Winter is certainly upon us in Melbourne, which typically sees many people’s property investment activity head into hibernation.
But unlike Melbourne’s plunging winter temperatures, your property strategies definitely shouldn’t follow the same path as the thermometer.
Those looking to transact property should remain attentive over the colder months, setting themselves up for their next transaction.
Preparation is always key. There’s a large amount of lead up work that goes into successfully selling a property, which can be initiated during the winter months.
Choosing an agent
Due diligence is key when selecting an agent. That can involve interviewing several agents, hearing out each proposal, which will involve components such as method of sale and marketing techniques.
While the size of an agent’s commission is a factor, it shouldn’t necessarily be the deciding one. Having the right agent will make up a quarter or half a per cent of a commission very quickly with high level negotiation skills and polished buyer interactions.
Presenting a home well is a critical component of a strong sales campaign, so it’s best to begin organising it during the Winter period if you plan to sell in Spring.
Firstly, you’ll need to look at the occupancy of the property. If it’s an owner-occupied home, are you going to remain in the property during the sales campaign, or will you move out?
It can be quite stressful making sure the home looks immaculate for every open for inspection if you’re residing in it, particularly if you have children.
Meanwhile, selling a rented investment property means determining how well the tenants will present the home.
You may have a great renter in the property, who’s been there for a long time and looked after the place extremely well.
However, perhaps their furniture doesn’t necessarily fit well with the property. It may be oversized, it may not look appropriate; and therefore impact on the saleability, so that’s certainly a consideration.
If you are looking to serve a renter notice to vacate, there are a number of steps that must be undertaken. Most notably, you need to give a 60 day notice period, plus a serving period to vacate the tenant.
With the new changes to the Residential Tenancies Act you also need to provide a copy of the sales authority to the tenant.
Ninety nine per cent of homes will need some form of decluttering. That may involve moving some furniture out, which can make rooms more open and easier to traverse during open for inspections.
It also involves removing some of the personal items, so that buyers can visualise themselves in the property and not feel as though it’s someone else’s home.
Hiring the skills of a specialist home stylist is often worth the investment, as they will help present rooms in the most attractive way for potential buyers.
We had one recent client property where a nice sunroom at the rear was converted into a little study, which resonated very well with buyers, particularly given the recent trend towards working from home.
Repairs and maintenance
Fixing and upgrading elements of the property is another key component of the sales preparation process that can be carried out during the winter period.
However, firstly when determining which aspects of the property to spend time and resources on, it’s important to understand where the value of the property lies.
If for instance you’re selling a home in a middle ring suburb of Melbourne, which is 90/95 per cent land value, then it’s not advisable to spend too much money on the house itself – as there’s every chance that it may be demolished or renovated extensively by the purchaser.
Understand where the value is and who your likely buyer is going to be, and then spend money where it’s appropriate to make sure you gain a return on that spending.
Painting, new carpets and garden upgrades can be really good starting points. But even little things such as light fittings, changing taps and even shower screens can provide real consistency through the home, and make a big difference to its feel from a buyer perspective.
It’s important to realise in both presentation and repair work, some tasks are more time sensitive than others. Decluttering is going to take less time to organise than painting and re-carpeting a property, particularly as there is strong current demand for tradespeople in Melbourne.
Once the presentation side of proceedings has been taken care of, it’s time for the photographer to visit, the floor plan diagrams to be worked up and advertisement copy written – ready for the property listing to go online. This will be done in conjunction with your agent, but it pays to have an understanding of the time frames involved.
Working towards your auction date
Working backwards can be a really good idea. Select your auction date, and then have your agent provide you with a calendar of events, so that you can lay everything out in terms of preparation, order of work required, and when it needs to be done.
Typically an early Spring auction date works well, as there is less supply, which means less competition.
A lot of vendors with the Spring market in mind, tend to hold off until around October – bolstered by the warm weather and better looking garden.
However, alternatively, going earlier means that there’s quite a lot of pent up demand from buyers that haven’t had a lot of choice during the winter months and are anxious to secure something.
We also typically see the clearance rate start to drop off as Spring progresses and supply starts to pick up.
As the buying market starts to thin out and clearance rates pull back, those who have sold early can often receive premium prices.
A typical auction campaign will go for about three and a half weeks – or four weekends.
If you’re looking to both sell and buy a property, going early in Spring has the added benefit of placing you in the middle of the heavily supplied period time wise.
As mentioned, as the season progresses and clearance rates start to weaken, the market can start to plateau, which offers great buying opportunities.
If you’ve achieved a premium price selling earlier in the Spring market, and then purchase a home of better value later in the season, you’re certainly well and truly in front.
Traditionally stock and supply for buyers does drop during Melbourne’s winter.
As seen in the table, if we go back to the last pre-COVID school holidays in 2019, the four weekends from the start of the June school holidays all had auction numbers below 600.
As a result, while there are still good properties out there, many buyers have traditionally tended to wind down and regroup during the winter months as they await the Spring rush.
However, 2021 is looking very different from the typical quiet winter period, with all four corresponding weekends set to have more than one thousand auctions take place.
So buyers cannot afford to wind down and wait for the warmer months, because they may well miss out on their ideal property. This level of activity is more reminiscent of a typical Spring selling period.
Vendors now have confidence in the market and are therefore willing to push deeper into the winter months, seeking to capitalise on the strong demand and high prices seen this year.
The last lockdown has also created pent up supply, with many vendors who planned to go to market during the period, forced to delay campaigns until restrictions were eased.
There’s also concerns the lockdowns might prevent further activity, so many are choosing not to delay.
Buyers looking to enter the market for the first time will need to take the time to organise their finance.
If you’re looking to purchase a property at auction, you’ll want to have your finance pre-approved.
So make sure you allow yourself enough time to be able to get your paperwork organised as soon as possible and speak to your broker to determine your maximum spend capacity.
You’ll then be able to determine the type of property to focus your attention on.
It’s important to understand if there’s going to be any restrictions around the type of property you can buy.
If you’re looking at an apartment, particularly some of the older style apartments, does your loan to value ratio change, if you’re looking at a strata versus a stratum or a company share?
Are there restrictions on the size of the property that you can buy, for example nothing less than 40 or 50 square meters?
There are also a number of suburbs around Melbourne that some banks prefer to steer clear of because of a perception of oversupply, so understanding if there are restrictions and keeping the communication lines open with your financial advisor or mortgage broker is really important.
From an investor’s perspective, what type of entity are you planning to hold the property in? Is it in personal names, which is traditionally the case for an owner occupier, or is it being held in some form of trust or superfund?
Other service providers that you need to be in communication with and have lined up, include a solicitor or conveyancer, as well as a building inspector.
Take home message
Having the financials, due diligence, as well as property reconnaissance and preparations in place enables investors to capitalise on opportunities that those less prepared may miss.
While established trends are helpful to understand, no one market remains the same from year to year – so it pays to keep your eye on the ball even in the more dormant periods.
Just take this winter for example – you wouldn’t want to be hibernating to emerge in Spring and find your potential dream home has sold through the ‘quiet period’