Home' API Magazine : June 2014 Contents 40
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demand and activity in a market place and whether vendors are
achieving their desired price or not,” Christopher says.
However, he points out some cities are more pro-auction
than others. Brisbane, for example, isn’t a pro-auction city,
whereas Sydney and Melbourne sellers and buyers love them.
It’s interesting to note that as a market picks up, so too does the
tendency for auctions. Almost everything is listed ‘for auction’
in Sydney at the moment, because buyers are willing to take
more of a chance in a hot market. Those who fear ‘missing out’
might be prepared to go way over the reserve, spend much more
than they planned to and compete heavily for property to secure
Hegney Property Group chief executive officer Gavin Hegney
says sales activity and auction rates paint a very strong picture
for price growth. He says investors should always follow sales
activity if they’re thinking about buying an investment but get
into the market before it’s too late.
“The best technique by far is to look at sales activity,”
“If you see an increase in sales activity, and I mean a strong
one, the next thing that follows in a three to six-month window
is a price increase. That’s on the basis the sales activity isn’t a
result of more property being developed.
“You’ll find the opposite is also true. When sales activity goes
down, prices go down.”
4 TIGHT VACANCY RATES
Is your head starting to bog down with data? Don’t
give up just yet. It’s time to turn to the back of
your favourite magazine once again and check the
vacancy rates on page 114. You’ll find not only the
vacancy rate but also the change over a 12-month
period for any given suburb. This basically shows
you whether or not more people are moving into the
area and searching for rental listings.
Destiny founder Margaret Lomas says falling or tight vacancy
rates are an indication of pressure being put on a suburb. It
shows an areas is in demand, she says.
“When inward migration grows, generally those coming to an
area will initially rent,” she says.
“Downward vacancy rates show that people are moving to an
area and... it often points to an area becoming more in demand.”
However, she warns they can also place a false reading
on price growth if you don’t explore why the vacancy rates
“If it’s because of a large project, bringing itinerant workers to
town or a big mining project with an end date, then it might look
like rental housing is in demand, when it’s actually only a short-
term demand,” she explains.
“Buying in a mining area can be fraught with dangers, as the
vacancies rise again once the project is complete.”
Inner west explosion
There are two reasons IT worker Troy Garner and his partner love
the Sydney inner west suburb of Erskineville as an investment
area. The first is its recent strong capital growth performance and
potential but the second, and perhaps most important reason, is
the rent in this area is also particularly strong.
The 35-year-old and his partner have just settled on a three-
bedroom terrace. They paid $944,000 and are now renting it out for
a strong $900 per week.
“It was exactly what we were looking for. There are two kitchens,
one upstairs and one downstairs,”
“It has the scope to be able to be diverted
into two units if we want, hence why the rental
return is so strong. We would then get more
than $900 per week. But then again, it also has
scope for a family home.”
Troy admits he missed fantastic growth
in 2013 as Erskineville exploded. But rather
than feel sorry for himself, he and his partner
decided to buy as soon as they could afford to.
They already had other investment properties
in Ultimo and St Peters, so were able to use the
equity from their two apartments and money
in a redraw account to buy in Erskineville.
But getting into this competitive area wasn’t
easy and required lots of research. The couple
was hoping to buy something as close to the city as possible, near a
train station and a good public school, which Erskineville has.
“We were originally looking to buy in St Peters, so ‘Erko’ was a bit of
a bonus,” Troy says.
“Alexandria was already really expensive and we missed out on a
lot of properties there for that reason.”
However, the Erko terrace they bought had been passed in at
auction. Troy and his
partner were relieved
to find something
with a price on the
internet rather than
‘auction’. They had
already been outbid
at a few other auctions in St Peters and Marrickville and wanted to
stay away from them, because properties often sold for a lot more
than the reserve. At one auction they went to, the reserve was
$820,000 and the property sold for $910,000,
“Auctions are really difficult at the moment,
especially when you’re an investor and
competing against young couples who will pay
that little bit extra to set themselves up.
“This terrace was listed for $950,000
(after it passed in at $920,000). It had
three bedrooms and two bathrooms.
Normally in that area they’re all worth more
than $1 million.”
Troy predicts the fact it has two kitchens
might have turned some people off, because
it’s not the ideal family home. The rooms are
also “a bit pokey”.
But for Troy and his partner, it’s all about
location and the huge potential the property
has. Even if capital growth slows down this year, Troy is still over the
moon with his purchase.
“My strategy is to buy and hold so the short-term gain isn’t really a
consideration. It’s long-term gain,” Troy says.
“When you’ve got that strategy it’s not really relative to think ‘I
have to buy now’. Every time is a good time to buy. You have to be
able to buy when you can afford it and then just fix the loan.”
æAuctions are really
difficult at the moment,
you’re an investor and
young couples who will
pay that little bit extra
to set themselves up.Æ
Name: Troy Garner
Lives: St Peters
St Peters, Ultimo
Strategy: Buy and hold
COVER STORY // BOOM SECRETS
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