Latest NewsHere's how to navigate the spring property marketSunday, 09 September 2018

Here's how to navigate the spring property market....  [Andrew Fawell]

Stock is approximately 25 per cent down in both houses and apartments compared to where the market was this time last year, there is a definite shortage of stock out there.

Combine this shortage with the opposing forces of tight lending criteria from banks and a softening of price valuations due to a fluctuating of the market, and buyers are presented with two real hurdles to jump prior to a property purchase.

We expect the coming spring property season will test the mettle of both buyer and vendor alike. Despite this affected condition, I believe that with pragmatic common sense and planning, this problematic market can offer real opportunity.

Know your lending criteria

There is no doubt that the new bank lending criteria has changed and is changing every couple of months.

I recommend that all purchasers seek a pre-approval and ensure that this is ‘stamped up’ every couple of months, as the lending environment is volatile and changing quickly.

However, the good news is that the banks will bend over backward for good borrowers.

A good borrower is defined as having a sustained track record for servicing all debts, longevity in the workplace and has a solid deposit!

Remember, banks look for ‘low risk’ borrowers.

Secure a correct valuation

Because prices have softened, so have valuations.

Yesterday’s value may not be the value of today.

As prices and therefore valuations are on a downward trajectory, purchaser’s need to be especially prudent with price expectations so that they do not have to make up the shortfall.

Essentially these are the two hoops that purchases need to jump through in this transitioning market, ‘pre-approval’ and ‘valuation’.

Andrew advises:

•Look to secure finance with a second-tier lender as second tier lenders are quite accommodating at the moment. Don’t rely purely on the first-tier lenders, it pays to shop around and much like a medical practitioner, get a second opinion.

•Align yourself with a good mortgage broker who knows how to get a deal through in a tricky market! Typically, these are people who have survived a couple of property cycles and know the tactics of navigation and negotiation. Ensure that you align yourself with a good broker who will advise you on what you can, and what you cannot afford.

•Align yourself with a real estate agent you can trust, who is honest and can tell you truthfully about market conditions, not just what you want to hear.

•Don’t get too clever and try and pick the bottom of a market, the market can, and does turn very quickly, it is more important to buy and sell in the same market.

•Get cashed up and get pre-approval! There is a ray of sunshine amongst these spring showers and there are good deals to be done for the bargain savvy shopper.

For example, now is the time to look to scale up to a more expensive property through a property exchange.

Say for example you would sell a $750,000 property for $700,000, losing $50,000 but saving $100,000 on a $1.1 million property and buy it for $1 million.

The net position in the change over including some stamp duty savings on the purchase of $55,000 pays for the stamp duty on the change over.

There are economies of scale now buying in the top end of the market.

Look around, as now is the time to buy the property that you always wanted, but thought you could not afford.

In summary, the spring market is a transitioning market and will offer lots of opportunities for those who are prepared, have researched, and have the right relationships in place.

Lastly, remember, that banks are in the business of "lending money" and this transition will settle down at some point and the banks will eventually open up their purse strings again.