Do you think the property market will burst in 2015?


One of the most real estate obsessed cities in the world

This is a question real estate agents get asked a lot as we head into the final month of selling. It’s a dangerous question because really we don’t know the answer and no one else does either.

According to SQM Research, the median house price in Sydney’s inner fringe has now surpassed $1million. To many that seems absurd, we dreamed years ago about our homes being worth a million dollars and somehow our dreams have become reality, even if that millionaire reality is a far from palatial home we imagined many years ago.

SOLD $1,280,000 - 3/5 McDonald St, Cronulla

SOLD $1,280,000 – 3/5 McDonald St, Cronulla

In Cronulla it is now very difficult to find an entry level house on a small block of land for $1.3mil.  If you are thinking of buying an apartment in Cronulla, it is just as difficult to find something under a million dollars. Last month a 2 bedroom apartment with superb ocean views and only a single garage sold for $1.4mil.

If you are not in the market already, how do you get into a market where you have to be a millionaire to buy a basic home? Parents are panicking for their children, 30 and 40 year olds are becoming first home buyers.

Should we take the plunge in November 2014 or should we wait and see till February 2015?

SOLD $1,118,000 16 Targo Rd, Beverley Park

SOLD $1,118,000 – 16 Targo Rd, Beverley Park

This is the dilemma now facing many buyers. Sure, interest rates are low but when you have to borrow the bulk of a $1 million dollars plus stamp duty then the mortgage you end up with is not cheap.

The Reserve Bank has been recently warning us to stop getting carried away, to stop borrowing too much money, but so far this has not had too much of an effect on an insatiable Sydney market.

Anything can happen as shown with the Global Financial Crisis and we now live in a very interconnected world, where something that happens in another country, on the other side of the world can affect us here very quickly.

SOLD $1,570,000 - 5 Cook St, Caringbah South

SOLD $1,570,000 – 5 Cook St, Caringbah South

Unfortunately I don’t have a crystal ball but I did win the Melbourne Cup this year so if I had to have a punt on which way the property market was going to go next year I would say upwards, but not at the same intensity as this year.

NSW is now the economic locomotive of Australia and Sydney the most desirable city to live in. Property sales off the plan are booming which means the residential construction industry will also stay robust. Also the NSW government has embarked on huge infrastructure projects which will support thousands of jobs into the medium term.

A steady increase, then a plateau is my guess but full disclaimer here, I have really no idea, just 18 years of being a real estate agent in one of the most real estate obsessed cities in the world…

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Who sells their property in winter?

Smart people do!
Well at least this winter, if you do decide to sell, you would be considered a savvy vendor.

Winter weather has been relatively mild with few rain days, so most properties are still very presentable. Traditionally people wait till Spring, but I stress traditionally because now it’s not just the weather that affects the sale price.I would argue that supply and demand is one of the major influences on property prices. In recent months in the Sutherland Shire and across Sydney open house numbers have dramatically increased, days on the market have significantly reduced and prices are on the up, up, up!

If you are thinking of selling, I ask you this question, do you think you will get a better price in spring when you could be competing with lots of properties in a similar price range but the flowers are blooming in your yard? Or do you think you will get a better price in winter, when there are just a few similar houses on the market and an abundance of buyers clammering for the same home, your home?!

And just to throw a spanner in the works this spring, we have a federal election. Every time there is an election, the few weeks either side of that date, (for whatever reason) buyer activity drops off.

No year is ever the same with economic and political circumstances affecting the supply and demand of the real estate market, but this year, most agents are seeing a shortage of good properties to sell and very competitive bidding from buyers.

HSBC this week dropped their 2 year fixed rate to 4.59%! Who would have thought a fixed rate under 5% was possible even 12 months ago! It is now cheaper to have a mortgage than pay rent for a lot of people in a lot of suburbs in Sydney. This will only encourage more buyers into the market this winter.

So if you are considering making a move this year, I would encourage you to do it right now!

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Changing moods as Australian Banks break-up and Obama wrestles debt.

The mood seems to have changed as we enter the second month of 2011. As the summer holidays end and its back to work, people and countries are starting to worry about their debt. From a domestic viewpoint, it looks like Australians are going to benefit from the war that has just been declared today, by the NAB against the other banks in a full page newspaper spread, cleverly marketed as a post-Valentines day break up.

The hope is that this will make the banks more competitive for mortgage rates and bank fees. A great relief for many mortgage holders, as Australians pay some of the highest rates and fees in the world.

How effective will the National Australia Banks strategy be?

I don’t think that the CBA, for one, will worry too much. Firstly, CBA would not be scared about losing a few disgruntled home borrowers, they have too many (as a % of total lending) anyway. Secondly, the CBA is so far out in front of technology that few will want to forgo that technology unless they are desperate for any slight reduction in rates. Those people are going to walk again as soon as someone else offers them a slightly lower rate.

Internationally, in regards to country debt, Australia is fine for now, thanks to the resources boom. Once the boom is over, say in 10 years time when China and India have completed their development, hopefully Australia has something to show for digging up its mineral wealth and selling it overseas. Another Snowy Mountains scheme?

Other countries e.g. U.S, U.K have huge public debt which threatens to get out of control like it did in Iceland, Greece and Ireland ever so recently. The US, for example has national debt of US$14 trillion, or, as much as the country produces in a normal year. The comparable figure for Australia is about 10-15% against 100% for the US.

Mr. Obama is grappling with this problem right now, in his third annual budget. The best he seems to be able to offer is $1.1 trillion in cuts over a 10 year period. This figure is less than this years suspected deficient. And guess who is going to take the brunt of the cuts? Of course, the already poor (energy assistance for low income families) and poorer states (in grants to develop low income areas). The other cuts are in environmental programs and forest services which are crying out for more funding.

All debt riddled countries are caught between the conflicting need for debt reduction through cuts to spending on the one hand and the pressing need to reduce unemployment on the other. Mr Obama is hoping for innovation and productivity gains to reconcile the two, an impossible task, particularly as Asia copies and improves all new inventions so quickly, a job made easier because everything has to be made in Asia now.

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Quit Smoking: Shorten Your Mortgage

Need another reason to quit smoking? This Sydney Morning Herald article gives you one.

Quitting cigarettes can do more than lengthen your life. It can shorten the term of your mortgage.

Research from financial comparison website RateCity shows a pack-a-day smoker spends $4,000 a year, or $300 a month, on cigarettes.

Dropping that money onto the monthly repayments of a 25-year, $300,000 mortgage, could reduce the term of the loan to 19 years and knock $100,000 off interest repayments.

The federal government recently lifted the excise duty on tobacco by 25 per cent, adding $2.16 to a pack of 30 cigarettes.

“Many households will be feeling the pinch of rising interest rates as we’ve seen mortgage repayments increase by about $340 per month for the typical $300,000 loan since September 2009,” RateCity CEO Damian Smith said.

“Borrowers who have also been slugged with the new cigarette tax will be feeling even greater pressure on their financial situation.

“This is why it’s a great time to re-assess your habits by quitting smoking and use that money to pay down your mortgage.

“Were not in the business of providing health advice, but for most smokers with mortgages, kicking the habit and redirecting their savings into their mortgage will likely have health and wealth benefits.”

Mr Smith said smokers who don’t have a mortgage should take advantage of high interest savings accounts on the market.

He said depositing $308 per month into a savings account with 6.25 per cent interest could earn $108 after one year or about $3,148 in five years time.

“The number one reason for quitting smoking obviously should be health-related, said Mr Smith.

“But the financial benefits of redirecting savings from an increasingly expensive habit cant be ignored and smokers need to assume that cigarette prices are only going one way up.

Quitting Smoking can shorten mortgage

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