February 2019

This is the 10th in a series of articles summarising monthly news and happenings in Sydney real estate, and more broadly.

Just Do It

Despite the ongoing slide of the Sydney home market, dwellings are still being bought, built and sold, and people will always be moving, changing, upsizing and downsizing for every reason under the sun.

Even though most dwellings are worth less than they were 12 months ago it is important to note that this is no reason to put life on hold. For example, in inevitabilities like career changes or impending births, price and profit are not the highest priorities, but finding the right place within the window of opportunity is. Acting on opportunities can be important for our progress through life, and whether you buy or sell at the optimum time to profit can be irrelevant when it comes to beginning new phases in love, life or work.

The ABC recently posted an article that included a definition of the German word torschlusspanik (pronounced torshless-panic). Reportedly this word summarises the feeling of missing out on a life goal or opportunity (not to be confused with FOMO – Fear of Missing Out – which tends to be more ephemeral fads and the like). Most people know the feeling, ‘oh, if only I had ___ when I had the opportunity’. Sometimes change is forced onto us, and sometimes it’s available for a short period. When we miss out, we know it after the fact.

The Ghost of Affordability Future

This article by Chris Leishman on The Conversation even discusses that the current falls in house prices don’t necessarily even help with affordability. People who are putting off buying because they are waiting for the market to fall further may not have taken other wider-ranging elements into account. For example, a downturn will inevitably mean that less people are putting their homes on the market and so there is less choice. This is reflected in the latest Core Logic data that reports in Sydney a 20% drop in new listings (It’s important to note that the market is nearly 24% larger overall for the moment however, if this trend continues that might change).

Attribution: CoreLogic

The point that Leishman makes is that the current housing market conditions could affect the economy, which in turn may affect wages growth, and this could then pressure lendors into tightening their loan restrictions:

“During the current price adjustment, housing affordability may appear to improve slightly. But low wages growth and limited working hours, coupled with lending restrictions, combine to make it just as hard for first home owners to enter the market.”

CoreLogic confirms this perspective with analysis of RBA projections that state “…members observed that if prices were to fall much further, consumption could be weaker than forecast, which would result in lower GDP growth, higher unemployment and lower inflation than forecast.”

In other words, if you are getting into the market for the first time, now is as good a time as any, and in fact may be a better time than in a future where a decreasing value market may have had knock-on effects that make a first purchase even harder to secure.

Leishman also notes that this apparent impending perfect storm can create opportunities for cash buyers who do not need to be at the banks’ behest. In addition (and with respect to data that suggests the different segments of the market are performing in different ways), this may also be a good time to upgrade to a bigger house. For example, even though prices might have dropped, a 5% drop in the price of a million dollar home is double the drop of the 5% drop in the value of a half million home. As Leishman says:

“Times like this tend to favour cash buyers rather than those who need to scrape together a deposit and secure a mortgage before they can buy a house.”

Be Prepared

With that in mind, a few simple reminders for investors and upgraders about what sort of approach to take whilst looking for an opportunity is timely. If there are fewer new listings, it could mean the competition for the best picks are just as high as ever. The Real Estate Conversation shares that an effective buyer:

  • Knows what they want. With crystal clarity. Lists are handy. What would a place need to be an instant fail, or instant win?
  • Gets out there. There is more to finding the right home than simply scrolling through lists. Sometimes the best places sell before they are even listed.
  • Builds relationships. Real Estate agents often have the inside scoop on details than can help you sway the balance between multiple options.
  • Is prepared. The story notes that finding the right place may be well and good, but if you don’t have the .25% holding deposit, or required ID and someone else nabs it, then that can be disappointing.

In regards to knowing what you want, TREC has another story that breaks this down even further by suggesting to include researching the suburb and surrounding area, the rental income per week, checking the value of the property and whether it will be easier or harder to maintain. Due diligence is important, not just because it’s something lawyers will tell you, but also for your own peace of mind.