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March 2010 Update: Have you missed the boat?
Welcome to your March edition of propertybuyer’s market update.
In this edition we will look at:
1. Market Update
2. Client Stories
3. Singapore Property Expo – March 27-28
4. Step by Step Property Success Course – 50% discount
5. Inspiration Corner - Thoughts of the Month
1. MARKET UPDATE –By Rich Harvey
All my buyers’ agents are seeing strong attendance at open homes and multiple offers on well positioned property. The prestige market has bottomed out as executive bonuses and job offers are starting to flow more readily. We are getting good inquiry in the top end range $2m to $10m+. But there is only a limited supply of harbour front and beachfront property available in Sydney, and buyers are very discerning at this level.
The middle market range from around $800 to $2m faces strong competition from families, professionals, expats and baby boomers all looking to upgrade or move suburbs. There is a much better volume of listings available this year as compared to last year – however buyers have to move quickly to secure the property they like.
The decline of first home buyers has been replaced with more investors. We have a large number of investor clients on our books at present. These clients will be in a position to gain both good capital growth and rental increases in the year ahead.
The Australian property market is gaining strong momentum this year and many commentators are warning buyers not to get ahead of themselves. The Reserve Bank will be watching movements in house prices very carefully as it considers interest rate movements in the year ahead. Official interest rates are currently sitting at 4% and the financial markets have factored in another 1% rise to 5% by years end. This will bring interest rates into line with long term averages or what the RBA call a neutral policy setting.
The mood of the market is upbeat and confident…..but there is still cautious optimism as Australia emerges strongly from the effects of the global financial crisis. Auction clearance rates last weekend were above 80% for Melbourne, while Sydney was slightly down to 65%.
Westpac’s latest “Outlook for Australian Property” has indicated that rising interest rates will provide the biggest obstacle to price growth. Melbourne’s growth rate is becoming unsustainable at an annualised rate of 20% growth. Westpac say that Sydney has languished the last 5 years and poised for strong growth the next few years. As interest rates start to affect mortgage repayments “Affordabilty” will become the new buzz word around property circles this year. At a national level we are sitting at between 35% to 40% of disposable income for mortgage repayments (long term average around 33%).
I see three key factors affecting the pace of house prices:
1. Availability of finance – Banks are still out there lending, but they have tightened their lending criteria. Some of the major banks have just reduced their maximum LVR’s - CBA down from 95% to 90% and Westpac from 90% to 85%. Mortgage insurance is still applicable on loans above 80% LVR while all low doc loans above 60% will pay lenders mortgage insurance (LMI). Lenders are more carefully scrutinising credit reports – so action point for investors – check your public credit file before applying for a loan. Lenders also restrict access to equity unless the borrowing is for further investment purposes. The general tightening of criteria by the 4 major banks should eventually see the rise of more second tier lenders re-enter the market at some point in the future.
2. Overseas economies - Many overseas economies are stilling being propped up by “fiscal and monetary stimulus” ie cash handouts and favourable policies to generate economic growth. As these are wound back the effects of massive government debts may be felt on world sharemarkets and cause a wobble with our own economy and sharemarket. The demand for our resources from China and India (and others) will have a strong influence on our future prosperity which I believe will continue.
3. Fear and greed drivers - When the market is very active, some buyers have the perception they will “miss out” and make silly offers or bids (the “fear” factor). In a very hot market this can perpetuate a cycle where the market gets a head of steam and creates a so-called bubble. Prospective buyers see others making good money and want a slice of the action (the “greed” factor). More buyers jump in straight after expecting the same result. The property market can be driven by the same emotions of fear and greed as the share market. The smart investor will understand these cycles and not over-pay on a property. They will undertake extensive research on local values and make considered offers. We do this everyday for our clients.
When presenting my seminars, one of the charts I get particularly excited about is the massive under-supply compared to our rapid population growth. We have a unique situation in Australia which will underpin strong price growth for the next 2 to 3 years. Economists and futurists will be arguing the numbers and what policy should be used to fix the dilemma.
So what are the numbers?
Population growth estimates point to a 60% increase over the next 40 years ie, Australia should have a population of approximately 34 million people by 2050.
We are not building enough houses to satisfy current demand – let alone future demand. The ANZ forecast a massive supply imbalance of 400,000 dwellings by 2015. This figure is much higher than I have reported in previous updates with Sydney having the largest under-supply problem.
While one of the basic solutions for Government is to release more land, this will not solve the issue for decades. It takes considerable resources to develop basic infrastructure in these new “greenfield” sites – roads, schools, hospitals, water, drainage etc. At present developer charges per lot are very high and make many subdivision sites uneconomical. Governments are reluctant to release too much land as they then have to fund the development of new infrastructure which puts a strain on already stretched budgets. It makes no sense to release new land if the new housing areas are not serviced by basic infrastructure.
What does this mean for home buyers and investors? It means we are well into the growth stage of the property cycle. You haven’t missed the boat, but you need to get on board if you want to move ahead. Waiting by the sidelines for the market to “correct” means you are likely to be priced out of the market. Many Australians have achieved financial security by buying well located properties.
As affordability becomes more of an issue, I expect to see the proportion of renters (currently 31%) increase to around 40% in the future. This will simply widen the gap between those in the property market and those watching the market from the stands.
My advice to all subscribers is to buy as much property as you can reasonably afford right now. Get your retirement plans in place now – and your kids/ spouse/ family will thank you for it. In summary:
- We are in the growth stage in cycle
- Revalue your portfolio and refinance if needed
- Develop clear search & negotiation strategy
- Focus on capital growth
- You are better off being in the market that waiting on the sidelines!
- You haven't missed the property boat - it is set for a long voyage.
This article was written by Rich Harvey, founder and CEO of propertybuyer ®, Sydney & Australia’s leading Buyers Agents. Rich is an economist and was awarded the 2009 National “Buyers Agent Award for Excellence” by the Real Estate Institute of Australia and the 2007 National Telstra Business Award (amongst other awards).
2. CLIENT STORIES
Buyer type: Home Owner
Buyers brief: Large block, solid house with scope for renovation in Sydney’s Northern Beaches
Appraised Value: $1,375,000
Purchase price: $1,300,000
Saving: $75,000
Buyers’ agent comment – Matt Corbett:
Derek and Leanne were living in Gladesville, looking for a home in the lower half of the northern beaches to raise a young family. They weren’t overly familiar with the area and had just had a new baby and found it almost impossible to do inspections. Within less than two weeks I found them 2 properties that met their expectations and gave them my opinion of how much I would spend on each of them in order to meet their needs and not overcapitalise in the area. They agreed that the first of the two properties was their best option, a house in Freshwater, so we moved very quickly to secure it at a great price. I have no doubt they will be very happy there and it will be an excellent long-term investment.
What our clients say:
“We had been persistently looking for the 'right' house without success for a number of years, and so thought a change in tactics might be appropriate. We considered the cost of engaging a professional buyer and placed our trust that we would save the cost and more from any deal - that hope was more than met, and our expectations were exceeded.
After engaging Matt, he quickly sifted through the properties available in the market, provided us with a few options to attend, which met our wish-list. It quickly became evident that Matt had listened to us intently with the options ticking a lot of our boxes almost immediately. One property (which we now own) particularly caught our eye, and Matt quickly provided a range of professional analysis and research at a speed or quality which we could not have matched. It gave us great confidence to make a decision and to make it quickly - in a manner which we know we would not have done, if we were going through the process by ourselves. Matt, coached us through the process, as this was our first purchase, answered our questions, and gave us boundaries on the value of the house. It enabled us to expedite the process, and give Matt clear authority to push ahead. Matt completed the negotiations, hand-held us through the inspections and contract signing, and positioned us for a fantastic win in securing the house.
And all of this happened within 3 days of seeing the house for the 1st time!!! There is no way we would have felt confident enough to close such a deal in that time-span without the professional support Matt offered. Just as importantly, Matt's 'after-sales' support was fantastic, helping us right through to the settlement date. Fantastic service, we got great value for the engagement of Property Buyer and would use them without question again.”
Derek (National Logistics Manager)
Buyer type: Home Owner
Buyers brief: House on Sydney’s North shore, close to transport
List price: Offers over $1.2m
Purchase price: $1,160,000
Saving: $40,000+
Buyers’ agent comment – Matt Corbett:
Chris and Sally were undecided on a few areas and originally asked me to do an appraisal on a property in Cabarita and represent them at auction. As it turned out, other bidders got carried away at auction and paid far in excess of what I felt the property was worth. Chris and Sally agreed and were happy to continue their search before coming across a property in Sydney’s south. I asked our buyers agent expert in that area (Saul) to meet them at the property and give them his opinion of value, which exceeded Chris and Sally’s budget. Consequently he was proven correct at the up and coming auction. Shortly after they found a property that they were both extremely keen on and it had been previously on the market for $1.25m, before being reduced to ‘offers over $1.2m’. My relationship with the agent, our ability to act quickly and the solidarity of our offer allowed us to secure the property well below the asking price.
What our clients say:
“As a first home buyer, we found Matt's expertise, professionalism and calmness under pressure extremely reassuring throughout what was an extremely stressful period. There is no substitute for an insiders view of the residential real estate industry, regardless of how much you think you have learned from the media and talking to friends. Matt regularly went beyond the call of duty, working weekends and evenings on our behalf as well as offering to undertake the pre-settlement inspection. Matt also deferred to his colleague (Saul) when we changed tack midway through our search and began focusing on a different part of Sydney (which Saul was more familiar). Although we were initially disappointed that we missed out on our first choice property at our first auction, it was reassuring to know that the final price came in well above Matt's appraised value.
Just as importantly, Matt steered us away from properties that were less suited to our needs and would have taken many years to recoup a reasonable capital gain. When we found a property that my wife and I both liked, Matt negotiated a price that was $50K below what the vendor was seeking 6 months prior - a tremendous outcome given that average prices in the area had actually appreciated during this period. I suspect Matt's familiarity with the vendor's agent and his negotiating acumen greatly assisted in this process. I have no hesitation in recommending Matt and his Property Buyer colleagues (Saul and Dave) to anyone interested in securing property as an owner or investor. I shall be seeking Matt's services when the time comes for my wife and I to source investment properties.”
Christopher and Sally
If you are considering buying and would like to get the upper hand with a professional buyers’ advocate representing just you (not the vendor), sourcing and negotiating the best opportunities throughout Sydney and Australia, then please call our team on +61 2 9975 3311 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it for an obligation free chat. Click here to send us your Wishlist
3. SINGAPORE PROPERTY EXPO
I have been invited to present a key note presentation at the Singapore Property Expo on the weekend of 27-28 March. I will be speaking on “How to pick winners in the Australian Property market.”
If you are an expat living in Singapore or foreign investor looking to buy a property in Australia please come along and hear the presentation. I have limited time slots available on the Monday 29th March for meetings to discuss your personal situation and property strategies (for home or investment).
Please contact me directly if you would like to catch up in Singapore (Tel +61 2 9975 3311 This e-mail address is being protected from spambots. You need JavaScript enabled to view it ).
4. STEP BY STEP PROPERTY SUCCESS COURSE – MARCH 21 & 22
I am very selective about promoting other property courses. However I believe investors will gain a lot of valuable information from this course below (and no we don’t get any kick backs for recommending this)!
Medine Simmons and Jane Slack-Smith are skilled property investors with 20 years’ experience, 16 properties and between them, a portfolio worth $10m. They have investigated the market from every angle; real estate agents, banker’s strategies, buyers’ advocates, conveyancers, solicitors, accountants, ATO policy, builders and tradies.
They have offered Propertybuyer clients a 50% DISCOUNT SPECIAL OFFER for the course in Sydney this weekend.
SYDNEY: March 20th and 21st Menzies Hotel - only 10 seats left, now $750pp +GST (were $1500 +GST pp) or $500 +GST pp if two tickets booked together.
Book now at www.stepbysteppropertysuccess.com.au
What will be covered:
• Setting your goals and how property investing will assist in achieving these.
• Determining your property investment strategy, eg capital growth, off the plan, renovation and flip, buy and hold, land banking etc.
• How to research. Jane gives 20 websites she has used over the years that give free information on such things as demographics and past capital growth.
• We select a suburb on the day, do all the research and then go online and look at what is available…real time. Then we discuss the opportunities so you know what to look for.
• How to gain most from valuers using a valuation template so that you can access equity to do it all again.
• How bank policy changes in 2009 have changed advanced investor strategies and how to prepare for the coming years.
Once you have this knowledge you are better positioned in speaking with your buyers’ agent, solicitor and accountant and asking the right questions to get you to your goals quicker
The class size is very small at just 20 so you will get meaningful content.
Early Bird Pricing still available for Brisbane and Canberra $1050 early bird +GST or $1500 +GST within a week of the course. BRISBANE: 24th-25th April, CANBERRA: 22nd -23rd May, ADELAIDE 3-4th July, DARWIN 28-29th August.
Register your interest now for Hobart, Perth. For further information and registration go to www.stepbysteppropertysuccess.com.au or phone 1300 96 36 46
5. INSPIRATION CORNER
The common denominator of success is “forming the habit of doing things that failures don’t like to do.”
We may have all come on different ships, but we're in the same boat now. Martin Luther King, Jr.
Promise only what you can deliver. Then deliver more than you promise. Author Unknown
“A sale is not something you pursue; it's what happens to you while you are immersed in serving your customer.”
Look out for my next property seminar to be held in mid May. I hope you enjoyed your March update and we look forward to keeping you informed in the next edition.
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 This e-mail address is being protected from spambots. You need JavaScript enabled to view it to find the easier way to buy property. Click here to send us your Wishlist
Warm regards
Rich Harvey
Managing Director
Tel: +61 2 9975 3311
www.propertybuyer.com.au
PS…. YOUR REFERRAL IS APPRECIATED
Your subscription to propertybuyer’s monthly market updates are absolutely FREE! As a return favour, please send this newsletter to someone you know that would also benefit from the information. The majority of our business comes via referrals, therefore I would really appreciate your help. Please forward this email to a friend or colleague, by pressing the “Forward” tab on your email program and suggest they subscribe.
Many thanks. Rich
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