17/05/2018
Dear Friends,
Huge volatility- I have personally never experienced such a negative sentiment towards buying since 2008 during the GFC. Most of this has been directed towards strata property, but is now across all properties and price ranges. This does not mean there are no buyers or properties transacting, in fact there are lot's of buyers looking, however I am finding many of these buyers don't yet have finance and are saying things such as "we have only just started looking" or "I am not in a rush as prices are going down". On the weekend I personally had the experience of having a qualified buyer register at an auction, a very realistic reserve price (lower than the last sale) yet the buyer decided to low ball and subsequently went home empty handed. The property is now for sale at the reserve price and is attracting interest. It will be sold to another new buyer at asking price or higher. I use this as an example of the frustrating behavior and attitude taking place out there. My advice? Now is a great time to buy! If you see a good deal, co-operate and buy. You will then enjoy the tremendous capital growth in the coming years which Sydney is renowned for.
Small risk big rewards- As above. No-one has a crystal ball and it is near impossible to time the peak (in selling) and the bottom (in buying) of the market. I use the property clock analogy. Twelve o'clock being the peak up the top and six O'clock the bottom of the market. February - March 2017 was twelve and I say we are somewhere between five and six c'clock meaning it has bottomed out now or has a small way to go. Either way I would recommend buying property anywhere between four o'clock and seven o'clock this way you always have growth reserves ahead of you. And if it's a peaking market, choose another capital city or regional centre where it is six c'clock.
Grab a bargain- Where I see large scale development diluting the strata market I see buying opportunity. I recently saw a 100sqm 2bed 2bath 2car apartment in a very new complex sell just under $700,000. Keep an open mind. Buy anything that represents great value. It's like a boxing day sale out there, keep emotion out of it and if you don't like the place just re-gift it and sell for a profit next Christmas to someone else.
Land a comodity- A very general statement. Buy property with a large land component. Don't be scared of main roads. In fact buying a good size block on a main road is usually cheaper because of road noise but these are the first properties that get rezoned in the future. E.g. Botany Road Botany. Landbank. One day you will see unit blocks will retail all the way down this road.
Preempt finance drama- If you are looking to buy soon my advice is start speaking to a broker as well as the bank. You may have a great relationship with your trusted bank, but they might not have the best product or their policy may restrict your borrowing. Doesn't take much effort. Call a broker. I can give you my personal brokers details if you email back. Also get your paperwork ready. Recently I had to go into the RTA and update my address sticker on the back of my license so it matched a loan app. The royal inquest is putting pressure on lenders to really dot the i's and cross the t's. The ATO is taking ages to process financials. Banks are making you lodge and aren't using draft's. Banks are asking for pest and building reports on already purchased property.
Vendor trends- It seems like half of my vendors are moving out of Sydney and the other half are divorcing. I believe Sydney and the intense nature of this beast is putting huge pressure on families. Family living isn't the way it used to be. Ipads and Uber eats have replaced healthy things such as backyard cricket and home cooked meals, and in my opinion it is mentally damaging and leading to sea changes and family break downs. Our city has so much to offer, beautiful beaches, walks, activities and the list goes on. You only get today once. Live in the moment and never sacrifice your life or hold yourself hostage to real estate.
The next generation- The book 'Rich Dad Poor Dad' a classic I am sure many of you have. Education on how to work hard and smart and invest in appreciating assets and build wealth. Many young people are walking around these days with a sense of entitlement and a defeatist attitude towards buying property. Anything is possible but now more than ever with the digital evolution influencing kids at every second you aren't watching it is most important showing them things like work ethic as unless they are given a huge inheritance their children will have no chance in climbing the ladder. Some are becoming things such as 'instagram models' for example and positioning themselves effectively in a depreciating asset class rather than investing in their own knowledge and building a basis for a successful life and creating wealth. Obviously there is nothing wrong with pursuing your passions but reading between the lines is important and diversifying your skills and gearing up with experience is better than putting your eggs into one basket in such competitive industries.
Diversification- Scared of the market dropping? Just diversify. Owning a larger number of cheaper investments is much safer than say buying a single family house in the area for say $1,700,000. Heard the term rent-vesting? Rent a house for $900pw that may normally cost you $1,500,000 e.g. $1700pw repayments and use your money to buy several smaller positively geared houses on quarter acre blocks. Taking Sydney out of the equation, for the same money you could more or less buy some sort of entry level house in nearly every major capital city for the same combines value and end up with a positively geared property portfolio of five properties.
If you are thinking of selling please give me a ring and I can advise you of the buyers I am working with and give you a professional, free consultation. Billy Couldwell
