White shoe wearing apartment flippers

I’ve recently been to Surfers Paradise on holidays and bought a new hat. In between trips to the beach and checking out the reflection of my hat in shop windows as I walked along (man, it looks sensational!) I took notice of some real estate agent shop fronts.

Apartment Flippers

As we all know, the Gold Coast has long been a property hotspot, a haven for property developers and apartment flippers (when you buy an uncompleted property off the plan and then flip it to someone else at a higher price before it’s finished or soon after without outlaying anything more than the deposit) and other groups of people who wear white shoes.

If the real estate ads in Surfers Paradise are to be believed, it’s no longer the real estate hot spot that it once was. It seems to me that some of the apartment flipping white shoe brigade have been caught out when the music stopped unexpectedly and they weren’t able to get a chair. In short, they’re out of the game.

Real Estate Agent Blunders

One of the first ads I saw (and this is real) read: “Motivated vendor liquidates assets; vendor paid $620,000 12 months ago, apartment now on the market for $440,000.” After I stopped looking at the reflection of my hat and concentrated more on the ads I found loads more like that one. I had always thought that real estate agents were supposed to act in the best interests of the seller. It appears that’s no longer the case either. I read more and felt anger and rage on behalf of the poor sods who had engaged these real estate agent idiots – seriously, who would pay someone a hefty commission to publicise their financial embarrassment in a shop window?

Australian Housing Prices

Economists are telling us that Australian housing prices are ‘softening’ and at a seminar I went to yesterday that statement was made again. Whether it will affect all house prices or just those in areas which have become overheated is hard to say. The other problem is that we won’t know when the property market bottoms, assuming prices do drop, until it has past. Any decrease in prices is obviously going to be good news for some and bad news for others. Good for the buyers sitting on the side lines who have saved a sizable deposit and have the ability to repay a mortgage and bad for the sellers – particularly the ones who have got themselves over committed.

Fundamental Questions

The issue with buying a property is that you only truly know what it’s worth on two days. The day you purchase it and the day you agree to sell it. So, in the current climate if you’re looking to step into the property market, you need to be able to answer yes to the following fundamental questions:

-Have you got a decent deposit – at least 20% is best so you don’t have to fork out extra for mortgage insurance?

-Can you really afford to repay the mortgage? (factor in interest rate increases of up to 2-3% so you know you will still be okay if the interest rates move north)

-Property isn’t a very liquid asset and the entry and exit costs can be in the order of 3-4% of the property value at each end of the transaction. Can you afford to hold it long term if you need to?

-Is your job/income secure?

OR… are you likely to turn into a seller in 12 months time who has got themselves over committed?

Hopefully the weather this weekend will be great and I can wear my new hat!

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