As we joke on our website, most local agents find a way to tell you it’s always a good time to sell. Why? Because it’s a good time for them to make money from you selling. That is not advice. At least not professional advice.
And, many local agents will give you a ‘rosy’ view of what your property is currently worth to convince you to sell – they will take ‘comparable sales’ of similar properties from months ago, when the market was considerably higher – and tell you that is a guide to what you might receive if you start to sell now – and therefore aren’t on the market until a month or two from now when prices will be even lower. This will only lead to disappointment when the market realities become clear.
But with all the media coverage of a downturn in the property market, how should you be thinking about your own property/ies ? Can it ever be a good time to sell in a market like this? Or to buy?
The market itself is mixed, but generally in a correction within a long-term upward trend.
All the doom and gloom in the media about property prices lacks context. Two things stand out to us at LongView. Firstly, the downturn in prices is patchy – it is concentrated in houses in the leafy inner suburbs where prices are down around 15%. In many lower-priced outer suburban areas – particularly the fast growing North and West, prices are in fact still rising modestly, particularly as attractive government policies are pushing first home buyers in the bracket up to $600,000.
Secondly, some context even on the downturn. Property prices have exploded over the last two decades driven firstly by population growth and secondly, by low interest rates and thirdly overseas, particularly Chinese investment. The primary driver – population growth – continues apace – 146,000 people moved to Melbourne last year – an MCG and a half! For as long as this continues and ‘they are not making any more land’, we believe the long term trend remains upward. But, with bank lending tightening and overseas investment reducing, the market has ‘taken a breather’, particularly in some locations that have seen particularly strong land value growth over the last two decades. The graph attached to this article and recently published in The Age / Domain gives you the big picture view.
As you can see, the market has taken ‘a breather’ several times over the last 20 years, but the unmistakable trend continues upwards. We believe this time will be a more significant ‘correction’ because of the severity of the banking pull-back and uncertainty over future policy given the current likelihood of a change of Federal Government in May. But the ‘house view’ at LongView remains that we will likely see price growth return some time in the next 12 -24 months.
If that is correct, aren’t the real estate agents wrong? Isn’t now a terrible time to sell? Why wouldn’t you wait until prices grow again? And if prices may drop further over coming months, why would you buy, when you may be able to get something cheaper in a little while?
Our answer is it depends on your circumstances. We suggest the following approaches to different situations:
- If you are exiting the market (ie selling a property and not buying another): we believe now is a poor time to sell and would counsel holding a further year or two when prices will likely recover. But if you need to sell, you should do it now as prices will likely get worse before they get better and the potential end of negative gearing in May could make prices drop further.
- If you are entering the market (ie buying a first or an additional property): we believe now is a good time to buy but things may improve further as prices continue to drop for some time. The more important factor, however, is the quality of the property – if an ‘A-grade’ property becomes available, we would buy it – they are always hard to find and will be cheaper now than they were and cheaper than they will be again in a few years. What’s an ‘A-grade’ property? From an investment point of view, one with large land content in a rare location (ie close to trains, beaches or parks). Its obviously more complex than that, but talk to us for a detailed discussion of how to select a high performing property investment.
- If you are selling then buying: then now is a very good time to sell – despite not getting the price you may have got a year ago, you will be buying in a market that will probably have declined further and you are buying later so things should be even better for buying. So despite it not being a great time to sell, it is an even better time to buy so you are actually likely to come out in front.
So, if you either need to sell or are looking to sell then buy, call Grant Lynch our Sales Director on 0408 110 011 or email@example.com and he can guide you on maximising price now. By attracting investors from all over Melbourne and the world, as well as local buyers, LongView can outperform traditional local agents in your sale (and tell you the truth about whether it makes sense to sell or not).
If you are looking to buy and want advice on how to select an ‘A-grade’ property, call Evan Thornley our Executive Chair on 0438 899 301 or firstname.lastname@example.org or Antony Cohen our CFO on 0419 381 905 or email@example.com and they can guide you through the process.