A property recovery is underway. The recovery will be modest and still below long-term growth averages for the nation, however, there is little doubt that property will be more expensive in 2013.
Signs point to growth potential for a number of residential sectors as a result of a positive shift in market sentiment in late 2012, the likes of which were evident in 2010 when Melbourne prices demonstrated solid growth. 2012 saw a steady increase in clearance rates and a small return to the market due to growth in median averages. The increase in the clearance rate from this time last year until the present is over 20%.
Property investors were among the most active buyers in 2012, but while this buyer segment is expected to remain active this year they will face rising competition from increasingly active owner-occupiers looking to upgrade or downsize following improved market conditions.
However, despite improved conditions buyers should exercise caution when engaging in a purchase. Property has become an increasingly complex investment vehicle and is no longer a simple prospect for the novice investor.
It’s important to recognise that no two properties perform the same because no two properties are exactly the same. Size, suburb, street and lot location, orientation, condition and broader economic conditions underpin property performance on an individual level, and exercise significant influence on capital growth.
In general terms, in 2013 the most active segment of the market is expected to be the middle tier established housing market, particularly family homes in the range of $600,000 to $2 million. This assessment is based on historical market performance, which is typically a sound indicator of future potential performance.
When purchasing property, investing time in analysing a property’s individual historical performance trend is a worthwhile exercise to provide peace of mind and some degree of certainty regarding future investment performance.
Property is far more complex today than it was in the past and no longer is it an investment vehicle for uneducated investors. Not all property will perform in the same in 2013 and buyers need to be informed and aware of this when buying to ensure they understand the capital growth drivers that make a good investment property.”
There are signs of a positive shift for property values, the likes of which we haven’t seen since 2010 including:
- More bidders at auctions and more interest at open for inspections.
- Anecdotal evidence of much better results being obtained at private sales.
- Second-ring areas and outer suburbs reporting strong selling results.
- The market had a strong spring and experience tells me that a good result in spring leads to a strong summer/autumn.
It should be noted that banks and lending institutions are doing everything they can to present attractive lending options. When the banks are lending at low interest rates the buyers will return to the market.”
Overarching tips for 2012
Remember, use the rule 'location, location, location' in all property transactions - buy in the right suburb, on the right street and in the right position on the street or block.
By making smart well-informed property decision you will watch your investment grow.
If you don't have the time (up to 20 hours per property) or the confidence to buy a flawless investment then seek advice from a certified property advisor. Don’t risk a guess on such a large investment.
Greville Pabst is CEO of WBP Property Group.