticed a lot of people, who have been exposed to the media are "holding off".  This is dampening demand a bit but not past the point where properties are not selling.  Sellers are also holding off, which makes for increased demand.

 Most people who are holding off and waiting for a "bargain" will end up getting back in when everyone else does.  The thing is that, in most cases, a bargain does not present itself until you start negotiating. Which means, don't hold off but keep a keen eye focused on the properties coming on to the market, both listed and unlisted.  

An amazing transformation is ocurring in the Elizabeth Bay/ Pott's point region.   Over the past few years, many of the areas hotels have closed down and become upmarket apartments.  This has attracted a new crowd and with it have come the upmarket night clubs, cafes and restaurants.

The area suits the couples without kids or the high flying executive.  They want convenience and quality...and they are getting it.

 With these changes will come solid capital growth.

In 2007, the property markets in Adelaide, Melbourne and Brisbane achieved high growth.  Sydney as a whole only achieved moderate growth. 

We are now in 2008 and have entered a time of uncertainty with a volatile stock market, predictions of economic slowdown, record petrol prices and likely further tightening of monetary policy through interest rate rises.  All these factors will slow the rapid growth seen in 2007.

So where is a good place to invest? 

Sydney apartments.

Sydney unit values have achieved very little growth over the past four years and are now cheap compared to other capital cities.  With many investors now looking to diversify out of the stock market, demand for Sydney apartments is set to heat up.

Australian Property Monitors have Sydney apartments as thieir number one pick for growth over the next few years.

According to RP Data "The nation's largest real estate market Sydney, is continuing to show improvements after three years of depressed prices.

Overall price growth for houses and units is now at 7.4 per cent per annum; this time last year the growth rate was just 0.4 per cent.

The number of houses being listed in the market is up by 24 per cent on the same period last year, suggesting the vendor confidence may be returning to the market."

In the inner areas, more and more properties and being sold via the Auction process, which is best suited to high demand situations.  Good properties are moving fast and we are having to prepare our clients for a speedy transaction when the right property presents itself.

It is only the beginning of this growth cycle.....

Spotlight on Sydney

"The Sydney market has received a lot of negative attention, however in recent times it appears that the Sydney market recovery is well on track.

Price growth has been evident in the market since early 2007. Since the beginning of the year Sydney house prices have increased by 8.1 per cent and unit prices have gone up 9.9 per cent. The price increases reflect the broad Sydney market, however when we drill down we can see that the market is far from homogenous. While the inner city and coastal areas of Sydney are performing exceptionally well (Inner Sydney up by 18.2 per cent and the Eastern Suburbs up by 15.7 per cent) the outer areas of Sydney are still struggling. Fairfield-Liverpool has faired the worst, with prices falling by 5.4 per cent over the year.

These outer areas may be in for a change, however, with the rental market showing very competitive yields and more investors starting to circle as the market bottoms. The median value of a house in the Fairfield-Liverpool region is now just over $361,000, having fallen by 18 per cent since prices peaked back in December 2003." Extract from RP Data reports
 

A survey conducted by Ashe Morgan Winthrop Property Investments has reported that 73% of property professionals expect the residential market to experience growth over the next six months, the highest number reported since the survey commenced 11 years ago.

This confidence comes in the face of the expected future interest rate rises.  Property professionals have factored these in.

The results of the survey was as follows:

• 55% of respondents now prefer investing in residentail property over other types of property
• 71% expect another interest rate rise in the next 6 months
• 64% intend to buy a property in NSW in the next 6 months
• 63% believe the Sydney property market will improve over the next 6 months.

One common request from vendors or their solicitors is for the purchaser to waive what is known as the “cooling off period”. That’s Section 66W of the Conveyancing Act (1919).

The Act allows the purchaser to rescind on the contract anytime with 5 business days.

These 5 days can be used to finalise finance, and complete checks and investigations on the property. If the purchaser decides not to proceed, they pay a small penalty fee but do not have to proceed with the purchase.

As the property market in Sydney's Eastern Suburbs and Inner West, starts to heat up, the real estate agents and vendors are increasingly putting pressure on purchasers to waive this cooling off period. 

I don't like this at all as purchasers, keen on a property, are forced in to a situation where, if they really want the property, the need to exchange without having time to do any searches.  This can be a really costly mistake.

It is unnecessary pressure.  In almost all cases, when an exchange occurs, the sale will complete.  The agent and the vendor will get paid.  All it does is seriously stress the purchaser. Why??

There have now been 4 interest rate rises since the beginning of last year. Over the same time period, Sydney housing prices have risen 4.1%. Compared to the other major cities, this is the slowest growth. If you are looking at buying a property in the inner suburbs of Sydney, price growth is is well above this 4.1% figure.

The interest rates are not making an impact due to:

• Rents are increasing making buying a property a consideration
• the share market is unstable.
• demand outstripping supply

Northbridge is one of those suburbs that sits on a point where a large portion on the homes are north facing and have views.  Families who move here never want to leave. In 2006, the median price for houses was $1,428,500.  So far this year the recorded median is $1,967,000.  That is an increase of 27%.  One of the main factors that has attributed to this growth is people's desire to live in a new home.  As the homes are typically 50+ years old, they are being bought for land value only.  The newly built homes are fetching a premium which is distorting the growth figures.

There is still a lot of buying potential in this suburb, especially if you are prepared to buy an old home to rebuild.  

Best Streets in Sydney's Inner West

Birchgrove

• Louisa Rd
• Wharf Rd
• Ballast Point Rd

Burwood

• Appian Way 

Best Streets in Sydney's Eastern Suburbs

Point Piper

• Wolseley Rd
• Wunulla Rd

Darling Point

• Yarranabbe Rd

Bellevue Hill

• Rupertswood Ave
• Ginahgulla Rd

Best Streets in Sydney's Upper North Shore

Roseville

• Roseville Ave
• Lord St

Wahroonga

• Burns Rd
• Water St
• Billyard Ave 

Best streets in Sydney's North Shore

 Northbridge

• Minimbah Rd
• Coolawin Rd
• Dorset Rd

Cammeray

• Cammeray Rd (water end)
• Cowdroy Ave 

Best Streets in Sydney's Lower North Shore

 Balmoral (Mosman)

•  Hopetoun Ave
• Burran Ave
• Kirkoswald Ave

Cremorne Pt

•  Milson Rd
• Lodge Rd

Neutral Bay

• Shellcove Rd 

Northern Beaches

Palm Beach

• Ocean Rd
• Florida Rd

Avalon

•  Ruskin Rowe
• Riverview Rd
• Cabarita Rd

Clareville

• Hudson Parade

Bilgola Beach

• Allen Avenue

Newport

• Calvert Parade
• Myola Rd 

Quite often I am asked whether I think the property market is recovering or whether I think that the credit crunch will affect prices.  In answering these questions, we need to think about the suburb in question.  Not all suburbs across Sydney have suffered or will suffer equally from external market forces.

If you look at the following table, which shows property prices for houses in Mosman from 2002, you can see that the market has continued to rise.  The small down turn that occurred in 2004 was short lived.  If this is the suburb you are considering, be careful what you read about Sydney prices.  It does not seem to reflect this suburb.
 

Houses

Calendar Year        Median Prices          Capital Growth  
2002                    $     1,690,000  
2003                    $     1,699,500                  0.6%
2004                    $     1,640,000                 -3.6%
2005                    $     1,860,000                 11.8%
2006                    $     1,900,000                   2.1%
2007*                  $      2,005,000                  5.2%
*Settlements as at 26/9/2007

The Sydney property market is reported in the media as being in the doldrums with loads of mortgagee sales and prices falling.  Although this may be true for Sydney as a whole, it is not true in every suburb.  In particular it is a far cry from the truth in regards to many of the inner suburbs.

With the rental vacancy rate at an all time low, the rental returns for investors is increasing.  This, combined with a rocky stock market, is fuelling a growth in the property prices in many inner suburbs.

If you are considering buying property in Sydney over the next 12 months, you would be very wise to ignore media reports and do some homework in the area you are interested in.  You may discover a very different picture.

 As a buyers agent, we are able to assist you in understanding the factors that affect location you are interested in.  For more information please contact us

When most people consider selling their home, they anguish over which real estate agent to use.  Some people really don't want to use a real estate agent. They don't want a sign out the front of their home or loads of people coming through their property.

We are receiving more and more phone calls from home owners asking if we have a buyer that would be interested in their property.  These homes are good quality homes in highly sought after locations.  The owners are happy to wait for a buyer.

As a buyers agent, we work solely for the buyer and are not in a position to be marketing these properties.  The main benefit to our clients is that we have the opportunity to consider properties that other agents are not aware of.

Sydney's East is showing strong population growth through higher density.  Units now represent 56% of all properties which is up from 51% in 2001.  This area has the highest population density with 7,601 persons per square km.  It is an area that attracts young professionals in their 20s to 30s. 

With 44% of the inner Sydney population renting, strong population growth and rental prices increasing, the return on investments is improving making for pockets of good potential buying. 

We are nearing spring and the number of properties that are being listed is lower than normal.  I am referring to the inner suburbs of Sydney where, it seems people had factored in the interest rate hikes.  You would expect the interest rate increase would have impacted on the property market in a negative way.  It has not had a chance.

We have  a few factors at play -

The demand is increasing because of:

• Population Growth
• people being more lifestyle driven and wanting to be closer to amenities, cafes etc.

The supply of homes is decreasing because:

• People are nervous they will not be able to buy again as there are few homes on the market.
• People are in a wait and see pattern.

Located just 2km from the city centre is this vibrant harbour side suburb that is perfect for investors and first homeowners alike.
According to Domain (SMH July 21st-22nd 07) “Even in a subdued market, Rushcutters Bay is a happening place. Properties in the suburb are spending less time on the market, prices have climbed and clearance rates at auctions are also up on the past year.”
Being located within close proximity of the city and next to Elizabeth Bay and Potts Point, it is only a short walking distance to the Kings Cross station, which is one stop to the city. The area is well located to transport, shopping facilities, parks, harbour, nightlife and cafes which makes it a desirable location to live and in turn a perfect location for investment.  “An area like Rushcutters Bay will always enjoy better long term capital growth than other areas simply because it is one of Sydney’s most well located suburbs.” According to Michael McNamara, APM, General Manager.
“In the six months to November, properties were taking 102 days to sell. By the end of May it was 60 days. Prices have edged up 32 percent from a median of $371 000 to $490 000 and auction clearance rates have risen from 65% to 75% for the same period, according to Australian Property Monitors.”

If you are a first home owner or an investor looking for property with good rental return and capital gains potential, don’t hesitate to contact Platinum Buyers Agents to assist with your property needs on 02 8003 7558 or by email on email@platinumbuyer.com.au

According to an article in the Property Investor Magazine (June07), “Sydney will lead the way as Australia’s capital city housing markets move on an upward trajectory over 2007 and 2008, a report from Advisor Edge predicts.”

In his National Property Sector Review, Advisor Edge head of property research Louis Christopher wrote that after a three year downturn there were increasing signs a housing recovery was under way on the East coast of Australia.

Christopher cited “the close historical correlation between asset prices and Australian money supply (M3) as evidence that house prices should climb this year and next.”

The article continues on to discuss the correlation between money and assets and the historical evidence of bubbles in house prices as a result. He says that as a result of the growth of money being at it strongest rate since the last recession that Sydney can expect to see house prices “climb by 10.5 per cent this year and a further 9 per cent next year citing improved affordability, improving interstate migration rates, comparative price levels with other cities and rising rents as the factors that show Sydney is due to turn things around.”

It has been proposed by Advisor Edge head of property research Louis Christopher  “Sydney prices should climb 10.5 per cent this year and a further 9 per cent next year” (Australian Property Investor June 2007).

There are numerous benefits for the foreign investor and expats to invest in this market while it is moving.

Based on the current upward trend in the property market and further evidenced by the increased auction clearance rates, property is going through a growth spurt.
For expats this creates a perfect opportunity to be part of this growth spurt, which is reinforced by an undersupply of rental properties and in turn acting as a catalyst for increases rental income potential for investment purposes.

Expats planning to return to Australia can benefit from capital returns by being part of this growing market.

For investment purposes these statistics are self-supporting however investing in a foreign country can be difficult for the simple reason that you lack complete and utter control over the buying process and accessibility to current market information from afar. 

Investing in property requires sourcing, researching and negotiating property information and requires accessibility to conduct inspections and valuations.

The benefit of utilising a buyer’s agent to a foreign investor is that they can outsource these necessities to professionally qualified persons who are educated in the property market and can make informed decisions in relation to the acquisition of a foreign investment.