Presenting your property for sale

© The Sunday Age — www.theage.com.au.
Reproduced with permission.
Costs are down so it's time to buy up
Unlike other asset classes, residential property has two kinds of buyers who make decisions based on distinctly different considerations.
Homebuyers make decisions based on emotional and lifestyle factors: “Will this home suit my family? Is it close to good schools? Can we make this house our home?” Investors, on the other hand, must confine their decisions to financial considerations, or risk making a poor decision. The best time to enter (or re-enter) the residential investment market is when the numbers stack up. This boils down to one thing: the difference between the interest rate you'll pay, and the rental return you'll receive.
Back in 2001, the rental return for many Melbourne investment properties was around 4 to 5 per cent, whilst the Reserve Bank's official interest rate fell throughout the year and bottomed out at 4.25%.
Taking into account retail lending margins, which made actual interest rates around 2 per cent higher than the official rate, the difference between holding costs and rental returns equated to approximately 1 to 2 per cent of the property's value (even less when negative gearing benefits are taken into account). The numbers stacked up for investors, who began competing aggressively and drove property market prices sharply upwards for the next two years.
By the end of 2003, however, the cash rate had risen to 5.25 per cent, whilst rental returns had dropped to 3 per cent in the wake of strong investor competition and property price rises. The difference between holding costs and rental returns widened to around 4 per cent of property values. By early 2008, multiple interest rate rises had widened the gap to 5-6 per cent, to the point where the numbers no longer stacked up for property as an investment asset.
During the intervening four years, savvy investors saw the writing on the wall, and looked for alternatives in other asset classes where the numbers did stack up-namely, the sharemarket. China's growing demand for our natural resources was fuelling activity in the mining sector and pushing up share prices in the Australian market. International share prices were also soaring.
Meanwhile, the lack of property investment activity had left the rental market in historically low supply, with vacancy rates of less than one per cent in some areas of Melbourne. This, in combination with greater demand from would-be first homebuyers who couldn't afford to enter the property market, was pushing up rental prices substantially.
By mid-2008, the tide had turned again. The official cash rate stood still after peaking at 7.25 per cent in March, and began dropping sharply from September. With every indication that further cuts are likely as we move into 2009, the cost of holding investment property is falling once again. At the same time, high rental prices have seen rental returns climb back to 4.5 per cent of property values. The gap between holding costs and rental returns is narrowing to 2001 levels; a trend I expect will continue for the next six to 12 months.
This provides an ideal window of opportunity for first-time investors to enter the market and buy at competitive prices before the broader mass catches on to what's happening, enters the market in droves and drives property values up again.
If this provides a good opportunity for first-time investors, it's even more favourable for returning investors who purchased before the last market peak of 2001-2003. Armed with a sizeable chunk of equity in their current investment property, and aided by rising rents and falling interest rates, many of these investors are now positively geared and in a strong position to re-enter the market.
TIP BOX

• The right time to buy investment property is when the numbers stack up
• The numbers stack up when the gap between holding costs and rental returns is shrinking
• The next six to 12 months provides a window of opportunity to buy competitively.

Some simple steps outlined below may help:

• Ensure that access to the home by pathways be trimmed of trees
• gardens pruned and shrubs cut back and lawns mowed.
• De-clutter all un necessary furniture, toys or nick-knacks around the home,
• Touch up painting where required
• Do handy work such as remove broken or cracked glass,
• clean carpets
• free sticky doors and windows
• patch damp walls or cracks
• If you have pets, it is important to eliminate all pet odours, bowls or hair inside the home

At this point it is important to get an unbiased opinion as to the presentation, best obtained from family and friends or an outside opinion such as a professional property stylist that we can provide you with.

If on the other hand your property is vacant – we recommend furniture hire. With our recommended panel of furniture hire companies we can obtain two or more quotes for the preferred length of time required.

Cantwells Property highly recommend decorator furniture, as it is an excellent investment in maximising the sale price of your property.

In order to successfully achieve the highest possible market worth of your property, the most critical factor apart form appointing the correct agent is to present the home in such a manner that it creates positive interest.