Even though auction clearance rates dropped nationally in response to the Queen’s birthday long weekend, predictions are varied what will happen through the winter months.
Already in some capital cities like Darwin
and Hobart, sellers are starting to drop prices by as much as 10%.
While inner city properties are going strong in Sydney, in outlying suburbs sellers are becoming more negotiable on their price than 90 days ago. Agents are reporting that these sellers located in outlying suburbs are adjusting their price expectations down by $5,000-$10,000.
To maximize and lock in projected potential capital gain, some investors follow a fundamental property-investing rule, buying 5-10 kilometers from the GPO of any capital Sydney in Australia. Starting at the GPO, if you were to put rings every 5 kilometers from the GPO, the potential capital growth can reduce 1-2% moving outwards from the GPO.
Conversely, when a property market goes up, it will start from the GPO and move outwards, beginning with the inner city, followed by the outer suburbs.
When property market turns downward, the outer suburbs will go down first, before the inner suburbs.
It’s a important, primary rule to property investing for those properties to buy and hold over a long period of time- buy as close to the GPO in capital cities as you can afford.
This plan works well, especially in these uncertain times. Since the budget was announced, many property investors are starting to take the attitude of let’s wait and see:
#1 The budget has not cleared the Senate, no one really knows what the budget will look like and it’s continuing impact on consumer confidence.
#2 Some people are refinancing to lower their interest rate but the investor demand for new property acquisition is getting quieter.
#3 Real wages growth is now decreasing, which means people are less able to pay increased property prices. If buyers have less buying power, this means prices will get softer. Prices get pushed up by people’s ability to buy,
#4 The price of what the rest of the world is prepared to pay for our minerals is decreasing. Iron Ore price is at $92 a ton, as of this writing and if gets as low as $80 a ton, the less efficient mining companies will not be able to stay in business and that will have a knock effect for property in mining towns, employment and investor confidence.
#5 Historically, clearance rates lower with the one set of winter. Like a bird, property buyers hibernate in the winter. Less stock is on the market and there is less activity. The stock on the market is left over from the “boom” may have less appeal which is reflected in price.
Property market moves on perception and that perception becomes the reality. If the investor market perceives there could be stormy waters ahead, they’ll be less inclined to invest.
As a property market changes, investor’s will often cherry pick and purchase the A grade property. They’ll leave the B & C property behind. A popular property strategy is to clean up the property and present it back to an A grade property.
My definition of A grade property are pretty houses-while ugly or plain houses often sit on the market. It’s possible to buy the ugly or plain house, clean it up and make it pretty and sell for a fast cash profit.
It’s also possible for an investor to make arrangements with a seller to fix up the property and share in the profits. There are many sellers who don’t have the money to improve their property yet, if they worked with someone who can do the fix up and clean up it’s mutually beneficial for both, as no one needs to qualify for a new bank loan or save up for a large deposit
If you'd like to know more about fast cash strategies click here
and listen to Rick Otton's free, popular property investing podcast, CreativeRealEstate.com.au.
Australian property investment specialist and best-selling author, Rick Otton, has been investing and teaching his innovative real estate strategies for 23 years. As the founder and director of We Buy Houses Pty Ltd, his goal is to empower people with knowledge through his cutting edge investment strategies
Disclaimer: while due care is taken, the viewpoints expressed by contributors and/or sponsors do not necessarily reflect the opinions of Your Investment Property.
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