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R & W Marrickville/Hurlstone Park Market Update 15.02.2020

February 15, 2020 by Aris Dendrinos

I read an interesting piece this week written by my favourite Economics writer, Mr. Ross Gittins from the Sydney Morning Herald.

I’m really going to show my age here but I’ve been reading his articles since I studied Economics for my HSC in 1988 !

I love two things about Ross Gittins. He explains economic terms and concepts in a very colloquial, easily understandable way and with great balance. I’ve never felt like he is pushing a particular agenda be it political or otherwise. He’s simply trying to inform, educate and provoke deeper thought amongst his readers.

The following article he wrote this week is a perfect example.

It basically tries to explain the unique phenomenon occurring in our national economy at the moment between low wages growth and increasing property prices, particularly in Melbourne and Sydney.

In a nutshell what appears to be happening is home owners are taking advantage of historically low interest rates and their side effects to pay their mortgage down further rather than spend more money.

This cycle has seen our inflation and economic growth fall well below the decades long trends we have been accustomed to.

But the main problem all of this creates for the property market is a lowering of available stock. Those who are thinking of moving from a cheaper home to a more expensive one are either delaying the decision or not making the move. They are staying put and making do with what they have or investing lesser funds in improving their existing dwelling.

It’s hard to argue against this mode of thought when stamp duty and other transactional costs get thrown into the mix. I’ve met and spoke with numerous owners these past two years who have decided to extend their current residence rather than trade up and have to pay upwards of $100,000 in stamp duty, etc. That money alone can go a long way towards renovations.

Once these owners make such a decision en masse it starts to trickle down the line. As the more larger expensive homes reduce in the number available to purchase so do those owned by people looking to purchase them and so on and so on.

This eventually reaches the first home buyers who don’t have a property yet and have to make the tough decision to either wait and build their deposit up further, borrow more money, rent vest (but where they can afford and rent where they want to) or significantly compromise on what they are willing to accept.

Sound familiar ?

If you throw in the deceased demand for new apartments due to the recent media exposure to poorly construed buildings you can see how stock shortage is a problem that isn’t going to go away either quickly or soon.

So my advice to those looking to buy ?

It a well worn out cliche but when the going gets tough the tough get going. Or probably more apt is the ability to think and act differently to whatever everyone else is doing.

The first thing I would do is actually ring up an agent you trust and I know this is going to sound pretty radical - talk to them ! In fact, chew their ear off.

Most buyers are doing the exact opposite because they live busy lives and spend most of their time researching and looking on line remotely. Those who think a bit differently make the time and get the information on the ground you can’t source from those other areas.

We are at the coal face and can offer some sound advice based on experience. Feel free to call me anytime, I’m always happy to help.

Aris Dendrinos
0412 465 567