It has been a busy start to the new year in the Sydney investment property market as good quality properties are being sold quickly to eager buyers – sometimes at their full asking price.

I’m not yet sure whether this strong buyer demand will be maintained throughout the year – or whether the strong results from sales early in the year will induce others to list their properties for sale – providing some increased supply to keep prices more in balance.

As I have previously reported, the Australian residential property market has fared better than several other markets internationally over the last 20 months. Several local market watchers (professional and amateur) saw this as being in part due to the government’s housing stimulus for first home buyers – and predicted that the winding back of these subsidies would have a slowing effect on property markets – particularly the first home buyer belt, which in Sydney is the A$500,000 to A$650,000 segment.

Contrary to these predictions, I have observed a lot of strength in this sector in early 2010.

I have clients I am currently helping to buy an investment property in the Sydney inner-ring suburbs (within 5km of Sydney CBD). This is a market with a lot of attraction in terms of amenity, rental demand and potential capital growth.

When I’m searching in particular areas, I spend time there, getting to know the suburb – and meeting the local selling agents – as well as inspecting loads of properties. Agents are consistently reporting high attendance at open house inspections this year – at even the most modest properties. And most of the interest is from mum and dad investors, including those looking for a ‘safe home’ (pun intended) for their retirement savings.

Anecdotally, many properties on my clients’ watch lists are selling before their scheduled auction date, sometimes within the first week of being offered for sale. Last week I attended a private inspection of a property not yet marketed – and within two business days there was offer and acceptance at the full asking price.

I don’t want to generalise and say that all Sydney property markets are on the boil – as thats not the case – but it is definitely the case in some specific areas. And in times like this it is even more important to be objective – and to ensure that the proper amount of due diligence has been done – before you sign the contract. This way you stand a better chance of avoiding over-paying and avoiding buying a lemon.

So – what should you always do?

Firstly – research your target markets. Understand the supply and demand factors for the type of property you are focused on. Know what has sold recently – and how much for. Understand the historic capital growth rates for the area – and the median and average prices and gross rental yields.

Be objective when assessing each property. Have a set of criteria – and measure each property against your wish list.

Have the contract properly reviewed by a qualified conveyancer or solicitor – preferably someone you already know and trust.

Engage a qualified building inspector to conduct a building / pest inspection. Obtain a strata inspection for any strata-titled apartment or townhouse.

It can be tempting to jump at an opportunity in a hot market – and neglect some of these prudent steps – particularly when a property looks too good to be true.

As a licenced buyers agent – a large part of the benefit I provide to my clients is my objectivity. Sure, there is often money to be saved in a well-negotiated purchase, but having someone you trust providing their expert / objective viewpoint and ensuring all the necessary legwork is done is what stands out in most buyers’ minds.

Ian Macintosh, L.R.E.A.
Searchlight Property