Is it the right time to jump in to one of Sydney's hotspots? Ask Margaret
Dear Margaret,
I am thinking of buying a house as an investment in Eastwood, NSW. Is this the right time? I see many houses in Eastwood for sale at present but the price is moving up so fast.
Do you have any advice?
Thank you,
K. C. Wong
Dear K.C.,
Eastwood, along with many areas in Sydney at present, is very much the subject of buyer frenzy. On the weekend we saw a ridiculous result where a property in this suburb sold at $1m over the reserve.
I always marvel at the fact that, when the buying is good (after a GFC, or other times when we have economic uncertainty) no one is brave enough to buy, as the uncertainty creates fear. Yet, when there is buyer frenzy artificially pushing up prices, everyone wants to rush in before it's too late! It's the latter scenario which actually carries the most risk.
When buyer frenzy exists, it's very easy for the investor to overlook the important growth drivers. All they see is an increasing price and they want in on the action. Often when you strip away the current demand you are left with very little, and this means that, once the attention is removed from the area, prices will stagnate and possibly fall. If instead you buy in an area which has all of the known growth drivers, and you manage to get in before any kind of major demand begins, you can be sure that the area will show great growth even after the frenzied demand settles down.
Where Eastwood is concerned there is no question that the values are strong and that, under normal circumstances, a buy there would not lose money for you. However, I caution you to take care at present, as the latest sale prices are far exceeding the intrinsic value of the area. This means that when Sydney goes off the boil, areas like this will suffer and those who bought as part of the current demand cycle may well find that they either lose value, or sit for a long time with little or no growth.
It might be better to find an area just like Eastwood which is yet to come under too much attention, then you can be sure of maintaining your buy in price, and possibly even increasing it over time and in the future.
Kind regards,
Margaret
Margaret Lomas is a best-selling author and writes and hosts the popular Property Success With Margaret Lomas and heads up the panel on Your Money, Your Call, both on Sky News.
She is the founder of Destiny.
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