September 2015 - What to expect in spring?
By Rich Harvey, Managing Director propertybuyer
With the Spring season now upon us, how will the property market perform? Will the expected rise in listings swing things back in the buyers favour? How much further will prices rise in this cycle and is the prestige market about to get its day in the sun?
In this edition we look at:
- How will the spring market perform?
- End in sight for underquoting?
1. How will the spring market perform?
Spring traditionally spells optimism for the property market. Sydney has seen a cracker winter period with new records and strong price growth. Spring will bring a significant number of new properties to market giving buyer's greater choice and take the edge off this highly competitive market. Many sales agents are trying to clear their current listings to make way for the usual spring surge.
More supply on market means price pressure is lowered. Instead of seeing 60 groups at a typical first open and 5 genuine bidders we may see these figures decline as they spread out over more properties.
Vendors should take advantage of the current market – it won’t be this way forever. Vendors need to be careful of the greed factor and set realistic reserves to ensure they get a result on auction day. Buyers need to be careful not to overpay and over-extend themselves. These record low interest rates will rise again at some point. Work out your repayments on 2% more. Be wary of using “out of line” sales in a suburb to justify the price paid. Take a long term view and don’t be influenced by other buyers’ erratic behaviour at an auction.
The prestige market is set to shine in the coming years provided our Aussie dollar stays under 75c. Overseas buyers and expats are enjoying a favourable exchange rate compared to two years ago when the dollar was above parity. We’re seeing a steady stream of enquiries for our buyers' advocate services coming from Chinese and Indian buyers. More than 50% of the transactions we do in the prestige market are off-market, however the majority of properties we purchase for clients in the middle and lower price ranges are still taken to market (even if we receive advance notice).
Savvy home buyers are looking well beyond their own backyard. As buyers’ agents we get a unique insight into the diverse Sydney market. Wealthy buyers continue to target blue chip areas in the Eastern suburbs, CBD and Lower North Shore. Buyers priced out of the East are now finding better value on the Northern Beaches or the Shire. $2m can buy you a 3 bed Paddington terrace or a substantial 5 bed home at Frenchs Forest.
Renovators are still targeting many suburbs in the Inner West. Families are moving to the Middle and Upper North Shore or the Hills district targeting top schools. The $1m to $2m price range is highly sort after by upgraders and family groups. Sydney’s South West is offering some of the most “affordable” offerings - but expect a long commute to the city.
Investors more than ever need to undertake careful research and selection. In a rising market virtually anyone can think they’re a winner, but the price you pay today determines your profit tomorrow. Yields will take a while to recover, and growth expectations need to be moderated. Sydney’s undersupply situation (which has underpinned the rapid price growth) is expected to continue. High building approvals has put a dent in the deficit but still not enough to bring a balanced market.
Sydney’s numerous infrastructure projects (West connex, NW rail link, SW rail link, Barangaroo, M1-M2 tunnel) will deliver strong benefits to suburbs adjacent to these projects.
Expect auction clearance rates to stay in the 70%’s, then possibly drop to high 60%’s by years end.
If you’re buying a property this spring, you’ll have more choice, but don’t be a fence sitter – do your research,get finances prepared, and use an expert buyers’ agent if you need a hand with shortlisting, bidding or negotiating. Don’t be afraid of missing out - there’s always another opportunity.
If you’re in the market looking for your next property, please call my friendly team of Buyers' Agents today on 1300 655 615 or email your wishlist to discuss your requirements. We will give you a leg up in this competitive market and find your ideal property in record time.
The unsustainable annual price growth of over 17.6% year on year (RP Data) will moderate as we move through spring.
Call our friendly team today on +61 2 9975 3311 or email your wishlist to discuss your requirements to give you the edge in this competitive market and put you at the front of the property buying queue.
Rich Harvey is founder and Managing Director of www.propertybuyer.com.au, Australia's most awarded Buyers' Advocates. Propertybuyer helps property investors and home buyers search and negotiate the right property at the right price, every time. Visit www.propertybuyer.com.au or call 1300 655 615.
2. End in Sight for Underquoting
NSW Fair Trading department have finally announced some positive reforms to help stop the problematic issue of underquoting. While a sensible reform is better late than never, the laws will come into force in early 2016. It has always been a bug bear for many buyers that the selling agent quotes “Offers over $890,000” when in fact the agency agreement says $950k to $1m and ends up selling for closer to $1.1m.
This ends up costing many potential buyers wasted time and effort in pest and build reports and solicitors fees in contract reviews when they had no chance of securing the property for their budget. The primary reason that agents have been underquoting is that they want to create a more competitive buying environment for the vendor and then effectively bid the price up as buyers become emotionally attached to the property.
The new underquoting laws will change the way agents communicate with their vendors and purchasers. The Bill, to be introduced into parliament this week, will see the implementation of new record keeping requirements and a tougher penalty regime.
Under the new laws, agents will be required to:
- Include their estimate of a property’s likely selling price in the agency agreement
- Record the evidence that informed their estimate and provide the vendor with this evidence in writing
- Ensure a price range is no greater than 10% of the bottom figure (eg. $500,000-$550,000)
- Ensure advertising does not include any imprecise or unclear statements such as 'offers over' or 'offers above' or $XXX,000+. Importantly, an agent must never include any price in an advertisement that is less than the estimated selling price in the agency agreement
- Record all quotes provided while a property is marketed
- Notify the vendor if the original estimated selling price is revised. The agent will be required to provide the vendor with evidence (eg. market feedback) for their revised estimate and amend the agency agreement.
Agents will also need to update any marketing for the property as soon as possible to ensure that no price is communicated that is lower than the new estimated selling price for the property.
As buyers' agents we welcome these changes as they provide another means to bring greater transparency to property pricing and a more accurate representation of the vendors expectations.