Opportunity only shows itself to people who look for it. In the current market there are great deals to be had, but you have to look for them. And if you are wanting to upgrade, you’ll never get a better selection to choose from!
It is worth remembering that if you sell and buy in the same market, you don’t lose and might even gain. Obviously in this market it pays to sell first! And good places with realistic prices are still selling. March sales were down 50% on last year but there were still over 5,000 sales.
As for falling prices, property prices will drop but mostly where people are forced to sell – death, divorce, or debt. Everyone will simply choose not to sell and sit it out. THE GOLD: We reckon the best strategy over the next 2 years is (1) don’t die, (2) don’t stray, and (3) put on hold any aspirations to be a property developer.
New houses is where you are likely to see some of the best bargains at the moment, especially if they have been on the market for a while. Put simply, builders and developers need to move stock. Given the cost of new builds, we’re talking reasonably expensive property. One client is looking at a new top end town house that has dropped in price by over 30%.
You might also find some great value in freehold apartments in Auckland. It looks to us that many are selling below the cost to build. Banks also make it hard for prospective buyers by only lending up to 80% which has put the brakes on demand. For good clients we can still get up to 90%. Long-term, apartments will be a growth market given limited land, higher petrol prices, and a growing population. But not all apartments are created equal. KEEP AWAY from leasehold. Some leasehold places have seen ground rents increase by 300% destroying any value left in the house.
Now is not a good time to become a first time property investor. Don’t buy if it means negatively gearing (rent less than mortgage interest.) Property prices will not increase for at least the next 3 years, so why invest in something that loses you money? Investing now needs to be all about yield – with interest rates set to fall and rents increasing I’d target a yield of 7%+
