{"id":25205,"date":"2015-04-30T01:00:20","date_gmt":"2015-04-29T15:00:20","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=4297"},"modified":"2015-04-30T01:00:20","modified_gmt":"2015-04-29T15:00:20","slug":"sydney-property-prices-how-much-is-too-much-john-mcgrath-2","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/sydney-property-prices-how-much-is-too-much-john-mcgrath-2\/","title":{"rendered":"Sydney property prices: How much is too much?  |  John McGrath"},"content":{"rendered":"<p>In his recent column in\u00a0<a href=\"http:\/\/www.switzer.com.au\/the-experts\/john-mcgrath-property-expert\/how-much-is-too-much-and-does-it-matter\/\" target=\"_blank\" rel=\"noopener noreferrer\">Switzer<\/a>, John McGrath discusses a buyers biggest fear \u00a0&#8211;\u00a0\u201dWill I pay too much?\u201d<\/p>\n<p><strong>Here&#8217;s what he had to say:<\/strong><\/p>\n<p>\u201cWill I pay too much?\u201d<\/p>\n<p><strong>This is definitely a question on many buyers\u2019 minds in Sydney today.\u00a0\u00a0<img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"alignright\" alt=\"John Mcgrath\" src=\"https:\/\/i0.wp.com\/propertyupdate.com.au\/wp-content\/uploads\/2014\/06\/JohnMcgrath-300x182.jpg?resize=240%2C146\" width=\"240\" height=\"146\" \/><\/strong><\/p>\n<p>After two boom years in 2013 and 2014, the rate of growth was expected to soften a bit this year.<\/p>\n<p>However that hasn\u2019t happened yet \u2013 an interest rate cut in February and an unusually low level of stock has resulted in more price growth (Sydney median home values were up 5.8% in the March quarter, according to CoreLogic RPData) and many outstanding sale prices well above vendors\u2019 reserves all over the city.<\/p>\n<p>It\u2019s understandable that buyers are concerned about paying \u201ctoo much\u201d but the fact is, in boom conditions like these, you are very likely to have to pay a premium if you want in.<\/p>\n<p>So how big a deal is this?<\/p>\n<h4>Here are my thoughts:<\/h4>\n<ul>\n<li>Property should always be a long-term hold. If you\u2019re investing, you ideally want to go in thinking you\u2019re never going to sell.\n<p>If you\u2019re buying a new home, you want to be looking ahead five years minimum.<\/p>\n<p>Property has too many costs associated with buying and selling (stamp duty, agents\u2019 fees etc) to allow for trading more frequently than that.<\/li>\n<\/ul>\n<ul>\n<li>With interest rates as low as they are today, paying a premium right now is much more manageable because you can lock in your loan at an incredibly low, rock bottom, once-in-a-lifetime rate of less than 4%, which will help you pay off that premium faster than anything else!<\/li>\n<\/ul>\n<ul>\n<li>If you choose to wait the market out \u2013 which could be another year, especially if interest rates drop again and stock remains this low, then you need to think about the opportunity cost of that strategy. For example, delaying an investment purchase by a year, means losing a year of income and capital growth.<\/li>\n<\/ul>\n<h4>Market watches (ie neighbours, unsuccessful bidders) will often claim that a buyer has paid &#8220;too much&#8221;<\/h4>\n<p>I question that line of thought.<img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" class=\"alignright\" alt=\"sell_your_house\" src=\"https:\/\/i0.wp.com\/propertyupdate.com.au\/wp-content\/uploads\/2012\/06\/sell_your_house-300x225.jpg?resize=300%2C225\" width=\"300\" height=\"225\" \/><\/p>\n<p>A property is worth what the market is willing to pay for it that day.<\/p>\n<p>And right now Sydney buyers are willing to pay a premium.<\/p>\n<p>If you want to get in, it\u2019s best to accept it and prepare yourself to move forward.<\/p>\n<h4>Preparing to pay a premium<\/h4>\n<ul>\n<li>If you\u2019ve decided on a budget of $800,000, does that mean you couldn\u2019t stretch to $810,000 if you needed to?\n<p>Maybe you\u2019d be willing to downgrade your car or delay your next holiday if it\u2019s the difference between buying and not?<\/p>\n<p>In a boom market, you need to think about a budget, and then a stretch budget, well before auction day.<\/p>\n<p>You don\u2019t want to be determining your stretch budget under the pressure of auction conditions.<\/li>\n<\/ul>\n<ul>\n<li>Focus more on repayments than purchase price.\n<p>Buyers can really trip themselves up if they allow psychological limits on purchase prices to get in the way.<\/p>\n<p>For example, if you\u2019ve decided that $800,000 \u2013 or anything with an 8 in front of it, is \u201ctoo much\u201d to pay, you might end up seeing a lot of homes sell in front of your eyes for $820,000.<\/p>\n<p>But what does an extra $20,000 do to your repayments over a 30-year loan?<\/p>\n<p>Yes, $20,000 is a lot of money, but when you\u2019re paying it off in 360 monthly installments, even with interest on top, it\u2019s not a lot at all.<\/li>\n<\/ul>\n<ul>\n<li>Having said that, it is absolutely critical that you not go over your head with debt.\n<p>It is never worth it.<\/p>\n<p>If homes in your target market are continually selling above your stretch budget, then it might be time to look at the next suburb over where homes might be selling for a bit less.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p>Looking forward, I believe the\u00a0<a href=\"http:\/\/sydneybuyersagent.com.au\/\" target=\"_blank\" rel=\"noopener noreferrer\">Sydney market<\/a>\u00a0will remain on an upwards growth trajectory.<\/p>\n<p>At some point, the\u00a0<strong>rate\u00a0<\/strong>of growth will taper, but the market will keep appreciating for some time yet.<\/p>\n<p>Sydney is well into the boom period of its current growth cycle, but after the boom, comes a period of more measured growth before any market softening begins<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In his recent column in\u00a0Switzer, John McGrath discusses a buyers biggest fear \u00a0&#8211;\u00a0\u201dWill I pay too much?\u201d Here&#8217;s what he had to say: \u201cWill I pay too much?\u201d This is definitely a question on many buyers\u2019 minds in Sydney today.\u00a0\u00a0 After two boom years in&#8230;<\/p>\n","protected":false},"author":176692473,"featured_media":3819,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[13],"tags":[],"class_list":["post-25205","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-latest-story"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Sydney property prices: How much is too much? 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