real estate report the winners & losers - Harris Partners

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during the campaign, with 4 making offers. •. Source APM .... You know you are being conditioned when the agent offers
HARRIS PARTNERS

REAL ESTATE REPORT Issue 105

THE WINNERS & LOSERS In rising & falling markets

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here is a simplistic thought pattern that rising property markets are good and falling markets are bad. Supporting the point, transaction volumes historically increase in rising markets and decrease in falling markets.

First home buyers find the level of entry difficult in booming markets and are best served looking to enter the market, when real estate is flat.

Upgraders – if you own a property and intend to sell it to purchase another one in the same market, you are more likely to sell in a rising market.

Many people think that first home buyers are permanently locked out of the market which is an overstatement.

These fluctuations in volumes are sentiment based as much as they are practical decisions by the respective buyers and sellers. Rising markets feel good whilst falling markets don’t.

There is no doubt that current conditions are difficult in Sydney for them, but an opportune time will come again. Indeed, it was first home buyers that created the post GFC boom as they took advantage of declining prices (and Government grants).

However, you are quite possibly better off upgrading in a falling market. If you sell a $1 million home and intend on upgrading to a $2 million home, a 10% rise in the market will provide an extra $100,000 on the sale but take $200,000 more on the purchase.

Whilst there may be more winners in a rising market and vice versa, it is not a universal principle. When you understand how a rising market can actually work against your best interests and a falling market can be used to your advantage, the property market takes on a whole new persona.

First home buyers who were brave enough to venture into the market in 2008 are now on the property ladder and climbing.

When you consider that a lot of fees and services such as stamp duty (and agent’s fees) are based on percentages, the lower the price the better when upgrading. Transitioning into a different market – if you are selling out of a booming Sydney market to buy into a sleepy sea-side village with flat to declining property prices, you win on both sides of the ledger. You sell high and buy low.

Depending on what your goal and objective for trading real estate is, you will be better positioned to act decisively or remain patient when you are conscious of the winners and losers in all market conditions. First home buyers – rising and/or fully priced markets benefit those at the top and disadvantage those looking to enter the market.

Conversely, a 10% market decline on the same transaction wipes $100,000 off the sale but a whopping $200,000 off the purchase.

Rising markets feel good whilst falling markets don’t. However, a rising market does not benefit everyone and vice versa.

The Perth market, for example, is severely depressed at the moment.

Continued on page 3

IN THIS ISSUE: The winners & losers

How’s the market?

Suburb Snapshot: Camperdown

Protect yourself from conditioning

(02) 9818 2133 www.harrispartners.com.au

HOW’S THE MARKET? Strength showing in data Dear Readers,

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espite the negative talk surrounding property prices in 2016, it is now becoming apparent that what ‘experts warned could happen’ has not ‘actually happened’. The May interest rate cut has stimulated the Sydney housing market right at the time that many felt the boom was done for. Many economists will state that this is unhealthy for the economy and they may be right. However, if you are trading in the current market, it is crucial you watch what is happening in the market rather than reading reports on what is expected to happen. As a purchaser, if prices are too high and you feel they could fall at some stage in the near future, it may be better to stop looking. Trying to buy a property below market price means you are likely to waste a heap of time and money in due diligence. If you are intent on purchasing in the current market, you need to take reports, forecasts and opinions with a grain of salt. The only thing that matters is the market conditions in front of you on the day.

102 James St Leichhardt sold for $1,499,950 after 32 parties inspected it during the campaign, with 4 making offers. As a seller in the current market, there is no need to get caught up in the negative sentiment that has prevailed for much of 2016. Interest rates are at record lows, stock levels are tight right across Sydney and the New South Wales economy is strong. The immediate risk for the market would be a sharp rise in unemployment or further tightening by APRA on bank lending. Even the Sydney apartment market that many predict to crash is performing well from a historic perspective. Despite all the talk, it is crucial to recognise the Sydney apartment market is not the Melbourne or Brisbane apartment market, both of which are over-supplied.

Indeed, the impetus for the wave of apartment construction in Sydney was to address undersupply. The undersupply in the market needs to be addressed before we even begin a discussion on oversupply. Lend Lease sold 391 apartments in their Darling Square development in just 5 hours after release on the last weekend of May. That does not suggest anything but demand exceeding supply. The greater risk/s with the Sydney apartment market is buyers overpaying and/or the quality of construction with off plan purchases. Neither of these risks are necessarily apparent or identifiable at the point of purchase, which makes managing the risk tougher. Best wishes, Peter & the team at Harris Partners

Suburb Snapshot: Camperdown 2000

2008

2016

Average House Price

$415,552

$741,147

$1,556,500

Average Unit/ Strata Price

$323,901

$532,247

$826,605

Sold by Auction

21

28

19

Sold by Private Treaty

175

278

27

$650,000

$1,370,000

$2,217,000

$578,113

$1,750,000

$1,590,000

Highest House Price Highest Unit/ Strata Price zz

Source APM

YTD

Continued from page 1

If you were to sell in Perth and move into Sydney or Melbourne, you will sell low and buy high. As important as it is to sell at the right time, if you are transitioning into a different market, picking the right time to buy is equally important. Negatively geared investors – creating a deliberate weekly loss to gain some tax advantages may seem like a sound and plausible strategy whilst prices are rising. When prices are flat or declining, the investor loses twice – a weekly loss plus declining asset value. Investors who are negatively geared need a market that rises faster than the accumulated losses through the negative gearing, to stay in front on the investment. Sharing a profit with the tax man is preferable to keeping a loss to yourself. Many property investors have lost sight of this one. If you get yourself into a position where you are positively geared, capital growth is yours to keep rather than compensation for carrying a weekly loss over a number of years. Investors – it is possible for investors to benefit in both flat markets and booming markets. The key is to transact accordingly.

The winners & losers There are two types of investors, incoming and outgoing.

15 years as baby boomers sell down their assets to fund their retirement.

Savvy investors know there is a right time to enter a property market and equally an appropriate time to exit.

The family home will be increasingly sold down by baby boomers whom are looking to unlock equity and move into smaller more manageable properties in lifestyle locations.

A crude yet timeless real estate cliché such as ‘when rates are high it’s time to buy and when rates are low it’s time to go’ are worth keeping in mind. This should not be your sole guiding light but it is worth keeping in mind. Sure, every expert says ‘sell high, buy low’ but how many actually act on this advice? Prices are currently high in Sydney and low in Perth. How many investors are brave enough to buy in Perth at present? Yet in 2011/12 when interest rates were much higher and the mining boom was ticking along, Perth was fully priced and Sydney was in a severe lull. Sure, hindsight is 20/20, but so is research coupled with long-term planning. Last time sellers – if first home buyers are the losers of a boom, then last time sellers are the recipients and vice versa in both instances. From a demographic perspective, there are a lot of last time sellers coming through the system in the next

WARNING

Baby boomers in Perth feel hard done by given the market has crashed there whilst last time sellers in Sydney feel as though they have won lotto. Particularly if they selling up to leave town. Just as first home buyers could be well advised to hold off on purchasing at present, last time sellers should give considered thought to exiting the market whilst times are good. We may not be in the midst of a full boom as we were in 2015, but is anyone going to really suggest that house prices are currently anything but high? Knowing what you now know, you may decide to act ahead of time or delay transacting until the market environment suits your agenda. There are winners and losers in all markets. If you plan intelligently and sensibly, you increase the chances of being on the right side of the ledger.

Recent research shows that many home-buyers would willingly have PAID MUCH MORE when they bought their homes! It’s not uncommon to see some homes UNDERSOLD for $50,000 OR MORE. It’s as if the owners have moved and left a suitcase full of money behind! At Harris Partners we GUARANTEE to achieve you the HIGHEST POSSIBLE PRICE. Call us now for further details

 A SUITCASE FULL OF CASH 404 Darling St, Balmain NSW 2041 p: (02) 9818 2133 f: (02) 9810 6432 e: [email protected] www.harrispartners.com.au

PROTECT YOURSELF FROM CONDITIONING I rrespective of whether it is shortly after you have signed a listing agreement, or your property has remained unsold for a lengthy period of time, you are always susceptible to being conditioned. Protecting yourself from being conditioned should start before you employ an agent. If you are mid campaign and your agent begins to condition you, it can be hard to extricate yourself from that agent, particularly if you have signed a lengthy agreement. Conditioning is most easily identified in circumstances where the agent bombards you with negative news about your home, usually disguised as buyer feedback. You know you are being conditioned when the agent offers few solutions other than to ‘drop the price’. To protect yourself from being conditioned by the agent, adopt the following strategies before you sign an agreement: Only sign a short agency agreement One of the most powerful elements agents adopt to set up the conditioning of ‘overpriced vendors’, is trapping them into signing a lengthy listing agreement to begin with. If your motivation to sell is high and the listing agreement is long, the agent has all but secured a sale. If the agent has overpriced the home, they will spend the next couple of months whittling the owner’s price expectations down by giving them negative feedback about the property.

DEFINITION OF CONDITIONING

A systematic process employed by real estate agents of communicating bad/negative news to the vendors to drive their price expectations down.

By only signing an agency agreement with a short ‘exclusivity period’, you can deliver the ultimate response to an agent who begins to condition you – you can fire them. It is your home and you are the boss. If you sign a short agency agreement, you maintain the power. If the agent insists on an agency agreement longer than 60 days, don’t hire them. There is no such thing as a ‘standard agreement’! Ask for a list of both positive and negative features on your home A hallmark of conditioning is when an agent praises the property in pursuit of the listing and then highlights every known/possible ‘negative’ once it’s on the market. The agent will act as though the negative feedback from buyers is a complete shock to them too.

Ask the agent, ‘How do you propose to overcome those negatives during the sale?’ It may be prudent to shortlist agents with the best responses to this question. Select your agent based on strategy not price If your property is priced correctly, the agent won’t have to condition you – they will be too busy negotiating with buyers. The reason agents have ‘overpriced vendors’ is because they ‘overpriced the listing’ to begin with. Unfortunately, many home sellers select their agent based on the selling price they quote. They inadvertently turn the ‘agent selection process’ into a bidding war. The big problem here is that it won’t be an agent who buys your property. If you select the agent with the best selling strategy as opposed to the highest selling price quote, your chosen agent avoids being caught in a nonsensical bidding war.

Prior to listing with any agent, ask for a list of the positive and negative features of your home, in writing.

Many people become angry when they learn that conditioning is a low rank premeditated sales tactic. They are surprised and disappointed that their agent of choice has taken the conditioning path.

Then the agent cannot use any negatives listed against your property later as seemingly new information, to get you to lower the price they originally gave you.

The key to success is to insure yourself against conditioning before you employ an agent, rather being left surprised and despondent after giving them the listing.

The hallmark of conditioning is when the agent tells the owner all the good news upfront and then bombards them with bad news once they are signed up and on the market.

RECENT SALES SOLD - $ 1,220,000

SOLD - $ 830,000

255 Elswick St, Leichhardt

3/7 Ballantyne St, Mosman

2

2

1

1

SOLD - $ 1,230,000

2

1

SOLD - $ 1,499,950 102 James St, Leichhardt

2E Alfred St, Lilyfield 3

1

1

4

3

1

SOLD - $ Confidential

SOLD - $ 1,300,000

23 Bligh St, Northbridge

175 Beattie St, Balmain

5

2

3

2

1

SOLD - $ Confidential

SOLD - $ 1,350,000

4 Mitchell St, Five Dock

46 Hermitage Rd, West Ryde

3

3

1

1

2

2

SOLD - $ Confidential

SOLD - $ 705,000

18 Quirk St, Rozelle

17/30 Bland St, Ashfield

2

2

1

1

1

(02) 9818 2133 www.harrispartners.com.au