21 November 2019
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This is how you crack one of the hardest markets out there.

How to buy in Sydney

John McGrath
26 March 2018

Sydney property values fell into negative annual growth territory for the first time since 2012 last month. According to the latest report from CoreLogic, Sydney home values softened by -0.5% over the year to February 28.

All this means is it’s getting a bit easier for buyers.  There’s more stock on the market, buyers have a bit more choice and some new negotiating power.  Auction clearance rates have softened a bit as volumes for sale increase and buyers become more discerning.

I expect this to continue for a while.   Usually when Sydney comes out of a boom, it returns to normal market conditions pretty quickly and it’s a new ball game for both buyers and sellers.

So this week, I’m going to talk about how to buy at this point in the cycle.

While buyers might feel buoyed by the market slow down, reality is we’re still only just past the peak of a boom in which property values grew by about 75%.  It’s therefore understandable that some buyers would be worrying about paying too much in today’s market.

So, what do you do?  Wait a while to see if prices go down, or just get on with buying?

The most important lesson from other booms in Sydney is that prices don’t go down much afterwards.  The city has very strong fundamentals holding prices up (eg strong economy, undersupply, population growth, migration), so buyers shouldn’t expect a big change.

In addition, real estate should always be a long-term play, so even if you do pay a bit of a premium (within reason) today, it’s not going to matter much in 10 years’ time when property values will have probably doubled.

In many pockets of Sydney, we are still seeing properties sell well above reserve. This isn’t happening as much as it was but we are certainly still seeing it with the better-quality homes in the best locations.  So, if you want to buy a great new home, you might still have to pay a premium price.

However, with interest rates remaining as low as they are, this remains manageable. Owner-occupiers can still lock in fixed rates around or even below 4%, so that should help a lot.  

Here are some specific tips on how to get ahead of other buyers, make offers and bid at auction.

How to get ahead of other buyers

Every buyer is online these days, so when a new property listing is uploaded the chances are you and every other suitable buyer will receive an alert to it. At this stage, you’re all on an even playing field.

It’s different when you’re a ‘database buyer’.

Database buyers have registered their buying criteria directly with individual agents and they are often notified of new listings prior to them going on the big portals. This gives you an advantage.

Agents often conduct pre-campaign inspections with database buyers too, so you can get a look at the property and perhaps even make an offer before public advertising begins.  

You can also get ahead of other buyers by doing thorough research on the local market – so you’ll be able to recognise and act on an opportunity sooner; as well as getting your finance approved, as this is a powerful demonstration of your commitment to buy.

Tips for bidding at auction

  • Be clear about your walk away price
  • If you’re going to start the bidding, start low
  • Project confidence – make the other bidders think you have no limit
  • Make your bids fast and assertive. Agonising over your next bid is a sign of weakness
  • Call out your offer in full (i.e. say “$350,000” instead of “$5,000”). When the bidding is down to small increments, it’s easy for buyers to lose sight of the amount of money being bid. Calling out the full amount is a reality check for your competitors
  • If it’s going to pass in, make sure you are the highest bidder so you get first right to negotiate after the event
  • Stick to your walk away price. Short-lived disappointment is better than long-lasting remorse
  • If you miss out, accept that it wasn’t meant to be and look forward to finding something better soon!

Tips for buying pre-auction or via private treaty

  • On auction campaigns, ask the agent if the owners are willing to consider pre-auction offers
  • Tell the agent you’re interested but don’t let on that you’re attached to the property 
  • Don’t start negotiations with your best offer, as it is always assumed your first offer is not your best (or your last!)
  • The best way to show you’re serious is by signing the contract and attaching a cheque for the deposit. This makes your offer a lot more seductive!
  • Put a deadline on your offers to encourage a decision – 5pm the next day is fair. Extend the deadline if the vendor hasn’t decided by then
  • If your first offer is rejected, pick an odd amount to offer next. I have done this myself with great success. For example, rather than offering $460,000 or $465,000, I’ll offer $463,500. I’ll tell the agent: “I’ve looked at the comparable sales as well as my finances and costs and I can offer $463,500.” An odd amount implies you’re at your financial limit
  • Respect the vendor and seek a win-win. Common ground between you – such as the desire for a long settlement, can incentivise the vendor to accept your offer  
  • Don’t make negative comments about the property. Vendors are influenced by their emotions, too! 

The Sydney market is currently taking a breather with the Easter long weekend approaching and school holidays commencing in mid-April. We typically see a surge of new stock on the market immediately after the holidays, so buyers should ready themselves for a potentially busy May!  

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