Headlines are a-plenty at the moment regarding the property market, funnily enough, most conflicting with eachother.
I have read – in the past few weeks – a number of stories about the ‘Big Short’ in Australian property markets, indicating that the loans that banks have made with buyers will all default at the same time. Also indicating that banks have made mistakes in loaning money to certain people, and furthermore that the prices of property being sold are so heavily inflated that if the loan defaults the amount wont be recoverable upon sale of that secured property.
The conflict comes with articles reflecting a severe lack of stock on the market and a circling number of buyers hunting for property causing a dramatic spike in Auction Clearance Rates in the first quarter of 2016 – Increasing competition.
The interesting observation that I have made is that, a lot of sales were generated – in the Sydney market particularly – last year, most of which were at a record high level. These successful sales could be what has continued to drive the property market.
If you had bought an apartment in Neutral bay in 2009 for $450,000 and in 2015 sold it at Auction for $1,000,000, I would assume that you have made quite a bit of money. Let’s further say that the owing amount on the loan was $300,000 and there was no capital gains tax to be paid, this would be a pretty tidy profit of well over half a million dollars even after agent fees and other associated expenses.
That’s enough, arguably, to put a 20% deposit on a $2,500,000 property, with room for extensive renovations, and only really pivots on serviceability of the loan.
However, this would also be a great opportunity for this person, you, to buy a $1,500,000 property, completely renovate, boost your savings account, purchase an investment property and feel secure in your finances. Something that has been less discussed – publicly – with the towering banter regarding Chinese investment and lower interest rates.
Speaking of interest rates, how’s the Australian Dollar?
Auction Clearance Rates at the weekend were reportedly up at 76% which has kept the clearance rate for the more than half of the first quarter consistently in the 70-80% range.
The Median sale price for property at Auction was reported up at $1,230,000 with 593 properties listed for Auction, 296 reported to have taken place and 325 sold.
Of these properties, 30 were reportedly withdrawn.
Thomas Merriman.
Thomas Merriman 