Recent media headlines would have you believe that Sydney property prices only head in one direction…….UP. Estate agents also have a vested interest in having us believe that property prices only ever head in the one direction as higher prices are good for business.
At the moment, everyone is saying the market is going crazy post pandemic with prices in some areas soaring 10% to 20% in the past 6 months alone. The current rises are being driven by a combination of low stock availability for buyers along with cheap money.
But price rises are not always the norm. If one looks more closely at specific market areas at specific times, you will often see a different story.
Take the second half of 2016 and 2017 as an example. That was the last time that FOMO gripped the property market. During this time, some buyers paid over and above a verifiable valuation simply due to the fear of prices rising even higher still and they would be priced out of the market.
We recently came across one such property in Sydney’s inner western suburb of Annandale. This one bedder sold for $670,000 in February 2017, which was around the peak of the market. It subsequently sold for $515,000 exactly two years later when the market had cooled. That is over a $150,000 price drop representing a loss of over 20%. The property recently sold in March 2021 for $630,000, still less than the 2017 price.
Another example is this property also in Sydney’s western suburb of Concord. The owner of a one bedder paid $548,000 in November 2016 and subsequently installed a new kitchen and bathroom. Despite these improvements and the elapse of four and a half years, the property only recently sold for $10,000 more.
The above two examples also demonstrate that units carry a different risk profile compared to free standing houses. The price of apartments is in part linked to the rental returns they demand. As a higher proportion of units are let to renters vs free standing homes, when rental yields decline so too do prices.
So if you buy at the peak of the market, you are best to avoid selling when the market softens, which it invariably will. With interest rates being at historically low levels making it easier to keep up with your mortgage payments, you are best holding onto the property if you purchased it at a peak. So the only reason to sell at the moment, is to cash in on a higher property price and in doing so to trade up or down.