North Shore property prices have kicked off in a big way in 2021! Henny Stier, the co-founder and Principal Buyers Agent at OH Property Group, shares her insight about how to manage a market that’s too hot to handle.
Queues to get into Open Inspections on the North Shore are long. 50-80 groups inspecting in a 30-minute window has become the norm. It literally feels like a stampede and so many buyers walk out looking dazed and horrified.
Auction clearance rate in NSW is hovering just under 90% and probably closer to 100% on the North Shore in 2021. Many properties are selling between $500,000 – $1,000,000 over the price guide given by the agents at the first Open Inspection. It’s no surprise that buyers are feeling despondent and frustrated at watching house prices spiral out of control.
Top tips for staying cool in a heated property market…
1. Make sure you can afford where you are looking to buy
There is a very quick rule of thumb you can use to work out whether you can afford to buy in a given suburb. Go to any of the main real estate portals and look up the median house price for that suburb. This median price reflects an average (dated) home on an average block of land for that suburb. From our experience, your budget needs to exceed the suburb median price in order to be competitive in buying there. As an example, the house median price in Killara is currently $3,100,000. So, if your budget is $2,500,000, chances are you are already priced out of Killara and should look elsewhere. There is no point wasting time looking for a unicorn!
2. Do your homework. Know what a property is worth
Determining what a property is worth takes skills and experience – but it can be done. Many buyers simply guess what a property is worth and rely on social proof or an Auction to confirm what they may be thinking. In order to make an informed decision on whether to pursue or to walk away, you need to know what the property is worth. Guessing is not good enough.
3. Get ahead of the market. Don’t chase it!
In a fast-rising market, the most recent sales result often set the benchmark for the next sales. If you can see that your budget is cutting it fine based on the most recent sale, you are better off making the switch to a more affordable suburb sooner rather than later. This allows you to get ahead of the market rather than always being just that little bit behind and missing out on auction after auction.
4. Hope is not a strategy!
An agent’s job is to try and get you to compete. This is how they get the highest price for the sellers – which is their job after all and you can’t resent that. They want as many people to come to Auction as possible. If the data indicates that a property is not likely to be in your budget, don’t waste time hoping that you will have a shot at Auction. Hope can be a cruel thing and disappointment will ensue if you’re just blindly believing the price guides – which are often severely underquoted to bait buyers in. In our experience, some sales agents deliberately underplay the level of interest they have on the property so as to give buyers hope that they stand a good chance of buying the property if they just come to Auction.
5. Know underquoting when you see it
If it’s too good to be true, then it is probably underquoted. For example, deceased estates are often heavily underquoted and the agent would tell everyone that they won’t be accepting offers prior to Auction. This is because if a solid offer is made and rejected, the agent would legally have to re-adjust the quoting guide and many don’t want to do this as they want a deliberately low guide to get as many people to come to Auction as possible. There are so many loopholes for agents to get around underquoting regulation so you need to educate yourself. You can’t change the system so you need to learn the rules of the game.
6. Don’t cut corners
Always order your own pest and building inspection. Don’t just rely on the Vendor-supplied reports as they are often quite light on details and just filled with disclaimers. We have seen many properties where we would advise our clients to walk away and other buyers just buy it without doing their own pest and building inspections.
7. Know when to hold and when to fold
In the heat of the moment, it is easy to get carried away when making offers or bidding at an Auction. We always advise our clients that they need to be able to live with their decision long after they buy. Ask yourself the question: “Will I feel better if win this property at $X or is it better to walk away than pay $X?”
If you have been looking for a very long time, be particularly conscious of making a rebound purchase (after you have just missed out on something). The sense of relief you will feel after purchase is only temporary – but the asset you will be stuck with is going to be with you for a long time to come. So, don’t buy the wrong property just for the sake of buying. We have seen many instances of impulse buying and regretful purchases where the property is subsequently put back on the market only a year or two later. It happens quite often and can be a very costly mistake given how high the transaction costs are (stamp duty, legal fees, selling fees, etc.).
8. Be careful whose advice you listen to
Lots of buyers are resorting to engaging Buyers Agents to help them navigate the current market and understand North Shore property prices . However, we have noticed a disturbing pattern of new or out-of-area Buyers Agents paying astronomical prices just to get a deal done. A good Buyers Agent is someone who is not afraid to tell you when a property is not worth buying and to advise you to walk away when the prices become silly. If you are going to buy at all cost, then there is no point engaging a Buyers Agent as you can do that yourself. A reputable Buyers Agent with a long track record would have been through this heated property cycle before and know how to manage the buying process in a calm and rational manner.
Conversely, many well meaning family members and friends may be giving you lots of different advice. Some may be advising you to just buy quickly. Others may tell you to not buy as the market is too hot. Be careful whose advice you seek and follow because it might just confuse you.