The early bird catches the real estate worm

The early bird catches the real estate worm

As you may well be aware, Robert is having a well-earned break for two weeks in the sun, re-charging his batteries and finessing his writing skills. It is impossible to compete with Robert’s passion and commitment to his newsletter. Suffice to say, he spends hours and hours every week researching and analysing the real estate market to pass valuable information on to our clients. It truly is a mammoth effort and we should know – we empty his office every week of all the articles and reports he studies.

I have provided a quick snapshot of the last six months in the office and welcome you to our mid – year report card.

The last six months have been a rollercoaster ride on the share market, which has shed around 30% of its value. These events have led to a ‘cleansing’ of the financial and banking sector which, it seems, is still in progress, although some are tipping it’s now hit the bottom.

Well, how does this affect the Real Estate market?

Despite the economic turmoil, the first three months of the year were solid, with our office turnover matching last year – surprisingly so! However, the past 3 months have seen a slowdown in turnover and an easing of prices. Many sellers prefer to sit on the fence and see what happens. At the same time, the buyers have become more cautious and lost their urgency to buy, waiting to see if prices will fall.

This past month we have seen a definite gear change, with the market softening around 5% across the board. If a seller has to move quickly, then up to 10% may be reduced for a quick sale, but mostly we have seen reductions of around 5%. We sold a house last week for $3.8m which was purchased 18 months ago for $3.7m, indicating a small increase, but that certainly isn’t the norm.

Last month we sold a home in the $9-10m dollar range. There proved to be at least 10 bona fide buyers in the market at this price point, but they all have very particular requirements and are waiting until they find the ideal property. Two other Mosman properties sold last month around the $10 million mark, a clear sign that the money is there if the property is right.

Properties in the lower price range ($1.5m to $2.5m) have been hit harder as they are very price sensitive. Interest rate fluctuations will continue to have a strong impact on this buyer group.

Now, it is a buyer’s market. Some properties will still get a premium with competition as they have most of the key ingredients that buyers want – north facing, level block, great views, quality finish, good floor plan. Also, anything seen as a bargain is quickly snapped up. We noticed that properties around the $1m mark are starting to move a little quicker, especially with rents moving up and renters now buying.

Our long term view and that shared by many, is that there will be a period of good buying before the market takes off again. This improvement will be driven by money moving out of the stock market and back into property, especially with rents rising. But according to economists, the biggest driving force behind the next property boom will be a lack of homes available and a shortage of new ones being built to accommodate our immigration.

Many people will still upgrade to a more expensive home in a soft market because the changeover costs are always lower than in a hot market. We always recommend trading while you can in a softer market because it is more cost effective, but sell first and then buy. Cash is king in this type of market.

So the question is, when will the market take off again? 6 months? 12 months? 2 years? … This remains to be seen, but what we do know is that when the papers announce the market is bouncing back, it has usually already jumped 10% which is a significant amount in this area. The trick is to buy before the rest of the market jumps on board and pushes the market further.

My belief is that if you see the home that is perfect for you, (or close to it) buy now. You can’t go wrong. I reckon your friends will applaud you in a few year’s time, acknowledging that you picked the right time to buy and will be reaping the rewards.

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