June 2009: Property - Red light or Green light?

Welcome to your June edition of propertybuyer’s market update.

In this edition we will look at…

1. Market snapshot
2. Client stories
3. Property Boardroom Briefing seminar – Wed July 8th
4. Rich went homeless for a night – CEO Sleepout
5. Inspiration Corner - Thoughts of the Month

1. MARKET SNAPSHOT: Property - Red light or Green light? By Rich Harvey

“Have we hit the bottom of the property market?” is a common question I’m asked several times a week by journalists and prospective investors/ home buyers. The answer depends on which market segment you mean, key economic signals and your perspective. There are a number of mixed economic signals that can give the green light or red light to making a buying decision. In negotiating the heavy traffic of property information it’s important to not misread the signals and get slammed by a wrong decision or miss out on solid opportunities.

As buyers’ agents, we get to see a very wide cross section of different markets, from high end prestige properties in the $10m+ range down to first home buyers in the $300k to $400k range. Lower interest rates and the first home buyer grants are stimulating lots of activity in the sub $600k range and this is likely to continue throughout the remainder of the year. Some commentators and buyers are suggesting that these factors have artificially inflated prices in this price bracket and buyers are better off to wait until the grants expire and buyer competition is reduced. I believe this is a misguided view as interest rates are not going to stay low forever and are likely to nudge upwards towards Australia’s long term central rate around 7% as recovery kicks in. In addition, the home buyers grants are very generous and unlikely to be repeated in the next decade (it will take a long time for a government surplus to return again!).

At the prestige end of the market Australian Property Monitors (APM) report there are signs that prices are recovering as median prices for the top 30% bottomed out over December and January and then rose slightly in the first quarter of this year. In Sydney the median price of houses in the top 30% of suburbs went from $1.105m in Dec 2007 down to $972k in Dec 2008 and is now recovering to $1.108m as at April 2009.
We are seeing a rise in inquiries from prestige buyers as they see sound value in the Sydney luxury market. Some top end properties have seen price drops of 30% as those with high debt levels have sought to deleverage. While the global financial crisis is not over yet, prestige buyers would do well to capitalize on the lower market sentiment.

The threat of rising unemployment is keeping a lid on consumer confidence – however, I believe the dire predictions of unemployment rising to 9%+ are very unlikely to eventuate. Australia is a clever country and we invest a lot of money in our education (still not enough) and the majority of our employment in the services industry which can adapt to structural changes more than other economies that are predominantly manufacturing and commodities based. The ability of home owners and investors to keep servicing mortgage payments will maintain prices in the property market. One of the key factors here is tighter lending criteria. As long as banks retain strict lending policies to prevent bad loans, then we are unlikely to see a US style sub-prime crisis.

BIS Shrapnel have just released their latest residential property forecasts and predict that property prices looking up. Sydney, Melbourne and Adelaide median property prices are predicted to rise by 19% over the next 3 year period, while Canberra and Brisbane are not far behind on 17% and 16%, respectively, Hobart 15%, Perth 12% and Darwin 11%.

Predicted price growth – Major capital cities

Source: BIS Schrapnel 2009

While some investors might get excited by the prospects of capital growth BIS Schrapnel, point out that the recovery will be slow at first (with unemployment peaking in 2010/11) and then prices moving into double digit growth around 2011/12.

The green light signals for investors and home buyers are lower interest rates, rising rents, lower vacancy levels and the shortage of suitable housing in most property markets. Low building approvals is putting upward pressure on prices in the future.

The NSW Government this week announced it would provide a 50% discount on stamp duty for all new properties purchased in NSW up to a value of $600k. Contracts must be entered into between 1 July and 31 December 2009 for newly built properties and for off-plan purchasers the building must be completed by 31 Dec 2011. Current stamp duty on a $600,000 purchase would be $22,490 which will be cut in half to $11, 245 under the scheme. This is a very welcome initiative that will help incentivise both home buyers and investors back into the market.

The biggest red light signal for buyers is predominantly at a personal debt level, ie, can you afford loan repayments if you were to lose your income for a short period of time. While there has been some good bargain hunting out there for savvy investors, good quality property sells well in all market conditions. Waiting for the elusive “bargain of the century” may never come to those that sit on the sidelines.

Other red light signals that would stop buyers entering the market include an oversupplied market (eg Zetland), buying in areas of declining population or next to an area about to be rezoned into an industrial estate.

Do your research and understand the property dynamics of the area you are buying into. Is there adequate infrastructure? Is new investment planned for trains, hospitals, schools, roads, or major industries? Who rents there and why? Focus on location first, then look at the property features.

Red light or green light…..as you are driving your financial future it makes sense to get a good roadmap and seek advice from others that have traveled the same road. There aren’t many shortcuts to property wealth, but there are true and tied methods for safe investing. As we head toward the end of the financial year, take some time to plan your next few years ahead. We’re here to help guide your property decisions and buy wisely.

2. CLIENT STORIES

Buyer type: Investor
Buyers brief: Eastern suburbs of Sydney. KEY feature – must have a granny flat with external access
List price: Vendor looking for over $1,500,000
Purchase price: $1,420,000
Saving: $80,000
Time taken: 34 days

Buyers’ agent comment – Saul Rudnick:
Essentially a brief like this is very limiting as there are very few properties on the market at any given time that fit the criteria. Through our networks we uncovered two properties that were suitable (in a tight market). We knew from day one that any property we liked we had to have a successful negotiation. Our systems gave us the upper hand in being able to negotiate a great result for our client.

What our clients say:
There is little doubt that I was dealing with a professional adviser, which for a much less experienced buyer like myself, is worth more than the actual saving on the negotiated final price. Saul Rudnick had no qualms about telling me that part of my thinking/ preferences were not well considered. That's very good because you don't want to be dealing with 'Yes' men! Thanks for a great job well done.
(Bert H, Managing Director)

Buyer type: Investor
Buyers brief: Investment property on Sydney’s Northern Beaches
List price: $675,000+
Purchase price: $651,000
Saving: $24,000

Buyers’ agent comment – Matt Corbett:
Trent was looking for an investment unit in Manly’s eastern hill and close to Manly wharf– 2 bed / 1 bath / 1 lock-up garage with good rental yield – 5% yield. Result: renovated unit in eastern hill, 800m from Manly Wharf and 200m from beach.

What our clients say:
I have now used the services of propertybuyer twice for the purchase of two investment properties. The first purchase in Queensland in 2005 has proven to be a sound investment and I feel that my most recent purchase in Sydney will also prove to be a sound and solid long term investment. Matt’s knowledge of the market and local contacts mean that I benefit from a huge saving of my time. I would happily recommend Matt and propertybuyer to any prospective investors.
Trent (May 2009)

3. CREATE YOUR FINANCIAL FUTURE" SEMINAR – Wednesday 8 July @ 6.30pm

Our next evening seminar “Create your Financial Future” will be held on Wednesday 8th July at North Sydney Leagues club. Click here to book.

These evening workshops that will help take your property investing and financial knowledge to the next level and provide excellent information for property buyers around the country. Our workshops are designed for both prospective and experienced property investors those wanting to create a complete financial plan.

In addition to my latest presentation on what is happening in the property market, this month I have invited an award winning financial planning company “Announcer” to speak about designing a strategic financial plan. Their founder Andrew Rocks together with Raymond Albrighton, are experts in their field and will be happy to demystify the topics of;

• Property Depreciation & Tax Advantages
• Tax effective Retirement Strategies
• Risk Management Strategies
• Wills & Estate Planning

On the property side Rich will cover:

• Why property investment is resilient and set for another boom in years to come;
• Market update - what is really happening in the property market
• Creating a smart investment strategy;
• Trends in the current market;
• Opportunities in times of volatility and lower interest rates
• How to choose specific investments for your portfolio.

Rich Harvey, founder and Managing Director of propertybuyer will present many tips that could propel your knowledge to the next level. Rich Harvey is a professional economist, licensed real estate buyers agent and experienced property investor. Rich & propertybuyer have won numerous awards, including the NSW Real Estate Institute (REINSW) "Award for Excellence" in Buyers' Agency for the last 4 years running. He was the winner of the prestigious National and NSW Telstra Business Awards and most recently named the 2009 “Buyers Agent in Australia” by the Real Estate Institute of Australia (REIA).

Receiving one of the top National Financial Planning Association AWARDS for ‘Wealth Accumulation and Protection’, Announcer is a leading Australian financial services company. Announcer has been providing clients with a unique, streamlined approach to all of their financial requirements for over 12 years. Providing complete financial solutions and strategies with added services such as Financial Planning, Tax Accounting, Investment, Estate Planning, Mortgages.

We look forward to seeing you there on Wed July 8.

Book your ticket now at: http://www.stickytickets.com.au/1960/Create_your_Financial_Future.aspx

4. RICH WENT HOMELESS FOR ONE COLD NIGHT– The CEO Sleepout

Last Thursday night, Rich Harvey, Managing Director, Propertybuyer slept rough at Luna Park in support of the homeless at the Vinnies CEO Sleepout. Over 220 CEOs from Sydney raised over $500,000.

The St Vincent de Paul Society thanks Rich for rising to the challenge of homelessness and showing his commitment to the cause.

Help Rich in his final push to fundraise here: https://www.ceosleepout.org.au/donate/donate2/ceoId/1086

Although I only got around 2 hours sleep it was well worth it to help those in difficult circumstances. A special thank you to all supporters for your generous contribution.

5. INSPIRATION CORNER

“Think like a man of action, and act like a man of thought.”
- Henri L. Bergson

“I am only one, but still I am one. I cannot do everything, but still I can do something. And because I cannot do everything I will not refuse to do the something that I can do.”
- Hellen Keller

“Even if you’re on the right track, you’ll get run over if you just sit there”
- Will Rogers

“Man often becomes what he believes himself to be. If I keep on saying to myself that I cannot do a certain thing, it is possible that I may end by really becoming incapable of doing it. On the contrary, if I have the belief that I can do it, I shall surely acquire the capacity to do it even if I may not have it at the beginning.”
- Mahatma Gandhi

“You can never cross the ocean unless you have the courage to lose sight of the shore.”
- Christopher Columbus

Thanks for reading our June update. Stay in touch for next month.

If you would like to buy a property and have a professional buyers advocate on your side sourcing and negotiating the best opportunities throughout Sydney and Australia then please call +61 2 9975 3311 or email us to find the easier way to buy property. .

Warm regards

Rich Harvey
Managing Director
Tel: +61 2 9975 3311
www.propertybuyer.com.au

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Many thanks. Rich