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2010 market indications

John McGrath
Tuesday, December 15, 2009

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A new survey from the Bureau of Statistics and RP Data confirms my predictions for market activity in 2010. Essentially, upgraders will remain the largest buyer group with a continuing increase in investor and downsizer activity.

The ABS Housing Mobility survey shows a massive 45 per cent of Australian home owners feel their homes are too small. This survey was conducted in 2007-2008 when interest rates were more than twice today’s levels and upgrading was not financially viable for many homeowners.

Today, interest rates are at significant lows – despite the three latest rate rises, so it’s no wonder upgraders are active right now. But we certainly haven’t seen 45 per cent of the country move house in 2009, so upgraders will still be out in force in 2010. And what do these buyers want? In addition to a bigger property, they also want a better quality property (45 per cent) that is close to shops, cafes and transport (40 per cent) in a quieter location (32 per cent) with better security (28 per cent).

The survey also showed that only 2.8 per cent of Australians had made their last move in order to downsize. This clearly proves the downsizer movement is only just beginning. About 25 per cent of respondents described their current property as ‘high maintenance’, indicating a wave of downsizing is on its way as the population continues to age. Downsizing will continue in 2010 but I believe the real peak of downsizer buying activity is still a few years off.

In previous posts, I’ve discussed the reasons why more investors will be in the marketplace next year. If you’re going to be one of them, you better take note of these valuable insights into what tenants want. The Mobility survey reveals the main reasons tenants are unhappy with their current homes: poor condition, lacking security, noise levels, traffic levels and not being close enough to shops and transport. In addition, 25 per cent complained their property was too cold.

Based on this, I suggest investors consider the following when looking to buy in 2010:

  • Good condition – most tenants are not fussed about a property’s age but they do want it in good condition. If you buy an older style or run down house or apartment, put some money into kitchen and bathroom renovations. You don’t have to do anything flash – just ensure these rooms are modern, neat and tidy with lots of storage space. Once you have a tenant, keep the property in good working order.
  • Good security – don’t expect tenants to be happy with a push-button lock on the front door. Things like that immediately tell a tenant you just don’t care. Put a deadlock and chain on the front door and key locks on the windows. A security building is desirable but not essential – a deadlock on the front door and an upper level position in the block is enough to make tenants feel safe.
  • Quiet street close to shops, cafes, transport – avoid properties on main roads. They are definitely convenient but noise and traffic are major issues for tenants and a Pacific Highway address will have implications for your future capital gains. Look at leafy residential streets within a 10 minute level walk of shops, cafes and transport.
  • North aspect – a perennial desire in real estate but not the be-all-and-end-all. Light and bright internal living spaces, balconies and backyards is the goal. A dark property is seriously depressing and they’re iceboxes in winter. Don’t go there – look for light! 
  • For maximum capital gains, try to buy within 15km of your state’s capital city.

As this will be my last post for 2009, I’ll take this opportunity to wish you and your family a happy and safe holiday season. Don’t forget to consider heading to one of those beautiful coastal locations I discussed a few weeks ago, where prices have dropped significantly.  You might just find yourself buying a great holiday shack or a solid long-term investment in between days at the beach with the kids!

Meantime, get set for an exciting market in 2010.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published: Tuesday, December 15, 2009


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