Beller's Andrew Fawell on Melbourne's potentially volatile Spring property market
Industry veteran and Director of Beller Group, Andrew Fawell has sized up the pending Spring property season, suggesting the wider sales market is in transition.
According to Fawell housing stock levels are approximately 25% down in both houses and apartments compared to the equivalent period last year, equating to a definite shortage of stock across Melbourne. This stock shortage coupled with tight lending criteria from banks and softening valuations due to a fluctuation of the market leads Fawell to believe that buyers will be facing tangible hurdles prior to a property purchase this Spring.
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.
In light of the looming impediments, Fawell has tips for prospective buyers as they shape up for a tilt at property this Spring.
Two key factors
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 backwards 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’".
Advice on navigating the buying season
According to Andrew Fawell prospective buyers should consider these key moves in order to arm themselves with the best chance of success this Spring:
- Look to secure finance with a second-tier lender as they 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!
Fawell also notes that there are certain bright prospects in the months ahead; good deals will present themselves to bargain-savvy buyers willing to scale up to a more expensive property through a property exchange.
The provided example sees a $750,000 property being sold for $700,000, thus 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 which 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, researched and have the right relationships in place. And 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.
Lead image: The Hip Pocket