Sydney property gloom, May 2003

Post-boom buying – May 2003

The gloom following Sydney’s property boom has well and truly bitten.
“Every dog has its day and it’s the buyers’ day now,” says Real Estate Institute president Rowen Kelly
The Reserve Bank has officially heralded the cooling of the property market, with preliminary figures from Home Price Guide showing Sydney prices have dropped by 10.5 per cent in the March quarter.
Residex’s John Edwards says the price drops – which are patchy and not yet across all suburbs – are the start of bargain buying for smart property buyers who do their research.
“My word, this market creates buying opportunities. Right now we have the best opportunities and you won’t get better prices in the future,” he says.
“When you take a good hard look at this market, it’s the time to get a bargain because unfortunately there are always some people who have to sell.”
Buyers agents like Sydney Property Finders Dennis Kalofonas agree, saying this is the first time in three years that buyers have the potential to snare a bargain.

FIRST HOME BUYERS

First home buyers may be tempted to wait and see if the market falls to more affordable levels.
But Edwards and Macquarie Bank’s Rod Cornish say buyers waiting for massive price drops could be waiting for a long time.
“A fall from $700,000 to $500,000 is a 30 per cent fall across the board and we have never seen that before, even in a recession,” he says.
Australian Property Monitors’ Louis Christopher believes significant price falls can happen, but it is more likely that prices will stagnate for a long time.
Homesearch Solutions Henry Wilkinson says first home buyers should buy apartments or small terraces close to the city rather than house and land in the outer suburbs.
“I would look for a renovated unit in a 1970s block or an Art Deco with character,” he says. “Stick closer in, it’s better to start with an apartment before you have kids and work your way up the property market.”
Harris Tripp First National’s Virginia Nicoll says the inner west is offering some good buys for first home buyers.
“There’s the odd cheap house in Annandale in the low $500,000s … and last year we were wondering if we would ever be able to sell a house again for less than $600,000,” she says..
Cornish says first home buyers who do prefer the outer suburbs should look for locations that offer some lifestyle near the bush or the beach.
Australian Property Monitors’ Louis Christopher – who believes price falls have not yet bottomed - says the affordability of house and land in outer suburbs is an attractive proposition for first home buyers.
“There is plenty of stock in the Hills district between $500,000 and $600,000 right now and I think house and land even in the outer suburbs will do better in the long run than city apartments,” he says.
“Even house and land in the outer west which you can get for under $500,000 is good buying.”
Kalofonas says small terraces between $500,000 and $600,000 in Newtown and Camperdown are good buying right now.
“With the increase in lone person households, these small terraces might cost a bit more but are a good long term buy,” he says. “Do some negotiating and you’ll get them for a good price.”

UPGRADERS

Buyers looking for their second or third home are in a catch-22 situation – they are buying and selling in the same market and will find it harder to exploit bargains.
“You might be able to buy a house more cheaply, but the catch is that there will be less buyers for your own house,” says Cornish.
RE/MAX Success 1’s Nick Kirshner says the best bargains on the northern beaches are in houses that “are tricky to sell”.
“Things near power lines or main roads have come back a lot in price and are taking longer to sell,” he says.
The lower end of the northern beaches property market – the houses below $800,000 – has seen more discounting than houses priced between $900,000 and $1.3 million.
“Houses for those people who already live in the area and want to upgrade are still selling well as long as they have the two bathrooms, garaging and are close to the beach,” Kirshner says.
Wilkinson says his picks for the best Sydney suburbs for upgraders are Willoughby, Naremburn and Chatswood where prices are more affordable now than they have been for at least two years.
“So much has been passing in there it’s not funny – you can try to get a freestanding house in those suburbs for $850,000 which will be on a large block of land,” he says.
Ray White Chatswood’s Robert McElhone denies that there have been price falls in the area, but concedes that buyers will do better this year compared to last year.
“We’ve got a two-bedroom cottage on Beaconsfield Rd which is asking $780,000 but has interest at $750,000 and has not sold because the price is just a bit too high,” he says.
In blue ribbon Mosman, O’Gorman & Mahon’s Kerry Mahon says owners who want to sell now have to be realistic about the asking price.
“There is a real problem for anything over $3 million – so if you’ve got a $2.6 million house, that’s the price you need to put on it,” he says.
Kalofonas says the area around Balgowlah, Balgowlah Heights and Fairlight is offering good value right now.
“I just bought one in Balgowlah for an outrageously good price and I can’t tell you what it is because I had to sign a confidentiality agreement – the agent was embarrassed at how low the price was,” he says.
Kelly says the best opportunities for upgraders are to buy property from investors.
“An investor will look at the balance sheet and they are prepared to drop their equity to stop the ongoing liability of an investment.”
Kalofonas says there is good buying in beachside locations that have experienced massive price growth during the boom.
“Areas like Clovelly that just went up on a massive spike are coming down at the same massive rate,” he says. “Look for those areas that really went ahead in 2003 and they have come crashing down this year.”
Cornish warns that the problem for upgraders will be a lack of good quality houses to choose from.
“Stock will come back and that will make it harder for people to find the right house they are looking for,” he says.
That’s why Kalofonas thinks the best buying opportunities are happening right now.
“There is so much stock now – have a look at the real estate ads in the papers, there is lots around that you can negotiate on,” he says.

ALWAYS NEGOTIATE HARD

The real art of snaring a bargain is in the negotiations over price – and right now, many experts are suggesting those offers should be at least 10 per cent below the asking price.
Wilkinson says put all offers in writing to the selling agent and detail why you have made such a ridiculously low offer by pointing out all the faults of the property.
“You want the agent to stick it in front of the vendor and that can make a vendor nervous,” he says.
Kalofonas says the real bargains only happen when people do their research.
“If there is a property I am interested in, I find out recent house sales in the same street and if they happened in the last two years then I take 15 per cent off,” he says. “I then put it all in writing and the selling agent can’t argue with facts.”
Auction tactics are also important, especially with clearance rates heading towards 14-year lows of around 40 per cent.
Kelly and real estate agents are advising interested buyers to always bid at auction and show genuine interest in a property.
“That way the agent can convince the vendor that the bid is a genuine market price rather than allow the vendor to think of an alternative selling strategy or take the property off the market,” he says.
Wilkinson says it’s important to gauge the interest in a property up for auction by asking how many contracts have gone out and whether any offers have been made.
“If the interest seems soft, then I would make an offer the week before the auction but it would be a ridiculously low offer – then I would think about bidding on the auction day if I thought I could get it for the right price,” he says.

WHERE NOT TO BUY

Macquarie Bank’s Rod Cornish says the best bargains are appearing in the poor quality sectors of the property market and cautions against buying second rate property.
“Those are the areas like the apartment market, especially around Alexandria and a lot of that first home buyer stock in the outer suburbs,” he says.
Cornish says rental yields will need to improve before prices start to increase in those areas and that is likely to take at least three years.
Christopher says Australian Property Monitors’ data is showing weakness in houses around Sydney’s north-west and Hills district, as well as apartments in the Dee Why area and Alexandria and Zetland.
Experts agree that owner occupiers looking to buy in the current market must be prepared to stay in the same property for five years or more.
Christopher warns that “just because you get $20,000 or $30,000 off the asking price does not always mean it’s a bargain because the property might have been overvalued to start with”.
“One has to be concerned that the so-called bargain you buy now does not become even more of a bargain by the end of the year,” he says.

CASE STUDY

Tara Flynn describes last year’s property market as being “like a shark attack – a complete frenzy”.
Flynn and her partner Jeff Maher began looking in May last year for a small semi priced between $400,000 and $450,000 in Sydney’s inner west – but quickly downgraded their expectations to an Art Deco unit.
“When we started looking, there were semis in our price range but I ended up thinking we would have to forget about buying in Sydney because things were going up $10,000 a week,” she says.
They started looking to buy an Art Deco unit, but couldn’t find anything with carparking.
Flynn is glad they couldn’t get in last year, because the couple managed to buy a freestanding house in Ashbury for $460,000 in March this year, thanks to the cooling property market.
“I am so glad the market calmed down,” she says. “The house had passed in at auction for $450,000 and we got it by going $10,000 above our price range.”
“It’s worth paying the extra for a freestanding house on land with no strata fees and just one neighbour,” she says.
The couple wanted to be in the inner west so they could be close to the city and cafes.
“This area is like Balmain was 10 years ago but you can still find a carpark on the street,” she says.


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Post-boom buying – May 2003 The gloom following Sydney’s property boom has well and truly bitten. “Every dog has its day and it’s the buyers’ day now,” says Real Estate Institute president Rowen Kelly The Reserve Bank has officially heralded the cooling of the property market, with preliminary figures from Home Price Guide showing Sydney prices have dropped by 10.5 per cent in the March quarter. Residex’s John Edwards says the price drops – which are patchy and not yet across all suburbs – are the start of bargain buying for smart property buyers who do their research. “My word, this market creates buying opportunities. Right now we have the best opportunities and you won’t get better prices in the future,” he says. “When you take a good hard look at this market, it’s the time to get a bargain because unfortunately there are always some people who have to sell.” Buyers agents like Sydney Property Finders Dennis Kalofonas agree, saying this is the first time in three years that buyers have the potential to snare a bargain. FIRST HOME BUYERS First home buyers may be tempted to wait and see if the market falls to more affordable levels. But Edwards and Macquarie Bank’s Rod Cornish say buyers waiting for massive price drops could be waiting for a long time. “A fall from $700,000 to $500,000 is a 30 per cent fall across the board and we have never seen that before, even in a recession,” he says. Australian Property Monitors’ Louis Christopher believes significant price falls can happen, but it is more likely that prices will stagnate for a long time. Homesearch Solutions Henry Wilkinson says first home buyers should buy apartments or small terraces close to the city rather than house and land in the outer suburbs. “I would look for a renovated unit in a 1970s block or an Art Deco with character,” he says. “Stick closer in, it’s better to start with an apartment before you have kids and work your way up the property market.” Harris Tripp First National’s Virginia Nicoll says the inner west is offering some good buys for first home buyers. “There’s the odd cheap house in Annandale in the low $500,000s … and last year we were wondering if we would ever be able to sell a house again for less than $600,000,” she says.. Cornish says first home buyers who do prefer the outer suburbs should look for locations that offer some lifestyle near the bush or the beach. Australian Property Monitors’ Louis Christopher – who believes price falls have not yet bottomed - says the affordability of house and land in outer suburbs is an attractive proposition for first home buyers. “There is plenty of stock in the Hills district between $500,000 and $600,000 right now and I think house and land even in the outer suburbs will do better in the long run than city apartments,” he says. “Even house and land in the outer west which you can get for under $500,000 is good buying.” Kalofonas says small terraces between $500,000 and $600,000 in Newtown and Camperdown are good buying right now. “With the increase in lone person households, these small terraces might cost a bit more but are a good long term buy,” he says. “Do some negotiating and you’ll get them for a good price.” UPGRADERS Buyers looking for their second or third home are in a catch-22 situation – they are buying and selling in the same market and will find it harder to exploit bargains. “You might be able to buy a house more cheaply, but the catch is that there will be less buyers for your own house,” says Cornish. RE/MAX Success 1’s Nick Kirshner says the best bargains on the northern beaches are in houses that “are tricky to sell”. “Things near power lines or main roads have come back a lot in price and are taking longer to sell,” he says. The lower end of the northern beaches property market – the houses below $800,000 – has seen more discounting than houses priced between $900,000 and $1.3 million. “Houses for those people who already live in the area and want to upgrade are still selling well as long as they have the two bathrooms, garaging and are close to the beach,” Kirshner says. Wilkinson says his picks for the best Sydney suburbs for upgraders are Willoughby, Naremburn and Chatswood where prices are more affordable now than they have been for at least two years. “So much has been passing in there it’s not funny – you can try to get a freestanding house in those suburbs for $850,000 which will be on a large block of land,” he says. Ray White Chatswood’s Robert McElhone denies that there have been price falls in the area, but concedes that buyers will do better this year compared to last year. “We’ve got a two-bedroom cottage on Beaconsfield Rd which is asking $780,000 but has interest at $750,000 and has not sold because the price is just a bit too high,” he says. In blue ribbon Mosman, O’Gorman & Mahon’s Kerry Mahon says owners who want to sell now have to be realistic about the asking price. “There is a real problem for anything over $3 million – so if you’ve got a $2.6 million house, that’s the price you need to put on it,” he says. Kalofonas says the area around Balgowlah, Balgowlah Heights and Fairlight is offering good value right now. “I just bought one in Balgowlah for an outrageously good price and I can’t tell you what it is because I had to sign a confidentiality agreement – the agent was embarrassed at how low the price was,” he says. Kelly says the best opportunities for upgraders are to buy property from investors. “An investor will look at the balance sheet and they are prepared to drop their equity to stop the ongoing liability of an investment.” Kalofonas says there is good buying in beachside locations that have experienced massive price growth during the boom. “Areas like Clovelly that just went up on a massive spike are coming down at the same massive rate,” he says. “Look for those areas that really went ahead in 2003 and they have come crashing down this year.” Cornish warns that the problem for upgraders will be a lack of good quality houses to choose from. “Stock will come back and that will make it harder for people to find the right house they are looking for,” he says. That’s why Kalofonas thinks the best buying opportunities are happening right now. “There is so much stock now – have a look at the real estate ads in the papers, there is lots around that you can negotiate on,” he says. ALWAYS NEGOTIATE HARD The real art of snaring a bargain is in the negotiations over price – and right now, many experts are suggesting those offers should be at least 10 per cent below the asking price. Wilkinson says put all offers in writing to the selling agent and detail why you have made such a ridiculously low offer by pointing out all the faults of the property. “You want the agent to stick it in front of the vendor and that can make a vendor nervous,” he says. Kalofonas says the real bargains only happen when people do their research. “If there is a property I am interested in, I find out recent house sales in the same street and if they happened in the last two years then I take 15 per cent off,” he says. “I then put it all in writing and the selling agent can’t argue with facts.” Auction tactics are also important, especially with clearance rates heading towards 14-year lows of around 40 per cent. Kelly and real estate agents are advising interested buyers to always bid at auction and show genuine interest in a property. “That way the agent can convince the vendor that the bid is a genuine market price rather than allow the vendor to think of an alternative selling strategy or take the property off the market,” he says. Wilkinson says it’s important to gauge the interest in a property up for auction by asking how many contracts have gone out and whether any offers have been made. “If the interest seems soft, then I would make an offer the week before the auction but it would be a ridiculously low offer – then I would think about bidding on the auction day if I thought I could get it for the right price,” he says. WHERE NOT TO BUY Macquarie Bank’s Rod Cornish says the best bargains are appearing in the poor quality sectors of the property market and cautions against buying second rate property. “Those are the areas like the apartment market, especially around Alexandria and a lot of that first home buyer stock in the outer suburbs,” he says. Cornish says rental yields will need to improve before prices start to increase in those areas and that is likely to take at least three years. Christopher says Australian Property Monitors’ data is showing weakness in houses around Sydney’s north-west and Hills district, as well as apartments in the Dee Why area and Alexandria and Zetland. Experts agree that owner occupiers looking to buy in the current market must be prepared to stay in the same property for five years or more. Christopher warns that “just because you get $20,000 or $30,000 off the asking price does not always mean it’s a bargain because the property might have been overvalued to start with”. “One has to be concerned that the so-called bargain you buy now does not become even more of a bargain by the end of the year,” he says. CASE STUDY Tara Flynn describes last year’s property market as being “like a shark attack – a complete frenzy”. Flynn and her partner Jeff Maher began looking in May last year for a small semi priced between $400,000 and $450,000 in Sydney’s inner west – but quickly downgraded their expectations to an Art Deco unit. “When we started looking, there were semis in our price range but I ended up thinking we would have to forget about buying in Sydney because things were going up $10,000 a week,” she says. They started looking to buy an Art Deco unit, but couldn’t find anything with carparking. Flynn is glad they couldn’t get in last year, because the couple managed to buy a freestanding house in Ashbury for $460,000 in March this year, thanks to the cooling property market. “I am so glad the market calmed down,” she says. “The house had passed in at auction for $450,000 and we got it by going $10,000 above our price range.” “It’s worth paying the extra for a freestanding house on land with no strata fees and just one neighbour,” she says. The couple wanted to be in the inner west so they could be close to the city and cafes. “This area is like Balmain was 10 years ago but you can still find a carpark on the street,” she says.