Geelong Investors Take Note!
Investors take note, now is your time. Over the past 12months there has been a definitive downward shift in the number of investment properties purchased. This is understandable, previously the bench mark was a 5% return, and if a property was returning 5%+ then it was an easy purchase decision. What we have seen is this move to 3.5%, and if a property is yielding 3.8% – 4% then this has been a good investment purchase. The return is driven by the rental yield and it is no secret that these have been low. From now going forward this is where I expect the growth to occur, weekly rent is on the rise, vacancy rates are exceptionally low and with a balancing of house prices, rental yields are going to rise. If you are looking for guidance on what to buy; where and when, please do not hesitate to touch base, we are always happy to help.
Our Local Geelong Market
We are fortunate that our local real estate market is predictable. At the start of the year all the analysis pointed towards price growth through to the middle of the year; an interest rate rise in the last quarter followed by another rate rise in February/ March 2019. What we have seen has been a solid start to the year, rapid growth through the middle of the year, then with the major banks increasing their lending rates and tightening up their lending criteria; we are starting to see a slight slow down in the market place.
Is this slow down something to be concerned about?
A slowdown, not necessarily a cooling, or a correction of a market place, but a balancing affect that is bringing some honesty to property prices. What I mean by this is that property prices are achieving their true value. Over the past 5 – 10 years the average time a home was on the market before being sold was approximately 60 days; the last 12 months and especially the middle 6 months of this year, the average was around 28 days.
We have seen a spike in prices due to the shortage of properties on the market; multiple bidders at auctions and continuing local infrastructure development. It is my opinion that over the next 3-4months up to and through the Christmas period, we will see a steadiness in property values that won’t fluctuate as aggressively as they have done over the last 12 months. Good properties, in good locations that are well marketed will still continue to perform well, the major difference will be potentially fewer bidders at auctions. So instead of 5/6/7 , there may be 1/2/3 bidders or buyers looking to negotiate directly after an auction if it passes in. There is an element of caution with some bidders now, those who may have previously paid over their budget in the heat of the battle by $10 – $50,000, with confidence knowing their lender would back them; are now holding back and sticking to their limits. This element of caution is definitely not a bad thing, it just needs to be managed in a different manner by your agent. This is the beauty of the auction process, although there is nothing better that seeing bidders go toe to toe out on the street, an exceptional result can still occur with no bids and a property passing in.
Just recently, the change in approach meant that we were able to pass the property in and then sell the home for close to $30k over their reserve price. The reality is that our market is normal, sellers have been blessed by great competition, but bear in mind the simple fact that every extra dollar that they made, they most likely had to spend that on the next property that they purchased, so no matter what is happening in the market place, as long as you buy and sell in the same market you will not be disadvantaged. Sellers should continue to have confidence in the market, but be conscious of time frames; investors should start looking to re-enter the market, and buyers, have confidence that what you are paying is true value.