4 things you must do if you’re buying property in 2015
With the arrival of a new year, many Australians may have resolved to finally enter the property market in 2015, or increase an existing property portfolio.
This could be driven by the recent few years of strong performance recorded by property as an asset class. December CoreLogic RP Data statistics demonstrated that home values across the combined capital cities achieved a year-on-year increase of 7.9% by the conclusion of 2014. This was just down from the 9.8% achieved during 2013.
Certain areas recorded even higher growth levels, such as Sydney with its 12.4% year-on-year increase achieved by the end of 2014. This growth exceeded the predictions of many pundits, who may also have been surprised to hear of the unexpectedly high growth levels in several rural and regional areas. This demonstrates that the market can sometimes move in unexpected ways.
Heading into 2015, none of us can really predict what the year ahead will bring. We can’t say for sure whether interest rates will rise, fall, or stay the same. Nor can we predict with any true accuracy the “hotspots” which will provide the greatest capital gains, or the highest rental yields. Regulatory requirements may sharpen or become more lax, and economic activity abroad may see numbers of foreign investors increase – or drop – as a response.
I believe it will be an interesting year to watch unfold, and below are my tips for buyers heading in 2015.
1. PUT ON THE BREAKS
We entered 2014 off the back of the “sellers’ market” of 2013, in which vendors could easily find a buyer willing and ready to meet their, at times, fairly high prices. This is still occurring to some degree in certain market “hotspots” where a shortage of listings continues to drive upward pressure on pricing.
However, I believe there are still many areas now where this frantic demand is cooling off, and the power in the negotiation is beginning to tip in the direction of buyers. For this reason, I would suggest buyers take their time when attending open inspections, or when considering their different options. Be committed to looking at a number of different properties, instead of rushing to purchase at the first available opportunity. Take your time. Then come back with the price you believe the property is worth – not the price being pushed on you by the seller – and stick to your guns, or walk away.
2. …BUT DON’T BE TRAPPED BY ANALYSIS PARALYSIS
I would never advise anyone to rush into a purchase without having done some thorough research. However, I’ve also witnessed prospective buyers become trapped by what is often referred to as “analysis paralysis”. This occurs when someone overthinks, or over-analyses, a situation to such a degree that an action or outcome is prevented from ever actually occurring.
These days, we have so many great sources of property market statistics that it can become addictive to pore over every possible metric, speculating as to the best, or worst, time to make a move. However, as enormously informative as these sources are, they still only demonstrate historical trends which have already occurred – not those anticipated to transpire.
If you are truly considering entering the market, I would certainly recommend self-education on the historical trends of different locations and property types. But at some point it may be time to put down the research and begin to consider taking action.
3. RENT WITH YOUR HEART, BUY WITH YOUR HEAD
Speaking of trends, an interesting trend I witnessed in 2014 was an elevated level of interest in areas outside of the capital cities, such as Nowra in New South Wales and Queensland’s Gold Coast. This leads me to believe that prospective first home buyers who feel property prices are currently too high to enter the market may not be considering all of their options. It’s important to live in an area which is convenient for whichever lifestyle suits you best – whether this means access to a particular university, an abundance of local parks in a quiet neighbourhood, or a raging night life just down the road. However, it may not always be possible to purchase in these areas.
This is why I always recommend buying in an area you can afford, and renting where you wish to live. It’s my opinion that there’s no point waiting until you can finally afford to buy your dream house, if doing so means losing the potential capital gains you could have been making through another property. Using this technique could help you to enter the property market in a way which works for your particular budget, while allowing you to live in a location which works for your chosen lifestyle.
4. LEAVE YOUR EMOTIONS AT THE DOOR
Buying a home can often be an enormously emotional undertaking. Considering where to lay down your roots, raise a family, or simply begin your journey as a property investor can all be highly personal concerns. This is then heightened by the high, and long-term, nature of the financial costs involved.
However, buyers who enter into a home-buying negotiation with an objective mindset may avoid a number of emotional traps, such as bidding too high at auction for that “perfect” three-bedder with the cute picket fence, or signing up for a snazzy property, which is way out of their price range. By committing to remaining strictly impartial and sticking to a set of pre-defined parameters, it’s my belief that buyers will secure the most favourable outcome.
So look around, take your time, but don’t be afraid to make your move when the time is right. By following the above tips I believe buyers may be positioning themselves in a way which sets them up for the greatest chances of property-buying success in 2015.