let’s consider the seven essential factors about the property market that buyers need to know.
1. Stock levels have ever been this low
Property listings have been dropping for some time now. CoreLogic reported in May 2020 that listed stock had reached an all-time low. There have been some improvements, but by December 2020 the prices were still 20% lower than at the same time in 2019.
It is our opinion that there are two main reasons for this. Australians are not moving house as often as they used to. In fact, on average, families stay at the same address for three years longer than they did ten years ago.
The second explanation is Covid-19 and all the uncertainty that it has brought. People don’t like to make changes in uncertain times, since future outcomes are unclear. The temptation is to hang in there and see how the markets pan out which is why many will not list their homes. The end result is fewer homes on the market.
2. Markets differ
There is more than one residential property market and these markets should be viewed as separate since they behave differently. The factors that affect the prices of one-bedroom apartments are very different to those affecting the price of the suburban family home.
2020 saw steep increases in the price of houses, but apartment prices barely moved. The competition in many of the premium housing markets was fierce, but investors were not keen to put money into off-the-plan apartments, and so there was little competition in this market.
This difference in competition and pricing is unlikely to change this year, and prices in some markets will rise more steeply than in others in 2021.
3. Make an offer if you like the property
Although the stock of listed properties has dwindled, there are plenty of buyers. First time home owners qualify for substantial grants. Interest rates have dropped to record lows, and so many people consider this the ideal time to invest in property. This is driving competition between buyers.
Which is why if you see a property that ticks all the boxes, you should take action and make an offer that will secure the home for you. Take too long and someone else may buy the property.
With that in mind, if you’re in the market for a new property, it pays to put your best foot forward and make a strong offer. Otherwise, you’re likely to find someone else is willing to.
4. Some of the best properties will never list on the Internet
Many buyers make use of the two large property websites, domain.com.au and realestate.com.au. They don’t realize that the stock on these pages does not represent all the stock of available property.
Many sellers prefer to list their homes off-market and the trend is growing. When sellers list off-market, they find buyers for their property through a network of associates provided by their real estate agent. So, the sellers don’t broadcast the sale to a broader audience.
5. Why not buy before you sell?
Many people prefer not the buy a new home before they sell their current home. Their concern is that they won’t sell fast enough and will then have to cover the repayments on two mortgages. Alternatively, delaying settlement can result in expensive penalties. They are also concerned that their home won’t go for the price they need to afford their new property.
There is far less risk of this happening in the sellers’ market where we currently find ourselves. Assuming you have realistic price expectations, in market such as this, you are sure to sell. A knowledgeable real estate agent should be able to estimate what you can expect for your home.
If you are worried about the time it will take to buy your new home, making it difficult to simultaneously settle your sale, the seller may be willing to negotiate a longer settlement period with you. It is not uncommon for sellers to agree to 6-month settlement period. Many will also allow the buyer to reduce the settlement if they want to.
The NSW government recently announced that it will reform stamp duty as a means to assist people to buy their first home or the next. The government will soon scrap stamp duty, or transfer duty. Instead, home owners will pay property tax annually.
Transfer duty, especially on properties with high list prices, is one of the biggest obstacles to buying a new property. A house in Bellevue Hill currently sells at a median price of $5.8 million. For this, you will pay $344,490. In Paddington, the median house price is lower at $2.5 million and even on this, you’re in for a whopping $122,505.
We’re not sure though, if the scrapping the stamp duty will make it easier to access the property market. When the initial cost of buying a property drops, there may be more buyers in the market, willing to pay more and this is likely to push property prices up.
7. You’ll never time the property market perfectly
There’s always someone spouting gloom and doom, telling you to wait, and that your timing is poor. The truth is, you can’t time the property market. When the Covid-19 pandemic hit us, experts warned that the property market would suffer losses across the board. It didn’t happen. Some markets held their position while others soared.
In Woollahra, for example, the median house price in April was $2.88 million. By December it had risen by 28.5% to $3.7 million. So, if you were waiting for prices to drop in the area, you would have lost out badly.
There’s no time like now. If it’s time to make a move don’t wait to time the property market. Be decisive and start the process.