Focus on 2019: Why buy now?

Property experts are encouraging buyers to think long term, with the current market downturn offering some of the best buying opportunities in years.

The old adage of “sell in a boom and buy in gloom” is ringing loudly, with many property pundits claiming the softer market and brake on investors have created fertile ground for would-be buyers priced out of their dream suburb just a year ago.

According to a February report by investment firm UBS, unit values in Sydney and Melbourne fell by 6.3 per cent and 2.3 per cent respectively over the past year.

Research firm CoreLogic puts the annual drop in general dwelling values in Sydney at 9.7 per cent, and Melbourne at 8.3 per cent, while Domain economist Trent Wiltshire predicts the total price falls in the two cities between 2017-19 will be the largest since the late 1980s.

Director of Melbourne-based Wakelin Property Advisory Jarrod McCabe says price drops – after five years of outstanding growth – have delivered buyers the market they’ve “been crying out for”.

McCabe cites single-fronted terraces or cottages in Brunswick, in Melbourne’s inner north, that were a year ago selling for more than $1 million and can now be snapped up for well under seven figures. The same goes for villa units and apartments in quality locations, he says.

“We’ve seen some great value in recent months, and certainly good value compared with 12 months ago,” he says. “There are great opportunities to be had at the moment.”

Joe Russo of developer Caydon says APRA’s moves to dampen investor activity have clearly worked, but he maintains that demand from first-time buyers and downsizers is still strong.

He believes more investors should adopt a counter-cyclical strategy in a market offering softer prices, reduced competition and developer incentives. Currently, Caydon is offering a $20,000 bonus for first-time buyers in addition to the government’s $10,000 first home owner grant, plus offering to pay stamp duty for investor purchasers.

Crave Property Advisory’s Debra Beck-Mewing agrees, hailing “fantastic buying conditions” over recent months – with probably more to come. She estimates values in Sydney have cooled by 8 to 9 per cent, while units of more borderline quality may have dropped by up to 20 per cent.

“Up until about six months ago, most first-time buyers would be looking to buy in [better value] Queensland or South Australia, but we can now tell them they can afford to buy in Melbourne or Sydney,” the Sydney-based property strategist and buyers agent says.

Caydon is offering Focus on Mason, the 274-unit, second stage of the larger Mason Sq precinct in Moonee Ponds. Russo says Caydon recently leased 50 units in stage one of the development – at rental yields of 4.75 to 5.25 per cent – over a two-week period, for example.

“Population growth is still strong and we certainly aren’t seeing any evidence of an oversupply of good rental units,” Russo says.

The prediction and the challenges

Russo believes the market may have seen the worst of the price falls, and the fundamentals of low unemployment, low rates and population growth will see prices begin to bounce back in 2019.

McCabe, however, believes prices may soften further in 2019, but not drastically. Buyers in 2019, she says, will “lose their shirt only if they buy the wrong product”.