oc | Monday 24th February

It is all about Price, Property and Position

3psToday, Saturday the 25th, was the second-hardest auction day of the year, whether you were a buyer or seller. The last Saturday in November will be the toughest, as higher stock levels will be coupled with large amounts of unsold homes left over from the early 2008 and earlier Spring campaigns and also from today.

Why is it hard for both buyer and seller? Well, sellers who still expect everything to sell like clockwork at prices above expectations face disappointment, and, for buyers unused to such choice, it is hard to judge what price to pay and which property to buy.

Now, much more so than five or 10 years ago, it is about the quality of the decision you make and, in many cases, the quality of decision you make under pressure.

Over the next 12 months, if you buy right, you can set you and your family up for life or, at the very least, you can make a decision that will help you retire in a lot better financial shape.

If you buy poorly, you can miss an opportunity that for many years you will look back on with some angst.

Similarly, if you sell poorly under pressure or panic and your circumstances were such that the home was a key part of your longer-term financial outcomes, then you may not have enough firepower to get back into the market as it moves ahead in future times; or you may deplete your assets to such an extent that you simply have nothing left to appreciate. Good debt is still okay.

It is all about good decisions and nothing is so critical in Melbourne’s median-priced ($500,000 to $800,000) market today. By good decisions, we are not talking about an agent’s commission rate being cut back if you are selling – getting the right agent is the key “now” decision (of course, still well behind what you actually bought in the first place). By good decisions, we are not talking about knocking off ten grand in a pre-auction bid if you are buying; we are talking about buying the right home in the right position at the right price.

We cannot emphasise enough that if you are in your 30s or 40s and really only just getting into property, or your family is expanding or you are just looking for a change of scene, that time you spend on getting your next move right will be worth much more than all the time you spend analysing your super fund returns, your Harvey Norman catalogue and your newspaper car guide combined.

It is all about Price, Property and Position. Today, in October 2008, while many sellers are nervous and prone to knee-jerk reactions, there are around.

Positive advice:

Financial Good Decision One: Don’t buy a McMansion in an outer Melbourne new estate. Buy a smaller home (possibly in need of a scrub-up) near infrastructure, closer to the CBD and in an established suburb.

Financial Good Decision Two: Don’t get sucked in by kitchen bench tops (girls) or stamp duty/investment savings (boys) on a glitzy townhouse with nothing else going for it. If you buy glitz and nothing else, in 10 years (when it’s gone), what attracts the next buyer to your home? Nothing, and therefore your selling price drops. Please buy content (position – next to infrastructure such as shops and rail lines – and size such as yard space, car access etc).

Financial Good Decision Three: Don’t buy a block to build the dream and don’t buy a renovator’s delight unless you delight in renovating. Why? Building costs on top of your purchase price completely change your land-to-price ratio. If you can buy somebody else’s dream already completed and buy at a price close to land value and then make a few cosmetic modifications to get it right, you will be miles in front (on the long-term growth stakes). In other words, buy a well-located, sound building with a good floor plan in need of minor changes to meet your requirements – but of course get it at the right price.

Emotional outcomes are also important and the other “thing” involved in buying a home – so we accept that most times it’s not all a financial decision. What we mean is, if you’re a bloke and you buy financially well but your wife is not happy, then good luck with your future. Happy Wife – Happy Life still overrides all the money in the world (I can’t believe we wrote this). Make your nirvana a balance between financial and emotional considerations – but still ensure that you get the financial basics right.

In summary, if your emotional needs are being met, then financially always: Buy Position over Property; Property over Price; Built over Unbuilt: Good Floorplan over Glitzy Appliances.

Our advice, as always, is to get a professional buying agent to assist you to clarify your needs; hunt for on and off markets; value and then to your advantage. Of course, we would say that – but it’s true.

You have such a huge opportunity in the next year to set yourself up.

Do it if it feels right.

Good Luck and Good Decision Making

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