It is important for vendors to be strategic when listing their property, and with two years of continuous growth in the Australian property market, many Australians are being tempted to step off the sidelines and list their properties. In light of this, we have decided to share the following story by Century 21 Australasia's Chairman and Owner, Charles Tarbey, which is currently appearing in the October edition of Century 21's Property Investor. In this article, Charles shares his thoughts on the strength of the Australian property market, and whether you should list your property this spring.
IS NOW THE RIGHT TIME TO LIST YOUR PROPERTY?
With growing buyer levels, and recovering property values in many Australian markets, some homeowners may be tempted to step off the sidelines this spring and list their properties for sale in order to realise potential capital gains.
I would encourage homeowners to list their property this spring for one reason - that is, if you're selling to buy - the next level up, or in the location you would prefer to live in.
This is because if you sell your property right now and don't buy at the same time, you're likely to lose out on further capital gains.
I believe that any well-located area in a city should experience at least some price growth over the next twelve months.
I also expect to see the mid-to-high range of the marketplace experience significant positive price growth over the next year which is another reason why I suggest buying the next level up.
WHAT SHOULD YOU PAY FOR YOUR NEXT PROPERTY?
I don't believe that there is necessarily an issue with paying a little more for a property, so long as the price you pay is reasonable in relation to the current market.
If you can get a great bargain, well done; if you end up paying a little bit more, this shouldn't matter a great deal. The Australian market will likely continue to see ups and downs, but it will always grow over the long term - and the long term is what it is all about in the real estate cycle.
The country's proximity, or lack thereof, to the rest of the world, means it is somewhat isolated from some of the negative pressures that other parts of the world can face from time-to-time. This again bodes well for continued strength in the property market.
In addition, the majority of Australia's population lives in capital cities along the coast. This trend is unlikely to change, and the projected shortage of housing stock in Australia means that prices in these areas are likely to see reasonable growth for the foreseeable future.
Australians tend to live in larger houses compared to other people around the world, elect (interesting) but stable Governments, and occupy a safe and secure part of the world. In combination, these factors may make it attractive for people to pay more to live in Australia.
THE STRENGTH AND SAFETY OF THE AUSTRALIAN PROPERTY MARKET
I believe there are other reasons for the strength of Australian property prices, which is why I suggest keeping your capital in property.
Many of these reasons have little to do with the dollar, interest rates or the economy. Rather, they concern the emotional side of property.
Firstly, as soon as someone buys a property, they tend to think it is worth more than what they purchased it for. This is a remarkable phenomenon, which ensures that confidence in property values is usually strong in Australia.
Secondly, I've never known of anyone to sell a home for less than what they paid for it - unless they were pursuing a better opportunity, or being forced to sell.
Finally, in all my years in business, I've never had an employee come into my office and say, "I'd like a pay reduction." Australians, by and large, tend to want to get paid more, and this generally translates into an ability to borrow more. And once people's borrowing powers start to increase, property prices tend to start moving.
HOW TO USE INTEREST RATES TO YOUR ADVANTAGE
Historically low interest rates mean that many property owners currently have the opportunity to fix their loan at an attractive price.
I would encourage homeowners and investors to take advantage of the borrowing environment at present, as any loan containing an interest rate with the number four or five in front of it should help a buyer over the next five to six years.
Low interest rates often provide an incentive for owners to hold onto their properties; however, with a large number of buyers looking for good quality stock, many of these owners may be tempted to trade up and potentially realise even greater capital gains.
PROPERTY BUBBLE?
With properties moving at higher prices than three years ago, coupled with an environment of low interest rates, many Australians are concerned about the prospect of a property bubble.
I would caution both homeowners and investors to remember that there will always be some level of negative sentiment around the property market and the economy in general.
The Reserve Bank began lowering interest rates over two years ago, and any property bubble that resulted from these actions would have likely manifested at least a year ago - but hasn't as of yet.
LIST FOR THE RIGHT REASONS
I would again encourage homeowners and investors to carefully consider their motivations for selling - if you're selling to buy something else, go ahead and do so; don't be scared.
If you're selling to raise capital, reduce debt, or realise an asset for no other reason than to have cash in the bank, my firm belief is that you should hold off.
Many real estate agents will tell vendors and buyers that now is the right time to both buy and sell, regardless of the of market conditions. These agents are often too preoccupied with what they get out of it, rather than what's best for everybody involved.
For now, the focus for homeowners and investors should be on the potential growth in value of their property, or their next property if they trade up - not necessarily the amount of buyer interest in the market.
Century 21 encourages all parties interested in buying or selling property to consult appropriate advisors or experts before doing so.