Property buyers should avoid the herd, says John McGrath

Astute property buyers should be looking to buy now rather than wait for the market “herd” to change its outlook, prominent agent John McGrath has argued in his latest blog post.

Quoting investment guru Warren Buffett’s aphorism “Be fearful when others are greedy. Be greedy when others are fearful”, the McGrath Real Estate CEO urges buyers take “the umbrella view” and buy while the rest of the market is holding off.

“If you’re looking to purchase for the long term, which I always recommend, then a 2.1% decline in prices in the March quarter of 2011 is not going to matter in 2021 when property prices may have, once again, doubled,” he wrote on switzer.com.au.

“If you wait for the herd, there’s one thing I can guarantee. When the herd starts buying again, prices will go up, and you’ll be kicking yourself you didn’t grab this current window of opportunity,” he says.

McGrath also argues that current market weakness – 30% more properties available for sale across Australia than at this time last year, according to RP Data – will not prevail.

“I can tell you with confidence that the weakness we are seeing now is not the beginning of a downward stretch. The fundamentals of our property market are still very good, but right now, we have a little uncertainty going on.

“This relates to volatile global economies especially in Europe, uncertainty relating to interest rates, a more conservative approach to debt and recent natural disasters. From a property market perspective, these are circumstances that are temporary and will resolve themselves,” he says.

McGrath concludes by saying that overall, the market is still heading up and that the market fundamentals (strong population growth, a massive undersupply, increasing rents and a stable economy) will keep property prices strong in the long term.

In previous blogs, McGrath has argued that the climate remains positive for investors.

“Property prices are slightly softer and rental yields just keep on rising,” he says ahead of the winter season.

He lists the top 10 municipalities for rental growth over the year to March Quarter 2011 as:

• Woollahra, Sydney – Houses – 22.2% to $1100 per week
• Nedlands, Perth – Houses – 20.4% to $825 per week
• Burwood, Sydney – Houses – 19.6% to $550 per week
• Sorell, Hobart – Apartments – 18.2% to $260 per week
• Claremont, Perth – Houses – 17.2% to $850 per week
• Cottesloe, Perth – Houses – 16.7% to $875 per week
• East Fremantle, Perth – Houses – 16.4% to $675 per week
• Ashfield, Sydney – Houses – 15.6% to $520 per week
• North Sydney, Sydney – Houses – 15.3% to $828 per week
• Lane Cove, Sydney – Apartments – 15% to $460 per week