The big trap first-home buyers must be wary of
Competition for housing is expected to ramp up this year but buyers who avoid auctions could be missing out on quality properties, housing experts have warned.
It comes as the housing market finished 2020 on a high, with Sydney prices climbing nearly 1.3 per cent over the past three months of the year - despite the COVID-19 threat.
Property researchers and some banks have tipped home prices to rise by at least 5 per cent this year, with some forecasters, including SQM Research, revealing a double digit rise cannot be ruled out.
Real Estate Institute of NSW chief executive Tim McKibbin said buyers should brace for a whirlwind year.
"Home prices finished 2020 on an upward trajectory and there's a strong likelihood that 2021 will kick off with real momentum," he said.
"The restart of the auction season is still a couple of weeks away but expect listings to pick up toward the end of January and the start of February. Already, agents are preparing campaigns, managing new vendor inquiries and fielding private offers."
Real Estate Buyers Agents Association president Cate Bakos said it was natural for buyers competing for homes in the current market to want to avoid auctions but she warned this would be costly.
"Buyers shouldn't fear competition," she said. "Competition is usually a sign that there is something about the property that others like and that it will be a good investment.
"A lack of competition can suggest it is not a quality property. And if you buy a bargain, you'll sell a bargain."
Ms Bakos said the key to buying in a hot market was to target homes and locations well within budget.
"Buyers who are repeatedly outbid are usually going for properties that are out of their budget to start with," she said.
"Sold prices for comparable properties are a better indication of price than what the agents quote, which is usually much lower
"Once you study sold prices, you get a better idea which properties are really in your price range."
Ms Bakos said buyers who had been looking for their first home for a prolonged period frequently resorted to going for the "path of least resistance" and this often meant settling for a substandard property.
"You have to avoid that," she said.
"It's never a good idea to buy properties with major problems."
Advantage Property Consulting director Frank Valentic said buying a "lemon" would be more costly in the long run than overpaying for a quality home. "You don't want to end up making a lemon purchase by buying in a cheaper suburb that doesn't suit your lifestyle, or buying a cheaper house you have to turn around and sell two years later," he said.
"If you buy and sell within two years, you're not going to make money. You're likely going to lose money, once you add in stamp duty and agents' fees.
"Make sure you do your due diligence, take the emotion away and maybe even get someone else to bid for you, whether you use a buyer's advocate, a friend or parent."
Finder.com.au home loans expert Sarah Megginson said it was good to keep in mind that property expenses extended well beyond mortgage repayments. This meant selecting the right property was crucial.
"It's so much more than swapping rent for a mortgage," she said. "You'll also have to pay council rates, and strata fees if you buy an apartment. And all the expenses become yours - you can't just ring your landlord and ask them to send over a plumber."
Ms Bakos said the best way to navigate a hot market was to become an expert on local prices. This helped buyers make snappy decisions and feel confident with the purchase.
First-home buyer Alexander Kapruziak finally lucked in when he widened his search to Shell Cove on the south coast.
He purchased a two-bedroom unit in new development Nautilus, a part of the masterplanned estate known as The Waterfront. It includes views of the harbour and the beach.
"I love the area and I see the potential. Seeing the project grow in the past two decades I think it's one of the best places on the south coast," Mr Kapruziak said. "I just love the panoramic water views."
Originally published as The big trap first-home buyers must be wary of