Bargain-hunters who are targeting flood-affected Brisbane housing hoping to pick up properties at a 30-50% discount will be sorely disappointed. And those who do buy are at risk of losing money as prices in the over-valued south-east Queensland residential market continue to fall – due to factors unrelated to the floods.
Property forecaster Louis Christopher expects the bargain-hunters – who he says are “swooping” down on flood-affected properties – will find that prices of these properties are being cut by only 10-15% below the rest of the local market.
Christopher, the managing director of property adviser and forecaster SQM Research, believes the impact of the floods on the prices of flood-affected properties is being “overplayed big time”.
“The reason why we don’t think it will be steeper [than a 10-15% cut] is that this type of flood is something like a one in 30 or 40-year event,” he says.
Christopher argues that a cut of just 5% is justified for flood-affected properties but expects it to be higher because of over-concern.
He points out that the flood-affected houses in the inner Brisbane suburb of New Farm are also largely the affluent ones. “And they are affluent for a reason,” he stresses. “The properties are close to the city and people do actually like riverfronts and river views. Those demands are still there.”
“I don’t think there is going to be much of an adjustment for non-affected properties in regions which were partly flooded.”
Overall, the Australian housing market does not look promising for bargain-hunters – quite the opposite. But as Christopher says: “There are always bargains to be had in all types of markets. It is a matter of doing your research and finding them.”
The broad property market looks somewhat bleak for bargain-hunters at this time because, as SQM Research reports, housing prices are falling in all capital cities except Sydney. And Sydney is the only capital where SQM expects prices to rise in 2011 – albeit modestly – while modest falls are expected in other capitals.
The general Australian housing market looks lacklustre in 2011 due to a combination of high and sharply rising housing stock, the retreat of first homebuyers, higher interest rates and inflated prices.
Current potential bargains – despite the difficult market conditions – include these three examples of wholesale price cutting taken from the Home Discounts Report, published SQM Research (www.sqmresearch.com.au/homediscounts/):
- A three-bedroom house with a huge backyard in the Adelaide suburb of Elizabeth Grove. Its asking price is slashed to $159,950 – cut by 53% during 500-plus days on the market.
- A five-bedroom house in apparently excellent condition, with water views, beautiful gardens, a 7.37 hectare site and even a dam. This property in Dunalley Tasmania, is now selling for $395,000 – cut by 47% during 800-plus days on the market.
- A four-bedroom waterfront with a huge backyard, grassy lawn and mature trees. This property on Queensland’s Russell Island is now selling for $449,000 – cut by 39% during 900-plus days on the market.
Here are eight top tips for bargain-hunters:
1. Don’t rush to buy: “Look now, don’t rush,” suggests Louis Christopher. “The only trouble in trying to theoretically work out whether you have a bargain is that it may be a bigger bargain tomorrow because the market continues to fall.
2. Know the best time to grab bargains: The best bargains are found when a market hits bottom and is about to rise.
But as Christopher says, quoting the highly accurate maxim: “No one rings a bell at the bottom of the market.” And he adds: “Potentially, there could be bargains towards the end of this year [if most national markets have stopped falling by then].”
Buyers have an opportunity now to closely study their favoured markets and get ready to buy when the time is right and when the right property is found.
3. Be particularly cautious in over-priced regions: SQM names south-east Queensland and Perth among the over-valued capitals while describing Darwin as “massively over-valued”.
Christopher says housing markets in significantly over-valued regions will either suffer further corrections or remain sluggish. And a further rise in interest rates this year could trigger more price falls.
4. Expect Sydney bargains harder to find – but don’t give up: As mentioned, Sydney prices are rising. “And in the next three years, I am not expecting any dramatic falls in Sydney,” says Christopher. But bargain-hunters could still find individual bargains even in Sydney, he stresses.
Broadly, there are fewer bargains on the Sydney market than in the troubled capitals. However, because Sydney prices are not falling, there is much less risk of an apparent bargain falling in value after purchase – provided the property is in a sought-after suburb.
Patrick Bright, chief executive of buyers’ agent EPS Property Search in Sydney, agrees that property bargains will be harder to find in Sydney but makes the point: “When a market is on the move, what someone paid for a very similar property a month or two ago can look like a bargain”.
Bright says he finds that most properties in his experience which are selling at seemingly bargain prices have “something that’s not good about them”. And he warns that buyers of such properties will also eventually have to sell for a price below other properties in the area unless the undesirable aspect or fault is fixed.
Of course, some properties are now under-priced because the owners had initially asked for excessive prices, had trouble selling them, and finally cut the prices below market level.
What types of Sydney housing are among the best buys in this market? “Stick to the inner ring, 3-15km from the CBD,” suggests Bright. He points to land-locked properties [meaning those not close to future land releases] which are close to the CBD without being in it. Types of properties on his best-buys list would include those with such attractions as being close to beaches and those with harbour views.
“Correct property selection for the particular suburb is critical,” says Bright, “if you want to achieve a better-than-average return.”
Dennis Kalofonus, director of Sydney Property Finders, believes bargain-hunters should be looking in the Sydney market while remaining cautious. “It is too early [in the year] to predict whether a property is a bargain or not,” he says.
“I think there needs to be a few more weeks and a couple more auction phases to go through to get a really good idea of where the pulse of the market and the direction it’s going.”
Kalofonus says that among suburbs that may represent good-buying include those with large gardens yet are close to the city. He has watched these suburbs rapidly increase in value as couples with young children move out of terrace-dominated, inner suburbs into the closest ones to the CBD with big backyards.
“There’s no lawn in Paddington and Queens Park [inner eastern Sydney suburbs] and those suburbs are so expensive,” Kalofonus adds.
5. Watch for desperate vendors: Louis Christopher says some vendors in over-priced areas with falling areas become desperate to find buyers and lower their prices below market.
6. Look for stale properties: As discussed early, these have been typically on the market for at least two months without finding a buyer and then the prices are sometimes slashed.
Often the marketing of such properties follows a pattern: the vendors begin by asking above-market prices; the agents lose interest, sometimes to the extent of telling prospective buyers that the house is over-priced and the vendor is difficult; vendors become desperate; and the price is heavily cut, sometimes under market values.
7. Check levels of housing supply: When housing supplies are sharply rising, buyers can potential negotiate much harder for good deals.
Figures compiled by SQM Research show that the number of listings across Australia rose by more than 40% last year with Sydney experiencing the lowest national rise, 19.5%.
8. Watch out for future rezoning: Kalofonus warns that a house in a suburb with plenty of industrial land to be rezoned residential may seem a bargain today but may not be once new housing is built on former factory land.
http://s4.zetaboards.com/Australian_Property/blog/main/3247452
http://s4.zetaboards.com/Australian_Property/blog/main/3204321
Still think rents can go up after reading that? Nope didn't think so. Where is the money coming from? More debt I suppose you'll say. Well this is the last straw, I've had enough of the greedy landlords and housing speculators in this country. This is the last straw and I'll probably take the missus with me and leave the country!