Since the beginning of 2009, Sydney has recorded a cumulative capital gain of 76 per cent. Many suburbs on the North Shore have seen nearly 20 per cent in growth in just the past year alone – astronomical, but definitely unsustainable, reveals local property expert Henny Stier. The good news is, relief has come as the Sydney real estate market undergoes a noticeable shift in momentum.
Over the last two months the level of buyer confidence has definitely dipped and there is no longer a frenzied atmosphere. Across the board selling agents are reporting much lower turnout at Open Inspections. It has also been widely reported in the media that auction clearance rates are now back at 2012 levels. Sydney has just recorded its second consecutive clearance rate below 70 per cent; a far cry from clearance rates hovering at around 90 per cent in May.
Many auctions are even starting to fail or be withdrawn. Those which are clearing auctions are often struggling to do so, with vendors needing to lower their reserves in order to meet the market. There are fewer registered parties and the bidding can be sluggish and patchy.
It is worthwhile to note that even though the auction clearance rate has come down, this statistic is for all of Sydney. If you broke down certain segments in the marketplace to categories and price ranges and attributed auction clearance rates to those specific items, you could end up with some at 50 per cent and others at 95 per cent.
A good example is the $2.5 to $3.5 million range for a good family home in Mosman or Cremorne, with a flat backyard and good spacious accommodation in move-in condition. This ‘product’ has been so rare to come by that there is no shortage of buyers ready to snap these up. Likewise is true for similar quality homes in the $2-2.75 million range in Upper North Shore suburbs including Roseville and Lindfield.
Properties which have major flaws, however, are no longer as well received by buyers who are starting to be more selective. But there are certain types of properties which are continuing to see extremely strong levels of demand. Clear and large parcels of land ideal for knockdowns are, and will continue to be, very popular. Properties in blue ribbon locations within very close proximity to train stations or shopping centres are also selling at high prices, as are entry-level homes given the backlog of first-time homebuyers who, until recently, have been priced out by investors.
Based on many conversations with agents and auctioneers, there will be a lot of new properties coming on to the market this spring season. This will provide sellers with more competition and buyers with more choices. Barring a global catastrophe, the Sydney property market should be fairly stable for the remainder of the year. The general consensus among experts is that a soft landing is far more likely than a crash landing.
Looking to sell or buy this spring?
If you are looking to SELL, here are my top five tips.
- Hire an experienced agent who has been around long enough that they know how to handle a turning market. Given the past couple of years have been extremely strong, many agents claim to be able to get spectacular prices for their vendors – but this is often purely driven by the market and is not necessarily due to the skills of the selling agent. Now that the market is turning, you need to find an agent who knows how to negotiate well and not just rely on the lottery of ‘auction day’ to get you the best price. Many newer agents who have only been around for one or two years have only known a strong market where they take everything to auction. Their negotiation skills are therefore often untested. Be selective and choose an agent based on their proven track record over a long period of time. And once you have hired them, listen to their advice.
- Be realistic about what your property is worth. Don’t blindly benchmark against your neighbour who sold three to six months ago. The market is not the same.
- Check out your competition. In spring, buyers typically have a lot more choice as there are more properties on the market. You should be going to Open Inspections and comparing your property against those in similar price points in the same or adjacent suburbs. Remember, your buyers are likely to be doing this, too!
- Stand out against the competition. Flawed properties are no longer selling like hotcakes the way they were last year or earlier this year. So do what you can to get your property to be at its best.
- Price your property strategically. Underquote too much and you’ll get the wrong buyers through the door who really can’t afford your property. Quoting too high can mean you lose buyers who won’t come to your Open Inspections. Some agents are resorting to not quoting a price guide at all or being cagey with buyers. This may have worked in the past where many properties go straight to auction, but this could be detrimental in a turning market where many more properties are being sold outside of auction day and where buyers are less tolerant of this approach and can be easily alienated.
If you are looking to BUY, here are my top five tips.
- Get back to the basics and focus on the fundamentals of buying a great property. Desperation and fear of being left behind by the market has meant many buyers in the past year have compromised heavily and bought below average properties. That sense of urgency is now gone, so you should take your time and make sure the property you are buying is a sound one. Avoid properties that have major issues.
- Take your time. But don’t take too long. There is no such thing as the perfect property in your price point – so don’t wait around for it. If you find a property that ticks most of your boxes, and is within your budget, then don’t be scared to go for it. The best time to buy is when you and your family are ready.
- Do your due diligence thoroughly and don’t rush to make offers or bid at auction without having the contract reviewed/amended and without commissioning an independent pest and building inspection (or strata search).
- Don’t be coaxed to bid against yourself if you are the only registered party at an auction …ever. The best time to scoop up a bargain is when a property has been withdrawn from or failed at auction. That is your best opportunity to negotiate hard. Keep in mind, though, there is a fine balancing act. The longer you wait, the more likely that someone else will come along who also recognises the opportunity before them. Some buyers lose the big picture and negotiate just for the sake of negotiating. Your goal should be to negotiate to win and not to lose the property.
- Be careful not to overpay. Bank valuations are starting to come back more conservative, so ensure there is a buffer should the bank valuation come in below the price you have paid.
Are you house hunting or looking to sell at the moment? And have you changed your strategy with the changing market? Let us know your thoughts in the comments section below.
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