THE dire forecasts in the Australian property market have some investors starting to panic, with some economists even claiming it poses a threat the famously stable economy. But it doesn’t have to be doom and gloom if you’re a homeowner with dropping prices. What could at first seem like a problem could be turned into an opportunity.
According to the Financial Times, national house prices fell 1.3 percent in December, the largest monthly fall since 1983, which resulted in an annual decline of 6.1 percent last year.
Prices in Sydney, the country’s biggest property market, are down 11.1 percent from their peak, which warned this week the slump could torpedo Australia’s run of 27 years without a recession – a modern global record.
And the downward trajectory doesn’t look set to change course. Shane Oliver, economist at AMP, told the Times he predicts house prices in Sydney and Melbourne will fall 20 percent below their peaks.
Despite a decline across the board, some neighbourhoods are expected to drop more than others – opening up an opportunity for shrewd homeowners who want to trade up to a better location.
Those in the outer suburbs of Australia’s major cities, where prices are expected to decline the least, could potentially sell and buy into cities’ blue-chip suburbs – the high-class, more desirable postcodes.
Talking about the market in Melbourne, Advantage Property Consulting buyer’s advocate Frank Valentic told News.com.au that homeowners in a number of Melbourne’s middle northern and western suburbs are best placed to exploit this situation.
“Areas like Yarraville, Footscray, Seddon and Williamstown,” Valentic said.
“Those areas will be able to hopefully sell at a higher price because there’s more fish in the AU$1.5 million (US$ 1.1 million) pond. And if they want to make that move to the inner east or south, you might pick up a home in Elwood that sold for AU$2 million (US$1.4 million) a year ago at AU$1.8 million (US$1.3 million) now.”
While it might seem counterintuitive to buy in an area that’s declining fast, Valentic think’s there’s never been a better time to buy as “they are never going to go out fashion for long.”
The reason for the decline in the pricier neighbourhoods is largely as a result of their own success. House values in Melbourne’s inner east and south city locations have risen 80 percent in the past five years.
It was almost inevitable the bubble would burst eventually with growth rate that high. But they are not even close to losing that value and aren’t expected to in the future, but they will see the biggest decline during this slump.
“The gap between top and bottom closes when there’s a percentage drop,” Real Estate Institute of Victoria vice president Adam Docking, told News.
“Generally, we find that the inner ring always leads the charge, good, bad or otherwise. So this is a fantastic time to move when the market is not as buoyant as it has been, because your money buys more.”