Andrew Winter's Australian Real Estate Guide

By Andrew Winter

the essential real estate guide to buying and selling what, where and when in Sydney, Melbourne, Adelaide, Perth, Canberra, Brisbane and Regional and Rural Australia. Featuring tips and advice on buying and selling property, financing your purchase, residential property investment and exclusive tips on Australia's best and worst performing areas. Based on Andrew's popular newspaper columns this book is an essential guide to buying real estate for first-home buyers to seasoned developer.

• Language: English
• Publisher: HarperCollins Publishers Australia
• Release date: Oct 1, 2014
• ISBN: 9781460703434

Andrew Winter

TV real estate guru Andrew Winter is one of Australia's leading residential property experts. Best known for hosting the award-winning "Selling Houses Australia" and "Selling Houses Australia Extreme" on Foxtel's The LifeStyle Channel. In 2011 Andrew joined News Ltd as their real-estate expert. His articles feature in national and local newspapers and magazines, including "The Daily Telegraph" and "Herald Sun".

Book preview

INTRODUCTION

I don’t want to mislead you. I cannot guarantee you will become a property millionaire after reading this book. There are no assurances that you will be flying all around the world in the near future, at the pointy end of a plane and staying only in 6 star resorts. I certainly cannot promise that you will be so cashed up you will never have to give a second thought to upgrading your coffee to a large double shot every morning.

This book is a series of articles all about real ‘real estate’, told from my rather unique perspective, having not only been a practising agent for nearly 25 years, but combining this with a property media career that has given me even more insights into this complex yet fascinating, totally unique marketplace that is the selling and buying of residential property. I was passionate about houses when I started my career at 17 and even all these years later I never tire of seeing a fresh property I have not explored before.

I will focus on all elements of the property market from the very serious to the quite bizarre. What this book will reveal is the importance of people. In fact, a ‘property expert’ understands that real estate is as much about the people involved as the buildings themselves. Ignore the human element at your own risk!

You have a house to sell, you may have a price in mind, you may think you can go it on your own, you may think everything is ready to go. Perhaps you think buyers will be queuing up to sign contracts. You may have the best house in the street, you may be in a booming sellers’ market. Do you really need my help?

Alternatively, you may have been struggling to sell for what seems like an eternity. You have tried everything. You have had enough of ‘opens’ and failed auctions and think all agents are clearly related to the devil. You are therefore desperate for some assistance.

Maybe you are a ruthless investor determined to squeeze every last dollar out of your property – and quite rightly so. Investing in property shouldn’t be just because you like playing houses, but to make money. That all important sale price is absolutely vital and any help that can maximise your sale price may be welcome.

So who should become an investor in the first place? How do you research – and then buy or sell – to get it right? Is there really a risk? When should you considering ‘trading up’ or downsizing? How can you buy your first home? And how do you get the best deal when it comes to finance?

The book is about making sure that whenever you need to buy or sell a property – whatever the situation, whatever the market, whatever the property type or location – you can find some useful tips and guidance to make sure you sell for the best possible market price, buy a home you actually want to live in, or invest in the right property. And not just for now but for the future too.

Housing is like no other market or commodity because this is a people industry where emotions, tastes and influences play a huge part in the process.

The best bargains are not always acquired through years of detailed research of the general Australian housing market, or waiting for the next hot spot to pop up. And the top sale price is not always achieved because you have the best decor, kitchen and bathroom fittings in your street.

Besides, who can really define that special ‘feeling’ you get when you walk into the right home for you? Somehow you just know it’s right and this gut response can be very hard to quantify.

Selling and buying is not always just about location, location, location.

In this book I cover an array of topics to do with buying and selling property. Are you ready to share my insider knowledge of this fascinating marketplace?

CHAPTER ONE

BUYING PROPERTY

Buying a home – why is it such a popular subject? It certainly is unlike any other form of purchase. For most of us it is undeniably the biggest financial commitment we will ever make in our lives. But it is not just the sheer scale of dollars involved; it is the effect this purchase has on our lives and the family and friends around us. Spending all this money is supposed to result in a real home for you, a place to feel comfortable and safe, a refuge from the rest of the word. And let’s be honest here, there is also that ‘we have just bought a new home, isn’t it gorgeous?’ factor – a way to beat our chests socially. Why else we would spend so much of our hard earned cash each year decorating, improving and maintaining our homes, to say nothing of spending hours watching property TV shows and reading all the renovating magazines if the way our home looks is not of significant importance?

No home buyer intentionally sets out to make mistakes; buying a home is way too important for that! Not many people want to feel they paid too much for their new home or have unwittingly acquired a dwelling with a slab built on what seems like quick sand or a property with more issues, rot and leaks than a Queenslander amidst a cyclone! Way too much money is involved for pure naivety.

Can you define the ‘right property’? That’s not possible either. What is right for some is clearly wrong for others. And we have to acknowledge the other elements that come into play such as emotion and outside influences like the media, friends’ and family’s ‘opinions’ and that unexplainable ‘feeling’ that a property is either right or wrong for us.

There is no doubt buying a home is a hugely emotive experience for many of us and the reasons we like or want a particular home are not always entirely explainable.

Every other purchase we make we have real choice. If we miss out on the bright red V8 sedan, with sunroof and only two years old that we’d set our hearts on, luckily another 3000 were produced that year that are all virtually identical. Housing is not so simple. Buying a house is complex because no one single residential property is ever truly identical to another; it is impossible for it to be and that is why you hear the term compromise so often in real estate.

Buying property to live in is all about finding a new home, be it a stop gap measure to get on the first rung of the property ladder, or the ‘forever home’ or the lifestyle choice. No matter which, most of us want to not only get the home we will actually enjoy living in but also value for money, a property that will appreciate in value over the years – making us money. Yes we want the lot!

In this chapter I focus on the vital areas of the process that will help you secure a property you won’t only want to call home but that should grow in value because you will have researched your market, avoided unnecessary risks, considered the huge array of housing options out there and not been intimidated by the method of sale chosen by some sellers. I review elements of research and attitudes to risk. I also look at the various forms of housing on offer, pricing strategies and sale methods, and give my ultimate top five buying tips to ensure every dollar you invest is protected and will grow!

DO YOUR RESEARCH

  Understanding data

  Assessing the value of a home

  Area research

  Understanding ‘median house prices’

  What is normal?

  The importance of sale boards

  Downsizing

  Trading up

Understanding data

One of the wonderful aspects of my current work is that I can experience multiple housing markets in their many guises. This is very different to my years as a real estate agent when I understood one market extremely well, based on years of local knowledge. Such an experience would be typical for many practising agents today.

One of the things I have learned from my travels is that although the basic principles of how property markets behave rarely vary, the intricacies, local peculiarities, history, background and demographics have a huge impact in making the Australian housing market a vastly complex and often contradictory place. To add to the confusion, these localised markets are not purely city- or town-led. They can be suburb by suburb and, in some cases, one suburb can display several micro-markets.

For instance one mining boom town may offer the perfect buying conditions, while the one 250 km down the road may not. While they are both mining towns, and in the same state, real estate-wise, they could be chalk and cheese.

I know of one suburb where a record price was paid for a house, but mostly in that suburb sellers are struggling. You may have bought two years ago in an area and read data that states you should expect growth of 15%. Nevertheless, agents say you will only make about 5% if you sell now. How could that be?

Well, it might mean that you bought when the area was experiencing a mini-boom. However, the people whose sales now make up the statistics have been there longer and so enjoy a greater gain. Or it may be that those houses are bigger than yours, or cheaper and have grown more off a low base.

One of the interesting things about the market is the overwhelming amount of news and information that bombards us about it. It’s always interesting to read and it does give an overview. However, unless it talks about your exact suburb, or area, or refers to your property type and the era in which you purchased it, it may unwittingly present the opposite of reality.

So who should you believe? Well, data is extremely useful, but use this information as a general guide and don’t be surprised if you see exceptions. Our market is full of them and that is what makes it fascinating.

If you are about to buy or sell, track down the information about your specific market.

The key to understanding data and knowing how to apply it is to ask yourself the straightforward question: If I compare this information to my house, am I comparing apples with apples? Or is this information a banana? The truth about much of the data we access is that it is a serious fruit salad, but you can always pick out the bits that you like.

Assessing the value of a home

The value of a property is always decided primarily by what a buyer is prepared to pay. But it is also impacted by what the seller is willing to accept. So how much is your new home really worth?

The aim of researching is to find out enough information to understand which streets command a premium, which ones are in favour, or which areas are a little cheaper. Know of any proposed development schemes, transport or infrastructure changes? If you don’t, now is the time.

Your search process should identify homes that meet your criteria that are listed for sale, but don’t let that list get out of date as the weeks go by. Extend your research to homes quoting about 20% lower and higher than the price guide stated. In areas where prices are rarely disclosed, perhaps your four-bedroom home search should now extend to three- and five-bedroom homes.

If there are no prices quoted, call the agent!

Armed with this knowledge, get back online to property data sites. Nominal charges are common to access this data, but it is worth it. Target property sales with similar specifications that have been recorded recently, ideally within the last three to six months. General data relating to your suburb’s sales history is a guide to the future, but medians and averages can be misleading, even contradictory. One-off high or low-value sales, and new developments can corrupt these figures. Use this information purely as a general guide. Focus on the actual homes sold.

The secret is in how you interpret this information, so you need to play the comparison game. Find the most similar homes to yours, add and subtract dollars, and use as many examples as you can find. The aim is to see a pattern forming which will allow a value to evolve. If the property is unique for the locality, with very few comparable properties, consider employing an independent professional for a valuation. Don’t be afraid to talk to them about their findings – it’s not just a matter of waiting for the report.

Finally, for investment purposes establish a figure you are comfortable with. If you cannot secure the home at or very close to your target figure, walk away.

That said, as a home, it needs to be the right one and you must love it. If you envisage this being the family or ‘forever home’, don’t be scared to pay a little more. No moving costs in the next three or four years have a tangible value. But if you have to pay more, don’t go higher than 5%. So research, analyse and if it gets really tough then turn to the professionals.

Area research

Every property type who writes, speaks, blogs or tweets about how to get the most out of the property market and avoid mistakes should always make it very clear that you need to do your research before you buy, sell or invest in a home to rent.

The first element of that research should really be about the area’s demographics. For example, knowing the total number of dwellings within a suburb will help you to understand what percentage of the area is on the market. You’ll need to compare the demographic number to an online search of the suburb to discover how many homes are for sale.

Compare the number of homes for sale with neighbouring suburbs to give you an insight into the local supply, noting that some homes listed may be duplicated and some may be old listings or under contract. It can take a bit of time, but that time is teaching you all about the homes in that area, which is the point of the exercise!

Short supply in your area could mean that is not the time to buy, but the time to sell. Looking in the papers will add to your insights even more. Perhaps you are researching the rental market as a potential landlord. What you need to find out is how many homes in the area are rental stock. What rents are tenants typically paying? It is even better if you can obtain details about the typical average earnings and percentages of income that are spent on rent. All these statistics will help you to decide if the rental figure you are hoping for is reasonable and if there are good chances of retaining 95% plus per annum occupancy.

Another good way to discover a true insight into the type of area you are considering is to establish how many dwellings are owned outright, owned with a mortgage or just rental stock. Then you should look at the typical household mixes of that suburb. How many people typically live in a home? How many cars do they have? How many children on average? What age groups make up the population? Marital status? All these factors will help you to understand the choices you will need to make in relation to the type of property you should be seeking and what will be most attractive as a rental in that area. It is even more useful if you can compare this suburb or town with others that are similar, in your own state and nationally.

Be aware that when researching you might see information about your postcode as opposed to your actual suburb. This can be misleading as your postcode could be home to a range of vastly different suburbs, varying from family areas due to proximity to schools, to more built-up areas favoured by singles and couples. One sector could demonstrate a strong market now while the other sector is weak.

While it is useful to know your suburb’s median house price, it is also useful to be aware of how long it takes for homes to sell in the market and the price range of those sales.

How do you get hold of such information freely and easily? Well, the Australian Government supplies it. Bless them. If you recall, we had a census only two years ago, making much of this information pretty up to date. This is a great guide – it is free and incredibly informative. Not only will you find information on the suburb you may be considering purchasing in, but you will be drawn to learn about the suburb you live in now, where your mates live, your parents, and for fun, check out the areas that your so-called ‘high rolling’ pals have chosen to call home. Chuckle quietly to yourself when you realise that those ‘friends’ who always claim the people who live in their suburb are really the ‘right’ people, actually belong in an area where monster mortgages and rentals rule. Oh yes, that one can be saved for the next barbeque.

Anyway, all these fascinating facts are just a click away at www.abs.gov.au. Go to the ‘Quick Stats’ search button, put in your suburb and press ‘GO’. The world opens up to you. It is pure joy.

Understanding ‘median house prices’

We have all seen the headlines – suburb medians are at an all time high or conversely house price averages are tumbling. But how many of us understand what that means for us as home buyers or sellers?

To clarify, a median figure is the middle number in a row of figures. For example, if you have five numbers running from lowest to highest, it would be the third number. Averages, on the other hand, are the total of all sales figures you’ve collected divided by the number of sales.

Statisticians use median figures to overcome extreme data, thereby skewing the insights. Average sales can be impacted by a very large sale, or a very cheap sale – either will make the ‘average’ sale seem higher or lower than what the bulk of the data claims. To add even more confusion, although these are two very different ways to establish a figure, the outcome is often very close.

My concern around relying on this kind of data is that often too much emphasis and reliance is placed on the amounts quoted. These guides are certainly a practical and simple way of demonstrating basic changes in markets that are both positive and negative. But like all statistics, their downsides should be understood and it helps to take them with a grain of salt or commonsense.

So how reliable are average or median figures in illustrating the state of the local market? Well, be aware that every area will have homes that buck the trend – ones that achieve an unrealistic high sale price for whatever reason, or likewise a cheap sale, as a vendor needs to sell quickly. Doing this kind of homework is a good place to start, but it should only be the start of your researching journey to find your new home or to understanding how much your current home is worth. Happy researching!

Median and average prices only give us a general guide.

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THE BENEFITS OF MEDIAN HOUSE PRICES

A simple way of providing an overview of a housing market, its current and past trends.

An excellent monitor of an area’s house price growth and losses over long periods of time.

A guide for buyers as a starting point for their house hunting and research.

Factually correct as figures are based on actual recorded sales that have settled/completed.

THE PITFALLS OF MEDIAN HOUSE PRICES

Figures are based on completed or settled sales; they are actually only a snapshot of the housing market from around two to three months ago and not right now!

Figures can be easily skewed when sales are recorded at abnormally high or low value levels within a suburb. They can also be affected when a new development accounts for many of an area’s latest sales. If recorded sales data is all around a particular price range, that can impact on the accuracy of what is really happening in that area at that point in time.

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What is normal?

By definition, normal means conforming to the accepted standard, the common type, the regular or just plain usual.

In my real estate career I was often referred to as not normal. I wasn’t very good at conforming; I never wanted to wear a tie, was more excited about a listing because of the house and the owners rather than the fee, I loathed sales conferences and preferred pulling out fingernails to attending motivational seminars.

But I want to discuss normality, not in relation to real estate agents, but to areas and particular suburbs.

Understanding the normal elements of an area can really help you as a seller or as a buyer. It means less wasted time seeking features that homes in that area just don’t have, or worrying unnecessarily about a negative that in fact is so common it isn’t really an issue.

Imagine you are a buyer. You see a home you really like, it suits you perfectly, but the backyard is really steep. It would be prohibitively expensive to change this. You don’t mind, but you are worried that if you came to sell in the future buyers would be deterred.

First up, note in your property search how many other homes have steep gardens. Let’s say more than a third. If that’s the case you really have very little to worry about, providing you pay the right price. How much is that? Well, it is slightly less than a similar home with a perfectly level yard. So, if few properties have steep yards and this home is unusual, you want pay a figure that reflects this substantial negative.

This rule can apply to anything from main road