when buying and selling their primary asset. ... then sell their existing property. For a period of time, they ... Canad
ISSUE 117
AN INTRODUCTION TO INSIDE REAL ESTATE PLAYING AND WINNING THE PROPERTY GAME In a game of poker, there are two types of players. Those that know the rules and those that can play the game. In the real estate market, there are three types of participants. Those that know the rules, those that can play the game and those that have no idea what they are doing. Regardless of the category of property participant that you fit into, Inside Real Estate will assist you in a successful transaction.
Inside Real Estate has been written with rising, falling and stagnant market conditions in mind. The game is played differently, according to the market conditions. This subtle but relevant point is often lost in mainstream commentary about the market. The goal of Inside Real Estate is to teach consumers the keys to success in both rising and falling markets. At the time of writing Inside Real Estate, the Australian property market was as diverse as the landscape it is built on. Perth is depressed, its regional peers in WA are even worse. There are reports of properties in mining towns losing 80% of their value. At the same time, the Sydney and Melbourne housing markets are in a boom of historic proportions.
Inside Real Estate will bring consumers up to speed with current market trends and strategies.
During the mining boom, the exact opposite was occurring. Perth, and to a lesser extent regional Queensland boomed while Sydney and Melbourne struggled against elevated interest rates that were used to contain the booming National economy. The underlying message is that the economic cycle and conditions play a vital role when transacting real estate. A lot of commentary simply looks to the recent past to predict what will happen in the near future with property markets. This is clearly a lazy and ill-advised forecasting model. Just because Brisbane boomed after Sydney and Melbourne in the early 2000s, everyone jumped to the conclusion history would repeat itself. The Brisbane market, particularly apartments, had nominal growth in the ultra-low-
interest-rate environment. The city underperformed in less popular investment markets, such as the Gold Coast and Hobart. In a nutshell, the Hobart and Gold Coast markets have vibrant economic growth while Brisbane is struggling to transition away from the remnants of the mining boom. Research house RP Data Core Logic reported in mid-2016 that 1 in 6 apartments sold for a loss in Brisbane. Depending on one’s risk CONTINUED ON PAGE 3
IN THIS ISSUE • • • •
Inside Real Estate Buying then selling? Accurate pricing Recent Sales
BUYING THEN SELLING? TREAD CAREFULLY... Dear Readers, Welcome to the July edition of the Real Estate Report. In this edition, we provide insights into the contents of the book Inside Real Estate. The average consumer is known to transact relatively infrequently; and with the real estate industry changing so rapidly it is not surprising that consumer’s previous experiences are usually left redundant. Unintentionally, many people feel as though they are flying blind when buying and selling their primary asset. Inside Real Estate will fix that. If you are looking to buy and sell in the present market, we urge caution. In the past 5 years as prices have been rising, those looking to buy and sell their primary residence/s have often elected to buy a new home and then sell their existing property. For a period of time, they have had exposure to the market through two properties – the one they have bought and the one they now intend to sell.
The average consumer is known to transact relatively infrequently; and with the real estate industry changing so rapidly, it is not surprising that a consumer’s previous experiences are usually left redundant. In a booming market, while that strategy has risks, the buoyant market conditions minimised the risks. However, all booms end and we get the distinct impression this one is coming to an end. If you buy a property and intend to sell your existing home – you don’t want to discover the boom has passed mid-campaign. If you do intend on buying before selling, it may be wise to get your property reappraised by an agent. There are clear signs that the market is changing. Stock levels are up on last winter and the time on market is becoming longer. It may be prudent to budget for a lower sale price than you initially thought. Budgeting on a lower sale price
and getting more is preferable as opposed to hoping for top dollar and having a hole blown in your budget by a softening market. There are unknowns lurking in the market too. How will the Government’s measures to close out foreign investors impact the market? As we outlined in our previous edition, similar policies in Canada saw the market drop 15%. If stock on market is high in winter, you can expect it to be even higher in spring. A scenario whereby there are an increasing number of sellers and a declining number of buyers is forming for the market. The first home buyer incentives won’t have any impact on the Inner West market. Add the bank’s far tougher stance toward borrowers into the equation and you can see why we are urging those who ‘buy then sell’ to tread carefully. Markets that can go up, can also go down. All the best. Peter O’Malley & the Harris Partners team
Tread carefully: A scenario whereby there are an increasing number of sellers and a declining number of buyers is now forming in the marketplace.
CONTINUED FROM PAGE 1
profile and purpose for buying, now is either the very best time or the absolute worst time to buy an apartment in Brisbane. Regardless of what the market conditions are at the time you read Inside Real Estate, I hope that you gain enough knowledge and insight to transact successfully. As economies, cities, digital disruption and demographics evolve, so to do the challenges. The first of the baby boomers turned 70 years old in 2016. In the next 10 years, there will be a massive transition of wealth, much of it in the real estate market. This will come at a time when digital disruption puts consumers in direct contact, without the express need for an estate agent. Cashed up baby boomers will compete with aspirational home buyers for real estate in desirable locations within our towns and cities. Baby boomers will also sell down their property investment
holdings to fund retirement. These demographic and digital disruptions will change the complexion of the property market. Real estate agents will need to reassert their true value offering to the general public if they are to fend off the digital threat. Digital disruption has already changed the nature of the real estate industry. For better or for worse, the disruption is likely to continue. Airbnb has its sights set on real estate agent’s rent rolls. Landlords will increasingly opt out of traditional management structures and chase Airbnb style service and efficiency. It is a fairly accepted maxim that a large percentage of the real estate industry survives on their rent rolls. Some agents may be closer to extinction than they think if they don’t innovate against Airbnb style attacks. Recently, a client who is a savvy businessman mused that he was virtually a novice every time he transacted real estate due to the speed of change in the market.
The purpose of Inside Real Estate is to bring the consumer, who desires insight and knowledge on the real estate industry, up to speed before they transact. When it comes to real estate, learning through personal experience is too expensive and painful. Consumers only learn many of the tricks highlighted in Inside Real Estate, once they have completed their property transaction. Unfortunately, it’s often too late to avoid financial loss and heartache. Preparation trumps analysis when transacting real estate. Given the average person transacts real estate infrequently, the knowledge gained through stressful experience is then largely redundant. Inside Real Estate offers the lessons at a fraction of the cost of personal experience. The experiences and lessons that can be so painful and expensive are fully explained in the 64 chapters. Let Inside Real Estate become your ace the next time you are playing in the property market.
Inside Real Estate is available now in all good bookstores or online at dymocks.com.au
HARRIS PARTNERS RECENT SALES 44/150 Wigram Rd, Forest Lodge 2/29 Cook St, Glebe
$935,000
37 Burfitt St, Leichhardt
CONFIDENTIAL
$1,250,000
13 Colgate Ave, Balmain
$1,300,000
321/1 Missenden Rd, Camperdown
$690,000
802/3 Cary St, Drummoyne
$1,480,000
4/502 King St, Newtown
$740,000
5 Brown St, Forestville
$1,340,000
2/43 Montague St, Balmain
$1,100,000
4/65 Bland St, Ashfield
CONFIDENTIAL
ACCURATE PRICING THE KEY TO SELLING The Inner West property market has stopped rising. We can debate whether it has just stagnated or is just falling, but there is no doubt the market has stopped rising. The key for property sellers is to price accurately relative to the current market. As buyers will attest, price expectations have been loaded in recent years as vendors priced in future growth. Buyers are now resisting higher prices. The many measures regulators recently introduced to curb the housing boom has caused winds of change to blow through the market. Forget the reported auction clearance rate of 70%. That is a questionable number given so many failed auction campaigns go unreported. The true auction clearance rate in Sydney is closer to 60% than 70%. This must not be confused with a lack of buyers in the market though. It is more a case of buyers (and their financiers) unwilling to pay record prices.
Even though banks have been forced into more prudent lending, interest rates are at record lows. Furthermore, the NSW economy is booming, so the underlying story is good. A tough market is when you are priced below fair market value and still cannot find a buyer. A market that has tight credit controls amidst a booming economy is sensible. Earlier in this boom, the market rose as one. However, as the boom fades it appears the market is not cooling down in a similar fashion. To transact prudently, remember there are markets within markets. Apartments are underperforming houses. Luxury apartments with views that appeal to baby boomers are performing better than generic
high-rise apartments on busy roads or highways. General reporting covering the market at large does not always factor in booming pockets within the market. The auction clearance rate may be softening and taking sentiment with it, but that is unlikely to matter an iota if you turn up to bid on a renovated spacious family home, close to the CBD. If you are selling, a careful and critical assessment of how the market is performing in your category will ensure you price correctly and ultimately sell for more. The best sales results come after a competitive process. If you price accurately for the current market you will still create competition.
Many buyers are finding the banks reassessing the loan application mid property search. The banks are clearly tightening lending into the market. Given the boom was driven by cheap credit as opposed to inflation or rising wages, tightening credit controls is a big story.
Forget the reported auction clearance rate of 70%. That is a questionable number given so many failed auctions go unreported.
37 Burfitt Street, Leichhardt sold after only 15 days on the market.
