Buy in a frenetic market, or wait it out? Hotspotting's Terry Ryder
Expert Observer
The big dilemma facing many Australians is whether to confront the frenetic markets in many parts of the nation – or wait for things to settle down before seeking to buy.
I can understand people wanting to avoid the circumstances they currently face in so many locations: properties are selling very quickly, sometimes even before being formally marketed, and often for prices well above the asking price or price guide.
If you want to buy safely and sensibly with due diligence, it’s difficult to compete with cash buyers purchasing properties sight-unseen via a phone call. Surely it would be more sensible to wait until the frenzy dies down and conditions become more normal.
Actually, no. I think it’s a mistake to wait.
I don’t think the boom is a short-term fad, as some in media have suggested. This market scenario has been building for the past six months or so, it’s underpinned by multiple strong factors and it will extend throughout 2021 and into next year.
It’s a genuine nationwide real estate boom, the kind that we see only rarely in Australia. The last one was 2001-2002-2003 and before that it was in the late 1980s.
These events happen for identifiable reasons and this one has many factors. My list of influences, which I published in this space a month ago, has 16 dot points. It’s not about low interest rates and it won’t be stalled by the end of JobKeeper. The Reserve Bank might change its mind and lift the official interest rate, but the boom will roll on.
So if you wait until it dies down before buying, you may be waiting a long time and you’ll be paying a lot more for your next home or investment property. If you delay until saner times, you could conceivably be paying 20% more. That means a property worth $500,000 now will be priced around $600,000. A $1 million property will cost $1.2 million.
We already have many suburbs and towns across Australia where the median house price is now 15% or 20% higher than it was a year ago.
Sunshine Beach on the Sunshine Coast has risen from $1.23 million to over $2 million in the space of 12 months.
A $600,000 purchase a year ago on the Sunshine Coast is now worth between $700,000 and $750,000, based on the growth in median house prices for locations such as Birtinya, Mt Coolum and Coolum Beach.
An investment of $550,000 to $650,000 12 months ago in the Central Coast market north of Sydney would now be worth $90,000 to $100,000 more, based on the growth in median prices in locations such as Long Jetty, Berkeley Vale and Umina Beach.
But many markets are only just getting started. Rapid price escalation is likely to continue well into next year. The most conservative of the forecasters, the bank economists, are predicting big growth this year and next year.
So if you’re ready to get into the market now, don’t wait. You need to find a way to cut through the current frenzy and get the property you want.
If you’re an investor, there are locations in Australia with the credentials for long-term price growth but not yet “bonkers”.
The best way to proceed is to get your finances sorted, engage a reliable buyers’ agent, give them clear parameters and let them go find you a good investment property in a location with long-term growth drivers.
Terry Ryder is the founder of hotspotting.com.au
ryder@hotspotting.com.au
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