Consider these tips when looking for property in a depressed market.

Purchasing an investment property when the market is down can be extremely profitable.

But you still have to make sure you’re getting a good deal in a buyers’ market – and wise investors won’t be so blinded by the chance of a ”bargain” that they ignore their long-term strategy – which all means it isn’t as simple as it might look.

In a sellers’ market almost any price a vendor puts on a property results in a sale and such buoyant conditions tend to hide ”over-enthusiastic” prices.

In a depressed market, it’s much easier to buy real estate at more realistic prices because there’s more supply than demand.

Real estate isn’t a uniform market, though. There are many sub-markets that perform differently.

Good properties in certain areas can still sell within 24 hours of being listed, whatever the prevailing conditions, so it’s vital you get up to speed with the buying tactics used by seasoned investors.

Target fail-safe properties

The best properties to buy are those that will always be in demand. For many investors, this means acquiring property that’s close to the city centre. For others it means opting for houses or units priced at near the median price for their areas, which are sought-after by owner-occupiers and investors.

Areas that perform well over time and properties that have a high land content are often your best options.

With units, the golden rule is to go for an apartment in a popular location with restaurants and transport nearby. It should be in a well-constructed building with a high land-to-unit ratio.

Distressed sellers

Many vendors have been hit hard by changes in their circumstances. While mortgagee sales are a clear sign of the economic slowdown, you also need to be on the lookout for other signs of vendor distress.

The number of couples seeking divorces tends to rise in times of financial hardship. Other vendors give up on home ownership and go back to renting. You don’t always discover these factors the first time you talk to an agent. But if you prod him or her and ask the right questions, you’ll obtain information that may help you secure a good property at a great price.

Avoid speculation

It’s crazy to buy a property at below market value if it’s in an area where prices are set to fall. Some property advisers believe this is not a good time to speculate or to rely on the ripple effect to drive up capital growth in suburbs bordering proven growth areas.

Speculators do best when markets are running hot. With the number of properties for sale rising in many areas, your opportunity to make good money by targeting properties in established suburbs is higher. Why take the risk on an unproven area?

Look for multiple listings

Listing a property with several agents shows a keen vendor. Because no single agent has an exclusive deal, you may be able to buy directly from the vendor. This can eliminate $30,000 or more in agents’ selling fees from the sale. You need to tread carefully and take legal advice, however.

Many of these vendors usually want an agent to handle the final sale. Even so, the fact their property is listed by several agents means they want to sell and fast.

Go fast, go slow

A buyers’ market means buyers are more in control than sellers. It’s easier to negotiate a delayed settlement on a purchase but don’t forget that speed is also a useful bargaining tool. In a slow market, cash is king. A vendor may take considerably less for a quick settlement compared with another higher offer on delayed terms.

If you’ve found a property you want and have gone through your normal planning and checking processes, a cash unconditional offer and a quick settlement can significantly reduce the price you pay.

Story by Chris Tolhurst www.domain.com.au

SUPER Saturday was how Maurice Dunlevy of the Weekend Australian described last weekend, with 1700 homes on the sale blocks for auction on traditionally what is the busiest day of the year for most capital city auction markets.

Melbourne had the most with its 1074 scheduled sales, the largest in two years.

This compares to 891 auctions on the same weekend a year ago with 82% clearance rate.

“That’s unlikely to be repeated on Saturday after only 66% of properties being cleared at the prior weekend auctions,” said Maurice. And that was slightly lower than September’s 69% figure.

Sydney clearances are tracking at 62% so far in October but that figure is also down compared to the 70% of a year ago.

Up here it has been super Saturday for most of October and it doesn’t look like slowing much this side of Christmas.

Auction clearance rates have been trending lower since May this year and a lot has to do with concerns about the likelihood of higher interest rates and the absence of overseas buyers from the established homes market because of the high Australian dollar.

Story by Dimity Hendy http://www.sunshinecoastdaily.com.au/

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SPRING fever hit Sydney’s real estate market yesterday with a near-record 650 properties listed for auction.

Thousands of buyers flocked to bid, taking advantage of steady interest rates and a slight softening of prices.

Anthony Ishac, general manager of research and valuations at Australian Property Monitors, said there had been a significant increase in the number of properties being listed compared with the same period last year.

Mr Ishac said sellers looking to upgrade were realising the benefit of solid price increases over the past 18 months. ”There has been strong market growth over the past 18 months but now prices have started to come off the boil a little bit,” he said. ”I think people are taking advantage of the capital gain they have made in their properties to sell and upgrade while interest rates are holding and before prices start to soften.”

At Leichhardt yesterday, 200 groups inspected a house at 64 Wetherill Street, which sold for $1.53 million. The four-bedroom, two-bathroom home on a 449 sq m block attracted plenty of interest due to its generous proportions. The successful bidders were Leichhardt locals.

Story by Rachel Browne and Anita Balalovski www.smh.com.au

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DEVELOPERS and real-estate agents are divided on whether foreign investors are responsible for driving up house prices. But the two groups agree on one thing: the strong dollar has scared them away.

”A $1 million property is now … around 20-25 per cent dearer in round figures than it was a year ago in Singapore dollars, Chinese renminbi, Euros and especially in US dollars,” said the president of the Real Estate Institute, David Airey.

”It’s a good thing because the local market was getting overrun with foreign buyers, and that was putting unnecessary upward price pressure on properties, noticeably in Melbourne and Sydney … That price pressure was forcing local buyers to pay more or not buy at all.”

But Caryn Kakas of the Property Council, which represents developers, strongly disagreed that foreign buyers had any real effect on the market.

The number of foreign buyers was ”statistically insignificant”, she said, even before foreign-investment rules were tightened again in April. With foreign buyers already limited to buying off-the-plan apartments or new land releases, the changes mean that temporary residents now have to seek government approval to buy here.

”One-off purchases of large-scale multimillion-dollar homes seem to capture the imagination … but it’s actually a very small percentage,” Ms Kakas said. There are no centralised statistics on foreign buyers of Australian residential property, she said, and the lack of hard data had enabled a ”scare campaign”.

The developer Meriton said the strong dollar had clearly dampened the enthusiasm of Chinese buyers.

”The impact on other international buyers is harder to gauge,” said the Meriton sales manager James Sialepis. But he said the new rules had already reduced the share of foreign buyers.

Australian expatriates who had sent US dollars back when the Australian dollar was much weaker were ”taking great opportunities in this depressed market”, said the president of the Real Estate Buyers’ Agents Association, Byron Rose.

Story by Kelsey Munro www.smh.com.au

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Centro Properties Group, the Australian shopping-mall owner that ceded control to creditors in 2008, is seeking buyers for more than A$4 billion ($3.9 billion) of assets, said a person with knowledge of the matter.

Centro has set a Dec. 25 deadline for indicative bids for more than 40 properties, including the Galleria in Perth and The Glen in Melbourne, said the person, who declined to be identified because the plans aren’t public. Prospective buyers will be given access to financial information on the assets in the next few weeks, the person said.

Centro, which manages an A$18.6 billion collection of 712 shopping centers in Australia, New Zealand and the U.S., said in July it was in talks with lenders about debt due next year. The company had A$18.4 billion of debt as of June 30, company filings show, as the value of its properties fell and debt costs soared following a A$9 billion buying spree in 2006 and 2007.

“They’re still overleveraged, and there will be a lot more transactions over time, I would suspect,” said Kui Ng, Sydney- based head of property at Access Capital Advisers, which has more than A$12 billion under management globally.

Andrew Scannell, a spokesman for Centro in Melbourne, declined to comment. The Australian Financial Review reported Centro’s plans earlier today.

Goodman Buying

Australia’s 16 listed property trusts reported combined losses of A$19.5 billion and writedowns of A$21.7 billion in the year to June 30, 2009, after their strategy of borrowing to fund overseas investments backfired when property values tumbled and borrowing costs spiked during the credit crunch. Goodman Group today said it is offering A$1.47 billion to buy ING Industrial Fund, as Netherlands-based parent ING Group NV seeks to divest its real estate unit.

Centro shares jumped 6.5 percent, the most in five weeks, to close at 16.5 Australian cents in Sydney.

Former Chief Executive Officer Andrew Scott borrowed to accumulate malls, about 600 in the U.S. alone, then spun off the centers into more than 30 syndicates, three wholesale funds, two unlisted property funds and one listed property fund, which Centro then managed for a fee.

This structure makes a potential sale difficult and “quite complicated,” Ng said.

Centro in August reported a narrower fiscal full-year loss after writedowns on its properties shrank. The shortfall was A$652.7 million in the 12 months ended June 30, compared with a loss of A$3.5 billion a year earlier. Centro wrote down A$487.9 million on its properties, down from A$2.7 billion a year earlier.

It has lost more than A$6 billion in market value in the past three years.

The company said in July it had extended and refinanced $2.7 billion U.S. loans and started discussions with creditors on potential restructuring options.

To contact the reporters on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net; Nichola Saminather in Sydney at nsaminather1@bloomberg.net

To contact the editor responsible for this story: Philip Lagerkranser at lagerkranser@bloomberg.net

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In fact, both the national figure and the NSW numbers are at nine-year lows. Included in this data release is the proportion of loans to first home buyers. In NSW, this proportion seems to have bottomed out, bubbling along just above the low of 16 per cent seen in March.

House prices for the June quarter continued growing but at a slowing rate. This was a good result for existing home owners. Some of this strength was due to investors continuing their return to the market, as evidenced by the increase in investor finance in the past 12 months, filling the gap left by exiting first home buyers and other owner-occupiers.

However, this trend reversed in the June numbers, with the value of loans to investors falling significantly for the first time in nearly a year. So, while auction clearance rates and first home buyer numbers seem to have stabilised, it’s very likely the drop in demand for loans for owner-occupied and investor housing will translate into flat or falling prices across Sydney during the spring season.

Indeed, a closer look into June-quarter house prices showed that in the month of June, prices did fall slightly across Sydney as a whole. Of course, a pause in growth or some orderly declines in prices is good news for aspiring owners and probably necessary to encourage first home buyers back.

Matthew Bell is the economist for the Fairfax-owned Australian Property Monitors.

Australian mortgage holders are a third time unlucky this year, after the Reserve Bank board today lifted interest rates by 0.25 per cent. It is the third rate rise in as many months.
Mortgage holders will be disappointed with the increase. After being told by the Reserve Bank Governor, Glenn Stevens, that rates were getting close to normal levels, borrowers would have been hoping the pace of rate rises had slowed. Today’s 25 basis point rise takes the official rate to 4.50 per cent.
It is the sixth increase since September and means mortgage holders are now paying about $300 a month extra for their mortgages than they were in the middle of last year, says Domain.com.au blogger and property author Carolyn Boyd. "There were a lot of mixed signals this month that may have had mortgage holders thinking they were in for a break. While inflation last week came in higher than expected, consumers have been spending less at the shops."
Until today’s decision, mortgage holders on variable interest rates were paying about 7 per cent to their lenders. The rates that borrowers pay to their financial institutions are expected to normalize at about 7.5 per cent to 7.75 per cent by year’s end. That could signal there are still one or two more rate rises to come before Christmas.