Current challenges in the property market mean it is more important than ever to dig deeper in the search for success. Equally necessary is ignoring those pundits who declare the property landscape full of doom and gloom, said CBRE’s head of private clients and NSW Metropolitan Investment Nicholas Heaton.
“It would be easy for anyone, not only commercial property agents, to think that the property market is fraught right now because this seems to be the dominant concept of most property news,” Mr Heaton said. “Yet everything is not in dire straits. Making a blanket statement that the market is bad is too high level. There are micro markets that are performing well.
“Yes, some assets are coming off in value due to interest rates rising and it is understandable agents may go along with the sentiment around a bad market as vendors will be paying lower prices. But these are also the periods when counter cyclical buyers appear, the buyers who have been sitting on the sidelines waiting for the time to pick up assets which will show growth in the short to medium term.
“Commercial agents must understand the nuances of the market, and so do investors. To be an agent who says everything is not good isn’t accurate.”
Finding good deals
Opportunities to clinch good deals still exist, said Mr Heaton, and the secret to doing so in the current economy was twofold: either by pinpointing and listing the style of properties proving popular with potential buyers, or if it is clear an asset will be difficult to sell, then ensuring it is priced correctly.
“It (a successful sale) will always come down to one of those two things and especially in the tricky market we are now all dealing with,” Mr Heaton said. “There are certain assets that are hot right now and in quite high demand - and if they’re not then agents have to make sure to reflect that in price.”
Boarding houses and apartment blocks are high on the list of most attractive investments in the current market and those put to market recently have been selling well. On the flipside office buildings are among the most challenging of assets to sell due working from home and softening rents, Mr Heaton said.
CBRE has sold three boarding houses this year alone, two on Sydney’s northern beaches and one in the lower north shore suburb of Greenwich.
The Greenwich property stood out for selling at a bullish $5.653 million. It offered 16 double rooms, one large four-bedroom residential terrace and a separate entrance and frontage. The high-quality property with views of the Sydney CBD and Harbour Bridge, was built in 2014, provided significant depreciation benefits and reflected a yield of 5.5%. It is located walking distance to St Leonards train station, close to Royal North Shore Hospital and the Sydney Metro Station at Crows Nest which is currently under construction.
The popularity of boarding houses as well as apartment blocks with investors was being driven by the shortage of affordable housing and rising rents, agents said.
“Many investors have cashed out of their property assets during the housing boom and sold them to owner occupiers which has taken rental stock off the market,” said CBRE agent Toby Silk. “This has led to a huge shortage of rental stock and it’s driving up rents and creating demand for boarding house assets.”
Mr Silk said the situation would only be exacerbated by rising migration over the course of next year as the government increased the migration cap to counter labour shortages.
Mr Heaton said by the same token, apartment blocks were not being replaced due to increased construction costs while competition for existing stock was growing as the housing shortage continued. “I’ve never seen rental growth like this,” Mr Heaton said. “The most would be 5% and the forecast for the next few years is around 10% per annum.”
“As simple as it sounds, my advice to any agent is to list what sells. If you can’t see yourself buying it, it will be very difficult to sell.”