The New Rules Of PropertyRule 1: Save HarderWhile it might have...

The New Rules Of Property

Rule 1: Save Harder

While it might have been possible to borrow 100 per cent or more of a home's value during the property boom, mortgage lenders are now much more circumspect, says Peter Malouf, of Sydney's Place Estate Agents. As property values are falling - Australian Property Monitors (APM) predicts a 10 per cent drop in prices this year - most mainstream lenders are asking for higher deposits (up to 20 per cent of the purchase price) and a long-term continuous savings history to obtain a loan.


Rule 2: Hold On Tight

Don't presume you'll be able to buy a house, do a few renovations, and turn a profit in 12 months. While that may have been possible during the good times, in a bust market, you'll need to hold on to an investment property for at least three years or, even better, five years, explains Malouf. "Of course, you can still sell your property quickly, but, because of the competition now out there, it will have to be at the sort of price that buyers consider unbelievable value."


Rule 3: Drive A Bargain

"It really is a buyers' market," admits buyers' agent Annabelle James of Buying Sydney. She adds that the global economic crisis has meant many people are selling homes to pay off debts. Meanwhile, the glut of properties means clearance rates are slower, with the average home on the market for 100 days "compared to 30 or 50 days in 2002", says APM senior economist Liam O'Hara. This is good news for buyers, says James. "Don't be afraid to look in a higher price bracket than you think you can afford, and to offer up to 25 per cent off the asking price without embarrassment."


Rule 4: Trading Up? Get The Experts In

Selling a property in a rising market is relatively easy, but during a downturn it pays to have an experienced estate agent on your side, says Malouf. Ask to see evidence of what they have previously sold, talk to other vendors, and obtain a sales and marketing plan. Expect to pay an agent's fee of about two per cent of your home's sale price.


... or follow the old rules that still apply

1. Location, location

Buying the worst house in the best street - "or at least the best house you can afford", says James - is better than buying the best house in the worst street. That's because you tend to get more capital gain in good suburbs. To find out how individual suburbs are performing, visit www.domain.com.au.

2. Shop around

Get at least two quotes on finance options; don't forget to check application and
early withdrawal fees; and consider whether your loan allows you to make additional repayments.

3. Do your homework

Obtain building and pest reports, and find out from the local council what can be built on your land, and the neighbours'. Visit the area at night and on weekends to see what noise levels are like, and check the boundaries are marked correctly on the house plans.

4. Don't overextend

"Don't take on too much debt, and consider whether you have enough cash put aside to make mortgage repayments if you lose your job," says O'Hara, who warns that while interest rates may be low now, they're guaranteed to rise again eventually.



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