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June 18, 2015 | Media Statement
Perth’s property market has softened, and while this should lead to bargains for buyers, some sellers and agents have not been willing to meet the market according to Perth buyer’s agency, Property Wizards.
Managing director Liz Sterzel said some sellers may think their home is worth say, $500,000 because 6 months ago it was.
“They don’t get that the real estate market and property values move in a cycle and their property may not be worth $500,000 in today’s market – it could now be worth $475,000.
“In 6 months their property may be worth $500,000 again, but not in Perth’s market right now.
“We see this time and again in the normal ups and downs of the property market and it’s the selling agent who needs to educate these sellers,” she said.
VENDOR DISCOUNTING AN OPPORTUNITY FOR BUYERS
Ms. Sterzel said the average rate of vendor ‘discounting’ in Perth’s market right now appears to be around 6%, but there are some extremes, most notably in the premium end of the market, which is quite typical for the cycle.
She said that in a softening market, the premium end is often the first hit and it’s the most striking because you are talking big numbers – a 6% drop on $2 million is $120,000 less on the price.
“These properties may have been bid up by high flying executives when the market was rising, but cash pressures hit high end customers as effectively as the lower end of the market,” she said.
“Over the last 18 months there have been mining layoffs at the top level and offloading property in a soft market means taking what market offers.
“There have been some highly discounted sales so for buyers looking to get into a premium property this is the time to buy.
“Areas where a few sales at big discounts of 10 to 15% have taken place include City Beach, Cottesloe, Dalkeith and South Perth.”
Ms Sterzel said that in outlying lower priced areas the drops in asking prices have been smaller and less noticeable, but where sellers have overpriced, the property will sit on the market.
“For example a low end property in Armadale priced at $259,000 may not move at all and just a drop of $10,000 to $249,000, equaling a ‘discount’ of just under 10% is enough to attract buyers,” she said.
“So there are bargains in some lower priced outer areas but the dollar gain is not as great.”
OTHER OPPORTUNITIES STILL AVAILABLE
Ms. Sterzel said that there are also some bargains to be seen in add value properties, those properties that are able to be subdivided into two or three lots, or multiple dwellings.
“These types of properties have become very appealing to mum and dad investors due to their opportunities for capital growth, and for some time prices have moved up because of competition and scarcity,” she said.
“These properties retain their inherent add value potential and in the current soft market are great discounted properties to buy and hold.
“Once the market recovers there should be some good gains to be had.”
HOW TO FIND A BARGAIN
Ms Sterzel said buyers looking for a bargain have a few options.
“Investors should watch for properties where the advertised price is steadily dropping, with the caveat that they shouldn’t wait for too long once they’ve found the right property, or risk losing it to a similarly minded competitor,” she said.
“Investors could also look for properties that have been on the market for more than 2 months, as the sellers may be ready to accept a lower price.
“Scanning for properties that have been mispriced in the first place could help investors find bargains.
“And of course, those investors willing to roll up their sleeves and freshen up a tired property are likely to get a better deal on a property than those looking for one in tip top condition.”
Ms. Sterzel said that above all, investors need to make sure that the properties they are going after tick all the right boxes as an investment property, rather than letting vendor discounts cloud their judgment.
“Investors still need to do their research, and may benefit from enlisting professional help to find the right property at the right price for their investment goals.
“After all, a lemon at any price is still a lemon.”