The trouble with such govt intervention in the housing market, however, is that it can create an artificial short-term stimulus, causing prices to rise for a brief period, and then deflate again when 25% of the buyers have disappeared.  The proof is yet to be seen, and we won’t really know the outcome until the quarterly growth figures have been published in Jan 2012.  However, anecdotally, we have experienced increased competition from first home buyers in the last 10 weeks and have found ourselves competing with more than the usual number of purchasers, sometimes as much as 3-4 FHB’s on the one property.

There are always going to be some properties that are less “attractive” to first home buyers, however, and these can include “renovator delight” properties, those with development potential or land value sites only, as well as those over the mid $500K’s value.  As the stamp duty exemptions apply to those properties up to $500,000 and then a sliding scale applies until full stamp duty is payable at $600,000 there is less competition at the pointy end of the $500K budget.

Investors appear to be hanging back for 2012, particularly those who are buying “bread and butter” properties in those suburbs that contain median prices around the $400-500K price bracket.  We believe that, as a result, though there may be fewer FHB’s about in early 2012, investors may turn out in larger numbers and subsequently re-balance the market demand.  Should interest rates continue to fall (with the major lenders passing on these cuts) there may be just as much competition as we’re currently experiencing.  Interesting times ahead for 2012, we’re sure.  Now who has that crystal ball?!

House Search Australia was the buyers agency who sourced the homes, across a variety of suburbs and in differing price brackets.  It was a highly challenging but ultimately satisfying brief and we are very proud to have been chosen as the buyers agents to have purchased these houses for the show.  Not all “renovators delights” are equal and it was indeed quite an experience to watch our selection become transformed from ugly ducklings into the swans they became.  Well done to all the contestants and all those who worked behind the scenes. Great job!

As buyers’ agents one of our roles is to liaise between parties such as solicitors and conveyancers, building inspectors, property managers and lenders in order to effect a successful sale for our clients.  Not only does this ensure the process is an easier one for purchasers but it can often expedite the exchange of contracts and avoid being gazumped, especially in a sellers market situation.

Part of the due diligence here involves obtaining a copy of the contract of sale and passing it on to the buyers legal representative for review.  However, it’s in the best interests of our client, as their buyers’ agents, to double-check the “black box” in the middle section of the front page of the contract, which contains the inclusions and exclusions of the property for sale.  Vendors have been known to omit articles that were “assumed” to have been staying with the property eg: curtains, pool equipment, dishwasher- that are not necessarily considered fixtures of the property.  It is vital to not only check these inclusions upon inspection but also to take note of any exclusions and inform our clients.

Sometimes we need to itemize  other inclusions to ensure clarity here. For example, “pool equipment” as an inclusion can be vague and we have heard of cases where buyers turned up to their new home to find that the $800 auto pool cleaner had disappeared yet the pool scoop and brush had been left behind, constituting the “pool equipment”.  Dishwashers are a common inclusion that buyers assume are staying and, if unchecked, can find themselves doing the washing up by hand when they move in, to their surprise!  Items such as curtains, blinds and light fittings have been known to have been substituted between exchange and settlement, so it’s also good practice to take note of these and photograph them as a record for the pre-settlement inspection.  We do this for all clients and also take the time to test everything electrical in the property both at initial inspection and again prior to settlement.

Checking inclusions may seem like common sense and assumed to have been carried out and double-checked by buyers legal representatives, however it’s our duty of care to our clients to ensure that these are correct and recorded as accurately as possible to avoid any nasty surprises at settlement.  So, if you’re buying a property soon make sure you double-check and clarify those inclusions and take photos as an extra form of protection when conducting that pre-settlement inspection!

However, not all the news is unsettling.  Recent affordability index figures released by the Housing Industry of Australia (HIA) and CBA  show that affordability improved 3% to 55.7 for the March quarter.  A softening in house prices was one of the main contributors with national figures falling 0.6% in the same period.  According to John Edwards from Residex, Sydney, Perth and Brisbane currently appear to be at the bottom of the current market cycle- a genuine opportunity, in his opinion, to buy discounted listed properties in a buyers market.  But, I hear buyers argue, how do we know it’s the bottom?  And, if this is the case, what if prices fall further?  Even a modest 8% fall in the current median price equates to a loss of more than $50,000.

We’ve all heard the saying “Its time in the market, not timing, that counts”.  After all, the general theory being that if you hold property for a sufficient long enough cycle eg: 7-10 years the market will correct or catch up.  Capital growth tends not to be consistent year in year out, but rather spasmodic, with highs and lows.  Some of these low periods may include negative growth. However timing also does make a difference.  After all, when growth stalls prices also fall, often creating opportunity that wasn’t present in high growth periods.  The hard part is knowing when to jump in- as none of us have a crystal ball that forecasts capital growth rates or intimate knowledge of what moves the federal or state governments are likely to make, that impact on the market. We will never be able to accurately pinpoint the “bottom” of the cycle, until well after the event, despite the best intentions of the field experts out there who claim otherwise.

However, property still remains a popular choice for Australian investors and whilst banks are happy to heavily leverage on an asset that’s considered as “safe as houses” investors and home buyers will continue to jump right in.  Falling prices or not, historical growth has demonstrated that holding well-located median-priced Australian property over the longer term (and I would advocate 10yrs as a more accurate holding cycle than 7 years) pays off for many purchasers.  Sure, there might be a few troughs and hills along the way but it’s the whole ride that counts in the end.

However, with yields continuing to rise on the back of tightening rates, it seems that the tide may well be turning.

MD Louis Christopher also said the middle and outer suburbs of Sydney would represent good value for investors over the next 12 months, especially if the incoming government took a decision to boost the city’s housing market by cutting sales tax.

“There is an under-supply situation occurring for NSW. We are actually building less dwellings now than in 1984 and have been building less since the year 2000,” he said.

“In 1984, the population of Sydney was about 3.2 million. We now have 4 million”

It’s a well known fact that, due to high prices, that freestanding houses in the more popular parts of our city are not the first choice for investors.  Many, instead, elect to buy into a unit or townhouse complex as a cheaper alternative.  With households shrinking, it makes logical and financial sense for Sydneysiders to downsize into affordable dwellings, investing in lower maintenance assets whilst retaining funds for financial security later in life.

However, there will always be a demand for rental properties as not everyone wants to or indeed can afford to buy into the “Great Aussie Dream” of home ownership.  Whilst demand is strong and supply is low, with just 1.5 properties out of 100 available to rent, and affordable interest rates, it may well be time for investors to take a fresh look at what the Sydney property market has to offer.

The question we asked: When a property has any of the following tags instead of a listed price (or guide/bracket) do you contact the agent or simply pass it by in preference for those that do have a listed price?

By Negotiation

Just Listed

Express Sale

EOI (Expressions of Interest)

POA (Price Upon Application)

By tender

Auction (with no price guide provided)

The respondents were provided with three options as answers and the results were as follows:

1. Yes    8.6%

2. No     74.2%

3. Only if listings are limited in this area   17.2%

We weren’t really surprised with the responses given that buyers have been expressing their frustrations to us for years about advertised property with no price or guide/range.  In our experience, the large majority of purchasers haven’t got the time or inclination to follow up with agents to enquire about price guides. From the results of our survey and subsequent comments buyers expressed the following reasons as to why they passed “no price tag” properties over.  These included:

They don’t wish to leave their details with dozens of selling agents and receive follow up calls, get added to email databases that clog up their inboxes or have extended conversations with agents seeking new listings.

They don’t want to play second guessing games with agents who ask them “What’s your budget?” rather than provide them with a price guide quickly.

Agents who couldn’t provide them with price guides didn’t know their market well enough- the general consensus being that the estimated price provided on the listing agreement with the vendor should be provided to potential purchasers.

They believe some properties without a listed price advertise this way because the vendor is unrealistic and the agent doesn’t wish to scare potential purchasers away.

Auctions came under particular attack, as underquoting is still a concern with Australian buyers in the marketplace.  With over 74% of our respondents not even bothering to enquire on such properties without price guides, it begs the question: Are vendors doing themselves a disservice by listing without a price tag?

As buyers’ agents, it’s our job to enquire on every property, regardless of whether or not it’s private treaty, auction, price or no price.  We also find that we’ve been able to secure some terrific property for clients who wouldn’t have otherwise bothered, due to the missing price tags.  It takes time, lots of legwork and persistence at times, however saturating the entire marketplace for our clients is part of the job.  If you’re one of those buyers who pass over properties without price guides, then you could be one of the 74% of buyers missing out here on a potential great deal on a new home or investment property.

According to REBAA President Mr Byron Rose buyers agents are having a significant
influence on the Australian economy in general and the real estate industry in
particular.
“With our growing numbers and with more home buyers and investors realising the
value of using a buyers agent, we expect that figure to tip the $1billion mark next
financial year,” said Mr Rose.

“Buyer’s agents promote and protect the buyer’s interests, keep the bargaining and
financial position of the buyer confidential and provide anonymity if needed.
“Buying a home or any property for that matter, is a major purchase which is often
made after spending as little as half an hour looking at the home.
Mr Rose said in the last 10 years the number of buyer’s agents operating in Australia
had increased from half a dozen to an estimated 100 nationally.
“This recent growth has lead to the establishment of specialist Buyer’s Agent chapters
within Real Estate Institutes in some states and the Real Estate Buyers Agents
Association of Australia nationally,” he said.
“These groups have been established to satisfy the need for an independent
professional body to represent buyer’s agents and operate as a regulatory body for
this new and emerging industry. The aim is to set high standards and to provide the
consumer with access to a recognised group of property professionals with the
relevant and necessary qualifications.”

“Today’s move is good news for mortgage holders who are adjusting to the higher rates imposed by last month’s official rise coupled with the decision by several lenders to lift their own rates by quite a lot more,” says Domain.com.au blogger Carolyn Boyd.

Rates will now remain on hold until at least February, as the Reserve Bank takes a break in January.

First home owners will also benefit from an increase in the First Home Owner grant with the current cap being increased to $835,000 from 1 January 2011. The $835,000 cap will apply to applications where the commencement date of the eligible transaction is on or after 1 January 2011. The commencement date of the eligible transaction is the date of the contract to purchase or build a home or, for a builder, the date the foundations commenced to be laid.
Applicants who purchase or build a home which has a total value of more than $835,000 are not eligible for the grant.
The previous cap of $750,000 still applies where the eligible transaction commencement date falls between 1 January 2010 and 31 December 2010 (inclusive). Prior to 1 January 2010 there was no cap.
For eligibility criteria and other First Home Benefits go to www.osr.nsw.gov.au/benefits/first_home

Although Australian housing is expensive compared to other countries, the events that would lead to big price falls is unlikely to occur. After all, during the last GFC Australian property suffered only a 4-5% fall in prices. In the US, the 30% fall was driven by subprimehome lending, and the typical oversupply that accompanies high levels of speculation.

In Australia, however,  we have no subprime lending sector to talk about and a real undersupply of new housing.We have interest rates at levels higher compared with other international economies, so the Reserve Bank could respond to any overseas credit rationing by dropping interest rates again.

Even in the extreme event of another economic storm which  would force banks to withhold new lending, it is unlikely to lead to a wave of distressed selling.

Homeowners with a mortgage are in a strong position. A report from one of the big four banks, considered to be Australia’s largest home loan provider,  stated that its average home loan to home-value ratio is only 43 per cent and that 70 per cent of customers are paying their mortgage in advance, and are an average of nine payments ahead.

Australia has an undersupply of housing because of the natural increase in population and immigration.We have an economy where unemployment is approaching historic lows and incomes are set to rise strongly.

If we also take into account strong gross domestic product, retail sales and consumer sentiment indicators, and low mortgage arrears and delinquency rates, doomsayers will continue to be off the mark when it comes to predictions of house price collapses in Australia.

Summarised from Anthony Ishac’s article “Australia Would Buck another Global Downturn”