Welcome to the New Year. I hope you each had an enjoyable and fulfilling break. Whilst last year ended in a flurry, usually January builds up at a very slow and gradual pace. 2009 is not going to be an ordinary year. We have had a huge influx of enquiries and have already negotiated several property transactions in the last 10 days. The REIV has reported 677 homes were bought over the Christmas break. The market is speeding up much faster than most people have expected.
We know that the finance reporters are still writing about gloom, doom and recessions. There will probably be an increase in unemployment. But there will still be plenty of people who are secure in their employment, who have equity in their homes or are saving like crazy in order to take advantage of the first home buyers’ boost the federal government has offered.
First home owners will be a large growth sector of the market place over the next 6 months. With a sunset clause of 30th June in place for the extra $7000, or $14000 if you are building, First home buyers will be increasing the demand for properties up to about $500,000.
This current market is also very good for people upgrading. The higher the purchase price, the less likely the vendors will get ‘full price’ for their properties. So if you are selling a lower priced property, for which the demand is increasing, you have a chance of getting a fair and reasonable price for your property and more chance of getting a ‘good buy’ on the higher priced property.
Investors with equity in their homes, who in the past have looked at the share markets to invest in, will start to look for alternatives. I don’t know too many people who haven’t lost money in their super last year!! There are a couple of reasons people hesitate to invest in ‘bricks and mortar’. Firstly, areas with high capital growth usually have a lower return; this leaves a shortfall to be made up by the investor. This can be as much as $10,000 per annum. Whilst this is tax deductible (known as negative gearing) it can sometimes be difficult to find the money each week. Secondly, most people despise the process of buying a property. Thesearching, assessing and dealing with Real Estate agents every weekend is usually too stressful and most people give up.
This will change in 2009. Firstly, rental returns in the better suburbs which have had over 10% capital growth per annum over the last ten years or more have now increased substantially. Interest rates are dropping and these are the two fundamental numbers which make up how much money an investor has to find each week. With another rate cut due early this year, a good, long term investment, in a suburb that should have excellent capital growth will be very close to revenue neutral from day one.
Secondly, Buyer Advocates will alleviate the second issue. More and more properties are now being purchased with the assistance of a licensed real estate agent acting for the purchaser. In this market, assessing or negotiating a property without the assistance of an expert will cost you substantially more than the fees of an advocate. Add to this the lower stress and the wealth of knowledge a Buyer’s Advocate brings to the transaction, not paying for an expert seems ludicrous.
Our office has reopened earlier than expected and if you are considering a property purchase this year, please do not hesitate to call for an appointment. Our first meeting is obligation free and may just save you making a mistake with one of the biggest purchases of your life. We have packages to assist all budgets and needs.
Ian James
