Tuesday, November 12, 2013

Trading Up And House Hunting

When the stock market is sizzling hot, the conversation at parties and gatherings are about share trading and expanding the share portfolio. Similarly, when the property market is booming, family and friends like to talk about the property market and how they're looking to buy additional properties or trade up to a larger sized house. Why do most of us get the urge to buy when prices trend up?

Friends ABC have just bought a house at Maroubra. The house is smaller than their current abode but they've upgraded their suburb from Narwee. Maroubra is in the catchment zone for better schools for their child so that guarantees an academic competitive advantage for their son provided he is inclined to be educated.

Friends DEF are about to move out of their three bedroom Bondi Junction apartment into their newly built house at Little Bay. Not necessarily a suburb upgrade, but definitely a house and land size upgrade. They're just like Mr SMG and I, oozing out of the apartment with 'stuff' that we've accumulated over the years which means, either upgrade to a house or sleep on top of the entertainment unit and snowboards.

Friends GHI are planning on selling their house in Ermington and buying a house in Lane Cove or Gladesville. House size is probably negligible in difference but the suburb would be an upgrade to a more prestigious suburb.

Friends JKL are looking to buy in the Hills District around Baulkham Hills region. They've just migrated/returned permanently back to Sydney after a 6 year 'sojourn' of working in London. They'll be house hunting shortly. They've just sold their London 1 bedder for almost 500,000 pounds. London real estate prices can be even more insane than Sydney...

Friends MNO are looking for a house to buy. They're still undecided on suburbs and still in disagreement over what type of house and what budget they wish to lavish onto their house purchase so who knows when they'll bite the bullet. But...that hasn't stopped them from attending open houses.

Friends PQR have been looking at buying a house along the North Shore train line, mainly in the leafy suburbs of Turramurra and Wahroonga. That would necessitate them moving out of their apartment in Wollstonecraft so it's more of a suburb downgrade but a housing size upgrade.

The real estate market is really sizzling. Sometimes I read property articles on the major news sites and there are commentators there still going on about the housing price crash and how they're going to buy real estate dirt cheap, and that Sydney has run out of people who have money to buy properties. They've got their blinkers on. Seriously. If they've done their research and gone to open houses then they might see the massive crowd of Chinese folks who have plenty of dough to buy houses non stop. Population growth practically guarantees that we need additional housing built and that existing real estate near amenities and transport will always be in demand.

I'm trying to decide whether it's worth waiting to plunge into another IP after the market has calmed down(who knows when?) or to buy one now. The problem with waiting to buy (as always) is that if the boom creates more price appreciation, waiting will mean having to pay several thousands of dollars more. If property prices keep trending upwards, that means it's better to buy now and enjoy the price gains.

But buying now will mean jumping into the hungry hordes of buyers who are paying above the listed price in order to obtain a piece of real estate. Auctions have seen properties sold way over their reserve price. If we were to buy another IP, then we are very likely to get zero discount from the listed price and probably even have to offer above the listed price to secure the purchase.

As one of my friend keeps saying, "What to do? What to do?".

I'm going to have to set a deadline of next week to work on our budget and figures to see what we can afford in terms of loans and LVRs. The portfolio and numbers are getting more complex, taking longer and longer to compile but I really need to get my act together regardless of how busy I am.

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