Thursday, April 02, 2015

Hot and Cold.

We are seeing two sectors of the market starting to emerge... one is running hot, and one cold.

From what I'm hearing and seeing first hand, the suburbs surrounding the city such as Eastwood and Parkside and the western pocket of Mile End and Bowden, in the $400,000 to $600,000 range, are attracting huge enquiry. Chatting to our clients, these areas are in high demand and as for my friends, for some reason they are amongst the most active group right now. Six have purchased property in this sector and price band last week! To hear how active the under 30 buyers have become just shocked me!

So things are definitely hot in this section of the market where buyers are taking advantage of affordability in SA, and low interest rates, while it lasts. As a result, we are seeing new challenges emerge for purchasers to overcome.

A new dynamic is emerging as this part of the market ramps up demand. Buyers and sellers are being faced with the possibility they may be caught out having sold their property and are yet to find their next one. It is actually not a bad problem, as the opposite is far more traumatic... where buyers end up with two houses, two mortgages and no sale. In this sector, there is greater demand than supply, and active buyers in the market outnumber sellers. As a seller, they are thrilled with the speed (and price) of their sale. But when it's time to look for their next home, they are faced with the reality of being a purchaser, and the shoe is on the other foot! It is a good problem, but a problem nonetheless, unless handled correctly. 

Let us not forget that this is not across the whole market – it is happening in this easily defined hot spot of the current market.

We have seen buyers looking to purchase 'subject to' their own home selling, which seems like the best approach but has some big disadvantages too. One particular example earlier in the year that we were involved in had five parties, which were all contingent on the other! In other words, like dominoes; if one fell over, all sales in the chain after will fall over. This is logistically tricky and quite technical from a legal position. Everyone is required to be ready and able to settle on the one day. This is where the expertise of your agent and conveyancer come in. Moving day also requires a calm and organised approach.

The smarter option for sellers who are looking to spend more time hunting for their dream home is to factor in Plan B. We can help find rental accommodation... and the good news is NO mortgage payments, NO insurance and NO big household maintenance projects to allow full focus on finding your next home. The only concern is that if you are to 'break' your tenancy agreement, you may be up for some lease break costs, so simply factor that in. It does work out, especially when wielding a cash contract around with the next purchase. 

We have seen an increasing number of these people ('tenant/buyers') entering the rental market over the past few months. As a result, demand in the rental space is further tightened and these 'tenant/buyers' are directly contributing to our extremely low internal vacancy rate of 0.57%. It is a fascinating time.

So what happens when you are looking to break your lease early? It is not usually a huge problem, especially with the rental market being so strong. On average we see one tenant per month terminate early, but lately we have seen three to four times this level – this is over a large property portfolio.  

For those operating in this hot part of the market, it's an exciting time! Adopt the right strategy; get good advice. We believe the strategy of selling first (so you know exactly how much money you have to work with for your next property), is important. However in order to outsmart these new market challenges, good advice is critical. 

There are options. Adopting a longer settlement, rent back from your buyer, considering short term rental, even taking a holiday and living down the beach in a cabin, are all fun ways that can help the move be a positive and memorable experience. A quality agent can make all the difference. 

A quick coffee and a chat with one of our team is all it would take to get you on the right track and we will help you wherever we can.

From the whole Toop Team, we hope you have a wonderful and safe Easter break and enjoy spending time with family and friends.

Suzannah Toop

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