One of the big talking points in the media this year is the cooling of the Sydney Property Market.
Read on to find out why we are in the current climate and what opportunities exist for sellers, buyers, developers and agents.
Why Has the Sydney Property Market Cooled? Why Are We Seeing a Decline?
The ingredients for a strong property market still exists as interest rates are low and there is a supply shortage of dwellings in Sydney.
Changes to finance rules have made it more difficult to borrow from the bank.
This along with negative media about the marketplace has caused the drop.
What Are the Positives of a Cooling Market?
There are good opportunities to buy.
We tend to look at the market as one big beast, but in reality, it is many individual vendors and buyers and all their circumstances are different.
For example, a vendor may have a reason to sell their property straight away and as such, they are likely to be much more negotiable.
There are still gains to be had in the Sydney Property Market.
For example, Ajay Valanju bought a studio apartment in December 2017 in St Leonards for $530K and on sold in March 2018 for $575.
It was furnished for the sale which brought more interest from the market.
Is It a Good Time to Buy or Is It Better to Wait?
Always buy when you are ready to buy.
Generally, the market goes up, with the occasional 5% or 10% fall, but these are few and far between. In the long term the value will increase, so you should buy into the market as soon as you can afford to.
Is It a Good Time to Sell or Is It Better to Wait?
This is really up to your personal circumstances.
Some say to upgrade in a falling market, however, the market is unpredictable in the short term.
If anyone thinks they are capable of predicting how a market will move in the short-term they are kidding themselves and could easily fail by guessing incorrectly.
As a general rule of thumb property doubles every 7-10 years or 15-20 years with a lower inflation rate.
In the current climate, you would expect the property to double over 12-15 years.
This is the underlying reason to invest – you will make money in the long term, rather than responding to short-term swings and movement.
What Approach Should Property Investors Take?
Be relentless when applying for loans.
You may have read in the media that it is not possible to get interest-only loans, or that interest only loans are converted to interest + principle loans.
Ajay has been able to secure 3 properties in the last 2-3 months on interest only.
He had to talk to a lot of banks and brokers and in the end, the loans came from a non-bank lender.
The media say a certain line about the Sydney Property Market, however, it is still possible to achieve what you want if you are determined!
How Can First Home Buyers Benefit?
Take advantage of the government incentives on offer:
- First Home Owner Grant $10,000 for brand new properties up to the value of $600,000
- First Home Buyer Assistance Scheme
– provides exemptions on transfer duty (formerly stamp duty) on property new and old for up to $650,000 with a sliding scale up to $850,00 with concessions.
The challenge is to get a brand new property under 600k in Sydney.
Studios and 1-bed units are a great way to get into the market and at 600K that’s almost 34K in savings.
A lot of first home buyers think about buying a house they will be in for 5-10 years or longer, however its difficult to get anything like this under 750k in Sydney.
A good strategy is to take advantage of the government savings, if you are eligible for the First Home Owners Grant and associated transfer duty savings, get on the property market, then look at upgrading in a couple of years.
If you are in a couple and not yet married, you can use the first home owners grant for each person.
There is a requirement for the purchaser to live in the property for 6 months within the first 12 months of purchasing the property.
What Does It Mean for Real Estate Businesses in Sydney?
There are a lower number of prospective buyers at open inspections, therefore less competition.
Good quality properties will still trade at or close to the market high.
Properties by the main road, or with an unusual floor plan would be more adversely affected.
This could be a strategy for buyers as they are more likely to be successful in negotiating a disproportionate discount.
In the local market, the lower north shore hasn’t seen a downturn, and prices are at a similar level to before the downturn.
How Should Property Developers Approach The Cooling Market?
Property Developers should be realistic with pricing and adjust their expectations to what people are willing to pay.
In a buoyant market, new dwellings would typically sell for 20-30% above the existing market as there is a premium for brand new.
In summary, it’s not all doom and gloom in the Sydney Property Market and you should buy when you are ready and able to enter the market.
There are advantages to buying now as interest rates are still low and there are some great incentives for first home buyers if they are willing to start small.
As for investors, the market is cyclical and prices will eventually go up, so it’s a good opportunity to buy if you are ready.