I know we’ve been going on about the ‘lending war’ quite a bit [ie. banks cutting variable rates to 6.75% & 3yr fixed rates from 6.29%] so we thought we’d turn our attention to the Adelaide property market this month.
Let’s not beat around the bush, the property market is depressed at the moment. But aren’t those real estate agents doing a good job of remaining upbeat [the glass is half full – repeat 3 x] – heard any of these; “it’s just a pause in the market” or “we’re experiencing a soft landing that’s all” or “it’s the media’s fault, they’re focusing on all the negatives”
But the numbers don’t lie – according to research house RPData the total value of dwelling transactions for 2010/11 have seen their largest annual fall in more than a decade. RP Data analyst Cameron Kusher said the drop in value shows a strong correlation with a decline in the volume of transactions, and indicate low levels of activity in the housing market.
Auction clearance rates are down and so is the number of people choosing to sell by auction. Been to an auction lately? – it’s not pretty, you can only imagine how gutted vendors feel as they watch their beloved property being passed in without a single bid.
If you get out there and speak to a few honest agents you’ll find the vast majority will admit that things aren’t great. They’ll tell you inspection numbers are down – if they get 3-4 people through the doors that’s a great day, because it’s not that uncommon to stand around at an open and have no one turn up.
Of course properties are still selling but the data shows that the vast majority are sitting on the market for considerably longer. For example, 12 months ago a 3 bedroom townhouse around the corner from where I live sold for $715K which I didn’t think was a great price at the time. A few months later a comparable townhouse [a few streets away] hit the market at $715K – some 6+ months later the vendors had to accept a price in the low to mid $600k’s.
Being in the finance game we see transactions all the time and vendor discounting like this is rife – lately we’ve seen several real examples of people who bought in the last few years taking a hit of $100-200K just in order to get a sale.
By the way we’re actually very much pro-property [hope you weren’t getting the wrong impression] but in order to do well your strategy needs to adjust to match the market conditions. So in a slow depressed market it is probably not a great idea to borrow to the hilt and buy a negatively geared property [one that will cost you money each week] on the proviso that you’ll make a heap of money through capital growth.
Personally in a market like this if you are going to be a passive investor I feel you have to focus on cashflow – that is buy a property that will put money in your pocket each week. These sorts of properties do exist but having just come off the back of a huge property boom rentals are lagging a bit so the challenge now is finding these types of deals.
Alternatively, if you want to be more of an active investor you can still make solid short term gains and profits if you know how to add value to property. Our resident renovation expert Andrew is living proof of this – he’s still successfully buying, renovating and selling property for profits in this market! You’ll know by now that Andrew has showing people what he does through a series of seminars this year – next Wednesday Nov 2nd is likely to be his last for 2011 so if your interested go over to www.re-innovate.com.au/seminar and register your place.
Finally, the word is rates will be cut by 0.25% at the next RBA board meeting on Tuesday. As always we’ll let you know the outcome minutes after it is announced.
As you take a moment to read this month’s news, remember Urbantech is always as close as your phone!
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