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6 things to consider before you buy or sell

If you are thinking of buying or selling either an investment or owner-occupied property, there are some things we encourage you to watch before you dive in and act.

Every day journalists swamp us with their perspective on economic and market trends, and even family or friends seem to have “expert” opinion on the real estate market.

Every market is different, however there are some stats and trends to watch to help you understand what the local market is doing. You can use this to then have more meaningful conversations with real estate agents, and it can help set up your expectations before you buy or sell.

  1. Property prices

While it’s important to look at how property prices are currently performing, it’s also important to look at how they’re expected to change in the future.

As a rule, property prices are driven by supply and demand. When demand is high and supply is low, competition between buyers often drives prices up. Conversely, when there are too many properties on the market, sellers may need to lower their prices to attract a buyer.

If property prices start to plateau and market outlook predictions are less than positive, it may be worth selling your property while prices are still stable. On the other hand, if property prices have been experiencing strong growth and consumer sentiment is high, it may be worth dome deeper investigation.

If you are buying, then the vice versa applies.

  1. Days on market

It’s a good idea to review the average days on market over the past three – six months and compare those with the current days on market figures.

This can be a good gauge of whether it’s a good buyers’ market or good sellers’ market.  Markets that are in high demand will tend to show a decrease in the average time it takes to sell a property.

It’s important to note though, that days on market in rural areas and very expensive suburbs, tend to be naturally higher as there are fewer buyers.

  1. The suburb itself

An area in demand can be identified by a surge in new development, infrastructure and amenities. State and local governments will invest in areas where there is demand or a need to enhance the area’s ability to function and grow.

A word of caution though… Whilst buying in a sought-after area can be a good investment for the long term, buying a new apartment can in some ways be like buying a new car.  As soon as has been lived in, it loses its “brand new shine” and “perceived value”. For example, if you purchased an apartment and lived there for only a short time before selling, there may still be some new properties nearby, so you’d be competing with them for the sale.

  1. Surrounding suburbs

Looking at the surrounding suburbs, particularly those closer to the CBD is a good way to understand in what direction your suburb might move in future,.  If housing affordability and slow wage growth impacts a buyer’s ability to purchase in a certain area, they will tend to look for more affordable ‘next-door’ suburbs, thus causing a ripple effect on those neighbouring postcodes.

They might be a little further away from train stations, shopping centres or schools, however the “outer” suburb may have a median value up to 10% lower than the neighbouring suburb that is closer to the amenity.

  1. Auction clearance rates

Multiple factors can affect auction clearance rates, including interest rates, time of year (eg Easter and End of Financial Year) and sudden economic changes (eg Covid-19).

Clearance rates can be an indication if you’re in a buyers’ or sellers’ market. If rates are generally above 70%, it is usually a sellers’ market and vice versa.

A word of caution though – auction clearance rates is not a good indicator if there is only a low number of properties going to auction, as the numbers can be distorted.

  1. The property itself

Generally, properties with good, unique selling features tend to be more sought after and therefore have higher perceived and real value.

For example, at the moment, with lots of people working from home, two bedroom apartments with a study are more popular than simple two bedroom apartments.

  1. A note about Covid-19

It has been around six months since the impact of Covid-19 has been felt and while property values have eased a little over the last few months, it is been nothing like the demise initially forecast in March or April.

In fact, annual price growth remains positive and while there has been some weakness in Melbourne, other markets, including Sydney are showing only slight declines or stabilisation.

It should be said however, that the full effect of the Covid-19 recession has yet to be felt.

The property market may face renewed pressure now that the first round of Jobkeeper payments have ceased and loan deferrals and support for renters is withdrawn.

We expect to see some price weakness, particularly in the next few months and early next year.

 

We hope you’ve found this information useful.

If you would like some help with your property research and/or  buying power and borrowing capacity, please feel free to call us on 8004 2222 or book a time to chat with George.

 

PS  This article is prepared based on general information. It does not take into account individual financial or property objectives or needs and is not financial product or investment advice.

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