- Doing thorough research on the market, and knowing your budget is important.
- Price guides may be underquoted.
- Suburbs 'next door' may still provide the same amenity at a lower price.
Despite the current economic conditions, we are still seeing property prices steadily rising. This makes it difficult for any property buyer, in particular first home buyers.
When buying property in the capital cities and surrounds, where the popular suburbs have all the bells and whistles, home buyers are spending countless weekends attending open homes but are continually feeling frustrated and disappointed every time they miss out when the gravel falls at the auction.
Is it just down to bad luck that the properties are selling $100 000’s above the price guides outside of buyers’ budgets?
Not at all.
There are several reasons behind this, including a lack of market research to understand how to value a property, as well as setting realistic expectations on what your budget can buy.
Do your property market research
The best approach to researching the property you want to buy is to determine what would be the true market value of the property. The best way to determine this is to look at the comparable sold prices in the area, which are of a similar size, type, and style.
Once you gain this understanding of what properties will actually sell for, you will gain a better understanding of how to look and search for properties within your budget and no longer rely on the advertised price guides, which can be misleading.
Comparable sales
Stop looking at what is available for sale and the price guides to see what you can afford, and start looking at the recent sales prices.
The properties that have already sold will ultimately tell you what you can afford to buy in a suburb, and this is much more transparent than relying on the price guides listed by agents on properties that are available for sale.
This is the reason why ‘for sale’ prices are usually under-quoted. It is a sales tactic to drive more interest in a property, even though everyone knows it is worth more than that.
The sales tactic helps to drive prices higher at an auction, as well as push buyers beyond their financial limits, once they fall in love with a property, but this also leads to a lot of disappointment with home buyers that keep missing out on that dream home.
If you want to be successful in securing a property, either by placing an offer on a property or at auction, you really need to look for properties advertised for at least $200,000 short of your budget (for properties under $1.5 million), or otherwise consider looking at properties listed at around 10%-20% below your budget. This will give you a more reasonable expectation and some wriggle room when placing an offer or bidding at an auction.
It is also important to consider whether your budget permits you to buy in your favoured suburb, or if you will need to look elsewhere.
Sister suburbs
We see many home buyers missing out on properties because they are determined to buy into a “hot” or premium suburb where their budget just doesn’t match the growing popularity and increasing property prices in that area.
However, if you look at the neighbouring suburbs, this may help you to get into the market, and you might be able to buy into an area where you want to live.
A sister suburb is a suburb ‘next door’ to your desired suburb, has similar characteristics, and is just a ‘stone’s throw’ away.
Looking to the neighbouring suburbs may help you to secure that dream home that is within your budget, but has all the amenities and access you desire from the premium suburb.
Often, we see these types of suburbs have better capital growth potential as they grow in popularity when buyers are priced out of the premium suburb and start buying next door.
Sacrifices
If you are determined to buy a property in an area that you are priced out of, you still may be able to live in that dream area but you need to compromise and make some sacrifices.
You may need to settle on a duplex unit rather than a stand-alone property, or forgo the extra bedroom or office space.
Most importantly, the key to securing a property in any market is to be realistic about what your money can afford in the market.
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