With the Melbourne housing market continuing to cool, upgraders are in a position to exploit opportunities and grab themselves good properties for the long term.
There were a number of property markets that were suffering weakness and would provide potential opportunities for buyers looking for their forever home.
Houses in popular areas such as Melbourne’s West, Inner East and Inner South, as locations suffering weakness and therefore places where upgraders could take advantage of well-priced housing with long-term capital growth and demand.
Owner-occupiers who are good borrowers with a stable income and good credit history looking to move due to lifestyle, schools, location or for whatever reason, really are in a good position.
All they need is a good understanding of the market, are prepared to negotiate hard, are thinking about the long term and are prepared to consult an expert.
It’s true there has been significant reduction in activity but there are still quite a few transactions in the market, in fact, in the past week alone, there were 1,283 auctions in Greater Melbourne.
Upgraders can achieve bigger properties in better locations for a relatively reasonable price as this is a very strong buyers’ market.
However, to minimise the risk they need to sell before they buy to ensure they get the right price, particularly if they only own a unit.
Upgraders, who were looking for their forever homes, had a completely different strategy and risk profile from investors who tried to maximise their returns and minimise their risks.
CoreLogic figures showed the housing market had cooled with dwelling price growth going from 10.1 per cent in the 12 months to 30 November, 2017, to -5.8 per cent in the 12 months to 30 November, 2018.
The auction clearance rates decreased from 69 per cent in November 2017 to 43.7 per cent to November 2018.
In addition, there is potential for further price reductions at least in 2019 and increased likelihood of changes to negative gearing and capital gains tax which will further reduce investor activity.
This means that upgraders are in a very good position right now.
With the population of Melbourne expected to pass five million by 2021 and eight million by 2050, according to demographer Bernard Salt, there would be an undersupply of properties suitable for families, which meant capital growth over the long term would be positive.
Further, there is an ongoing undersupply of houses, particularly in the middle-ring and in areas with good accessibility to the CBD.
That has been a major driver to the increased property prices and is projected to be a major factor for price growth in the medium and long term.
In addition, the employment market remains steady and this will trigger stronger migration, higher wage growth and stronger demand for housing.
Greville Pabst, CEO of property valuation and advisory firm WBP Group, said there was certainly opportunities for upgraders in the current market, however, it was important for vendors to understand that selling periods were longer and fewer properties were sold under the hammer or within the usual four-week selling campaign.
“It is therefore sensible to allow for longer selling periods of perhaps up to 6-8 weeks,” Mr Pabst said.
“Whilst, upgraders can benefit from buying in the current market, it is vitally important to consider the terms and conditions of a sale. For example, if you are buying before you sell then it may be beneficial to structure sale terms to coincide with the terms of a purchase.
It is a buyers’ market, and with current supply it is relatively easy to buy. However, it may take some time to sell your existing property, so structuring terms to reflect this scenario is critical.
“Also, it may take 120 days to sell so if you are buying with a 60-day settlement you may need bridging financing. In this market you can negotiate favourably so that you are not put in this position. Most people only think of price, but terms and conditions are equally important.”
He said the next upswing would commence in the inner-city areas.
“Population growth is focused in Melbourne’s west and north, so I expect growth will be relatively positive in Melbourne’s inner west within the next five years,” he said.
The inner east has been one of the hardest hit areas in Melbourne, but I consider it will also be one of the first to recover and when it bounces it will bounce fast, as will the inner south.
Lifestyle attributes will drive growth in this area.
In particular, I find areas like St Kilda in inner Melbourne bayside to be particularly undervalued.”
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