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Oasis Property: Sydney Buyers Agents

Property news as it happens, from the desk of Managing Director Gavin McPherson.

Current Edition – March 2008

Well 2008 has well and truly set in now, and the season is underway. We exchanged over 10 properties in the ‘silly season’ of January, where many great opportunities and bargains were picked up for ‘off market’ properties and that left over stock (overpriced in 2008) from 2007. Either way, our frenzied start secured some great bargains for our clients, with some of the best being:

A sale arranged directly with a vendor (no agents) for a Darlinghurst apartment. (Investor) With rents on the rise this property should see this a positively geared investment within 3 years.

A magnificent block of land in Longueville (Premium Purchaser)

A 2/2/1 first home buyer apartment in Neutral Bay (Investor)

A large beachcomber, water views, large block at Bilgola Beach (Expatriate Investor)

An executive apartment in Pyrmont and Surry Hills (Interstate Investor)

With a slight increase in stock level for 2008 what does this mean for the market? Most industry experts point towards a similar ‘two-tiered’ market as to 2007, but with significant upward trends in the apartment sector. Property commentator, Jonathon Chancellor believes that:

"BIG investment institutions and property companies believe residential property in Sydney has more growth potential than any other class of property on Australia's east coast, a survey says."


This remark was brought on the back of a survey analysing sentiment from 31 of Australia’s top companies, including the banks. With a clock used to represent the market cycle the following assumptions prevailed:

 
12 o’clock reflected a market that had boomed and was setting for a downward trend. (eg: Sydney in 2003) 


3 o’clock reflected right amongst a downward trend (i.e. Perth at present)


6 o’clock reflected the bottom of the market and setting for an upward trend (i.e. Sydney in 2005-mid 2006)


9 o’clock reflected in the middle of an upward trend (i.e. Melbourne just coming out of this, and Brisbane at 10 o’clock)

 

Sydney, in fact represented our only city firmly entrenched in the upward quarter of 6 – 9 o’clock. As such, sentiment is still high in seeing potential in most Sydney markets. This is reflected in some of the results we have achieved at Oasis in achieving excellent rental results such as $500 per week (standard non executive rent) for a property captured for $450K in Surry Hills. At this price, and rentals only going one way (i.e. UP!) there seems much more room for improvement in many other areas including Glebe, Newtown, Edgecliff, Potts Point, Elizabeth Bay, Darlinghurst, Surry Hills, Kirribilli, Waverton, Neutral Bay, Willoughby, Chatswood, Manly, Leichhardt and all those others supported well by infrastructure, transport and cosmopolitan amenities. There will be some other fringe suburbs that should take the shape of good opportunities in 2008. Enmore, Marrickville, Manly Vale, Dee Why, Longueville/Lane Cove and Wollstonecraft are a few of my picks.

 

Interest Rates. Will they have an impact?

They most certainly will, although contrary to what most people think, the bottom will not fall out of the real estate market. Market forces of supply and demand simply won’t allow it. While the cost of lending has risen, it needs to be kept in context that while 20% of USA residential lending had exposure to sub prime mortgages, Australia only had 2% exposure at the time of our recent credit crunch. This simple comparison, and current inflation levels do still suggest that people’s capacity to pay is a lot higher than any comparative look at the US mortgage holders.

 

If history proves as any guide what will happen is:

 

People get ‘nervous’ about buying property around times of interest rate rises and speculation of more of them. (This is occurring now, with auction levels at 57% last week)

These people then retreat for a small period of time before they realise that they can afford the $40 - $120 per month extra repayments OVER paying another $60K for the property in a years time. Fixed interest rates hence become a mainstream consideration.

This above fact compounded with the fact that rental increases are not stopping, consolidates the fact that property ownership is within their reach and they come back to the home hunting market.

Worst of all, they tend to all come back at the same time (either at the first word of an interest rate decrease or stable indicators). In a nutshell – we live in a sentiment based market, and this unlikely to change. If you watch the share market currently you will find the same thing occurring. I guarantee that there are well seasoned savvy investors out there that are buying what should seem (in the future) very well priced shares right now.

 

What can I do about it?

Well, I don’t expect you to turn your emotions off like a robot, but looking back in history gives us the best indicator we can that property over time has never failed us.

Some of my best property experience has come from some of my clients. The experienced professionals with massive portfolio’s have always been around, and they always will. Why is it they always buy better than the others. I call it the Warren Buffet Theory. These clients;

 

“Buy while no-one else is looking”

 

As such, over time it has taught me that these ‘old fox’s’ seem to understand the notion of a ‘counter cyclical’ behaviour and buy property at small windows of opportunity where the majority seem to buck and baulk. Which investor/property purchaser are you? At present, I can validate that most of our investor clients at the moment are major portfolio holders (we have just purchased another investment property for Perth & Melbourne clients) who salivate for market opportunities in times like this.

 

I say this because the fundamentals of property are still strong and the one biggest factor controlling this has not abated in our market is. That is:

 

SUPPLY vs DEMAND

If you go to any Sydney property (in a reasonable locale) this weekend and see how many people are viewing the property? If the interest is there, you can be certain that when sentiment returns this will convert into small property booms. Just like what was witnessed in Summer ‘06/07, I expect this next interest rate rise will be a prelim of what will be good and steady growth for Sydney for the next 3/4 years – (Before we hit that 12 o’clock mark!) It is also predicted within this time (12 – 18 months) that we should see interest rate rises heading in the other direction again. (DOWN!)

 

So, while most people sit out on the sidelines and wait for sentiment to come back, we continue to be buying some extremely well priced property in the best areas of Sydney. See where you stand for affordability and long term property ownership because I can confirm that on the whole – property is only going one way, and it is not down!

 

Ref: Chancellor, Jonathon – AAP (Feb 5 2008) "Outlook for Sydney in 2008"

 

Archived Newsletters

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      November 2007 - "Investors back to market & new addition to Oasis team!"

About the Authors:

Gavin McPherson is managing director of Oasis Property Buyers and also serves as a Director of the McPherson Property Group. He has authored a range of articles and papers that present empirical data and solid research in a bipartisan fashion. Operating one of Sydney premier buyer's agencies also identifies him as having his ears to the ground to see emerging trends as they occur – not after they happen. He can be contacted at:
gavin(AT)oasisproperty.com.au