Property buyers should be wary of overpaying, particularly for low-grade properties at this stage in the market cycle, according to Pete Wargent, co-founder of Australia\u2019s first national network of property buyer\u2019s agents, BuyersBuyers.<\/p>\n
\u201cIt may seem hard to imagine in the current market conditions, but even in prime markets such as Noosa, we saw half a decade of poor property price performance following the onset of the financial crisis,\u201d Mr Wargent said.<\/p>\n
\u201cMany units bought off the plan in the Sydney and Melbourne construction frenzy of around seven to 10 years ago have failed to produce meaningful capital gains. The same could be said of some Perth property investments made around 2006.<\/p>\n
\u201cMany regional markets have experienced a huge boom in prices over the past 18 months, and buyers need to recognise that these conditions can\u2019t be sustained once the borders reopen and as new migrants inevitably gravitate towards the capital cities.\u201d<\/p>\n
\u201cInvestors this time around have been less drawn into regional markets for the yield due to lower mortgage rates and lower out of pocket expenses, but still this is not a time to be tempted by apparently high yielding regional investments, which usually come with a commensurate level of risk.\u201d<\/p>\n
Doron Peleg, the founder of property market research house RiskWise Property Research, said that buyers should beware of the risk of overbidding, especially when buying lower quality property.<\/p>\n
\u201cAs the market was booming over the past year with sizeable percentage price increases, the combination of overbidding and purchasing lower-quality assets had few adverse consequences, as the market tide took almost every property up,\u201d he said.<\/p>\n
\u201cEven if you were too excited and overpaid 10 per cent a year ago in Sydney, you still made a profit of more than 10 per cent, as the market has been delivering more than 20 per cent price growth.<\/p>\n
\u201cDue to a lack of stock on the market, there were buyers interested in almost every property, regardless of its quality<\/p>\n
\u201cNow, with decelerated price growth in 2022, and potentially a stagnant market, or even small price reductions, in 2023, the consequences of overbidding will be more significant.<\/p>\n
\u201cSo naturally, properties with sub-optimal qualities will experience lower demand as the market cycle moves on and will be more sensitive to price reductions in such conditions.\u201d<\/p>\n
<\/p>\n
Mr Wargent pointed to CoreLogic\u2019s Pain and Gain report as a reason for buyers to beware.<\/p>\n
\u201cThat report has consistently shown that even when the market is booming, perhaps five to 10 per cent of properties can still be sold at a nominal loss,\u201d he said<\/p>\n
\u201cAnd that\u2019s held true even at a time when at the national level property price growth has been the fastest in over 30 years.<\/p>\n
\u201cBuyers need to remember that the tide will go out eventually. So keep a cool head, research thoroughly, and pay the right price. If you can\u2019t afford to buy a AAA property, then try to focus on location while ticking as many boxes as possible within your designated budget.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
Property buyers should be wary of overpaying, particularly for low-grade properties at this stage in the market cycle, according to Pete Wargent, co-founder of Australia\u2019s first national network of property buyer\u2019s agents, BuyersBuyers. \u201cIt may seem hard to imagine in the current market conditions, but even in prime markets such as Noosa, we saw half […]<\/p>\n