Property correction underway

Property correction underway

No, it’s not what you think. Prices in Sydney and nearby regionals like the Central Coast & Newcastle are not falling, but I do think they are correcting. This present boom in prices I believe is a correction following on from an extended flat period in the market from 2003/4 to 2012. The run-up in prices from 2012 to current day 2017 in my opinion, is the correction we were due to have.

For those holding out hope for a fall in prices before they buy, I’m afraid you could be in for disappointment. With 70% of the market traditionally being owner occupiers, these people don’t sell even if sitting on negative equity. They have different reasons for owing property, namely to provide shelter for their families. Loans from lenders favour this type of property buyer with the many consumer protections that come with it.

Seasoned investors don’t panic sell either. They see booms and busts as a normal part of the real estate cycle and if they hold onto property they do well in the longer term.

Interest rates have never been lower and the state government is attracting First Home Buyers back into the market with Stamp Duty relief. Listing numbers have improved (thankfully) but demand is still exceeding supply which is putting a floor under prices. Auction clearance rates are 70+% still and although the rate of price increase has slowed, prices are still rising. This is just part of a normal real estate cycle.

In summary, I don’t foresee falls in prices anytime soon, so I’d be buying when you can afford to. Feel free to call us for an obligation-free chat.

State of the market Autumn 2017

State of the market Autumn 2017

The Sydney boom continues as auction clearance rates exceed 80% on most weekends. The major factor we see playing out is the Supply V Demand equation. Last year in 2016, sales volumes were down by around 50% in most of the suburbs we buy in. This was not due to lack of buyers but by a lack of stock on the market to buy. The situation has not changed much this year in 2017. The main problem seems to be two-fold:

  1. Owner Occupiers are not prepared to sell before they buy for fear of being locked out of the market because of extremely low stock levels and ever increasing prices.
  2. Investors are over-represented at almost 60% of the market (a factor of almost double their normal 30%) and when an investor buys, unlike an Owner Occupier, they have no property to sell – so there is no additional property being put back on the market for sale.

The one good thing about these stock levels being so low, is that it is forcing up the prices for sellers, and holders of real estate are sitting on large equity gains.

This is affecting all of the Northern Beaches, Upper and Lower North Shore, and Inner West. The Eastern Suburbs has seen more listings come through but not enough to satisfy demand. Price growth in Western Sydney appears to have stalled recording growth of only 1-2% in 2016. Stock in the $400-600K price range on the NSW Central Coast is being snapped up by buyers (in some cases sight-unseen) as the “ripple effect” moves out from Sydney (perceived by some to be ‘unaffordable’).

Do we see any change to this situation in the short term? Unfortunately, no.

The people that represent the bulk of the properties coming onto the market are known in the industry as the “4D clients” i.e. those affected negatively by debt, the downsizers, the divorced and the deceased.

The only things we foresee that are going to make a shift in this market is a sharp rise in the cost of money (interest rates), a sharp rise in unemployment, or a huge global unsettlement and we all hope & pray that does not happen.  All things being equal, with limited supply and huge demand, we will be looking at more price increases in 2017 as we saw in 2016.

The good news is that currently up to 50% of the properties we are buying for clients at present are what we call off-market or pre-market properties, silent sale properties not advertised to the general public but instead marketed to the agent’s private database of investors and Buyers Agents.  The great advantage to this is that in most cases you have no competition if you can act fast.

If you’d like to get an unfair advantage or are finding it difficult with your own efforts to buy property, then hit us up for a chat to discuss what we at Propertunity can do for you.