Property price rises are forecast to be locked in for 2021, but buyers who think they can’t lose are in for a wake up call as they’re now one of the biggest risks to the market. 

“The banks have joined leading property market researchers to forecast 7%+ increases in price across the capital cities and major regional areas,” said Debra Beck-Mewing, Chief Property Advisor from The Property Frontline. 

“When these forecasts are overlayed with pent up demand and fear of missing out, buyers become their own worst enemy by thinking they can pretty much buy anything and they’ll come out on top. 

This is absolutely the kind of thinking that leads to financial hardship, and buyers today only have to look a few years back for examples of what can happen. 

After the last three peaks of 2010, 2015 and 2017, buyers falling into the following two groups made the most costly mistakes. 

New’ property traps 

Those who were hit worst were people who purchased ‘house and land’ or ‘off-the-plan’ deals.  Many buyers will never see the capital gains or yields they were promised and might never be in a position to buy again.   

For example apartments in areas of Sydney have dropped between 15% – 36%, while Brisbane and Melbourne units haven’t experienced any capital growth for many years.  Some buyers think they’re getting bargains, but depending on the builder their properties may turn out to be worthless. 

The rental returns are tracking a similar path to purchase prices – at best they have remained stable but many areas have seen rents decrease more than 20%.   

When it comes to house and land packages things are just as bad – properties in areas such as Springfield Lakes Qld, Coomera Qld, outer suburbs of Maitland NSW, Greenvale Vic, and Mount Barker SA haven’t increased in capital growth since the original purchase more than 10 years ago. 

The trap here is that buyers are heavily sold into buying ‘brand new’ but they’re not told that if they want or need to sell, they will be selling in a completely different market because their property is no longer new. 

‘Sure Thing’ location trap 

The other issue is buyers who think a location will be a sure thing.  If this was true, then everyone who buys into a location would be successful and the truth is they’re not. 

“Even in one street there’ll be people who’ll do really well with their property, while the person next door will buy the wrong property and they’ll be on the road to endless financial pain. 

“This issue will be amplified as buyers look to regional areas for their next purchase.  Yes, there’s good opportunities in some areas but not everywhere, and it will be important to buy the correct property type for each area as well as match each individual’s financial requirements. 

“My observation is that people who have never purchased before or those who will buy maybe two properties in their lifetime seem to be the most bullish. 

“And buyers repeat this pattern over and over again – those who are confident get snagged into buying the wrong property or simply don’t do enough due diligence.  Then they’re left with the ruins afterwards. 

Protect yourself

  • Validate any claims made about properties you’re considering – use the property portals to obtain recent sales, rental data and pricing trends. 
  • Always do price comparisons for any property you’re thinking about buying – this is particularly important if you’re ‘recommended’ a property or told about an ‘off-market opportunity’.  Look at similar properties and compare recent sales, and it’s usually best to avoid the property if you can’t find comparables. 
  • Conduct due diligence for each purchase – at least read the contract and complete a building and pest inspection. 
  • Avoid ‘hot’ suburb lists – the information used to pull the lists together is typically 1-2 months old and doesn’t include enough detail to use for good decision making.  The other key point about these lists is they’re just a record of history, not predictors of where prices in those suburbs are heading. 

Watch the details  

Buyers are definitely dealing with a hot property market.  This means they may have to compete to buy the property they want, but this is not the time to drop your guard in relation to checking the key details of such an important purchase. 

About the author

Debra Beck-Mewing is the Editor of the Property Portfolio Magazine and CEO of The Property Frontline.  She has more than 20 years’ experience in buying property Australia-wide and has extensive experience in helping buyers use a range of strategies including renovating, granny flats, sub-division and development. Debra is a skilled property strategist, and a master in identifying tailored opportunities, homes and sourcing properties that have multiple uses.  She is a Qualified Property Investment Advisor, licensed real estate agent and also holds a Bachelor of Commerce and Master of Business. As a passionate advocate for increasing transparency in the property and wealth industries, Debra is a popular speaker on these topics.  She is also an author, podcast host, and participates on numerous committees including the Property Owners’ Association.

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Disclaimer – This information is of a general nature only and does not constitute professional advice.  We strongly recommend you seek your own professional advice in relation to your particular circumstances.