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What is happening in the Sydney property market?

What is happening in the Sydney property market?

The record low interest rates has been partly responsible for the residential property boom, which has seen record highs achieved for the sale of Sydney Property. Residential Real Estate has always gone through periods of boom, bust & then stagnation, it is part of a cycle driven by the forces of supply & demand. The current boom has happened before & will happen again, & buyers who feel that the rises will never stop, buy property almost in panic & are prepared to pay whatever price it takes to own that property, even though it may defy logic. As the price rises that someone has to pay, the “yield” received, falls (ie the rental income divided by the purchase price x100). Consequently one has to ask how much should you pay for a particular property before it is “not worth it”. When the property market is “normal” rational buyers will only pay a certain price, but in boom markets, there is no clear rational decision making

That aside, we are seeing many people who decide to take advantage of the property boom, & have sold their former homes & indeed why not.

But, for those who enter aged care, & pay their Accommodation Payments as a Refundable Accommodation Deposit (RAD) ie Lump Sum, they are frequently being left with large sums of money left over, after paying the RAD. These sums are then taken into account for their Age Pension entitlement, which usually falls or is lost completely. Not only that, but the residual funds are then to be invested at a time of record low interest rates, (as most tend to invest in bank accounts) & consequently the interest income is very low, & as a consequence of havingsuch a large amount of money left over, they are also having to pay a much larger Means Tested Fee.

Therefore in many cases, selling the home delivers a worse case outcome for those entering aged care, as the pension falls, the interest earned is very low & the aged care fees are increased.

However for those who can get a decent rental income on the former home, can keep up their pension entitlement, keep the Means Tested Fee low, then they can possibly get a better outcome. We know there is a reluctance for some people who worry about the “hassles of renting”, but that’s where we come in. A good property manager should take all those hassles away, that is our job. You don’t want to be bothered every time the tenant needs to get a tap washer fixed or some other minor issue arises, we just attend to it & get it done. If there is a major issue, we would advise the landlord (or their attorney) of the problem & get quotes to get it fixed, so that you can make your decision quickly & have the tenant retain quiet enjoyment of the property. Keeping on top of tenants who may pay late is half the battle, so that they keep up to date, & regular inspections to ensure the property is being maintained in good shape, is all part of what a good property manager does. Naturally keeping the lines of communication open with the landlord is also expected

So don’t rush into selling, the property will continue to keep growing in the future, even though it may go through periods of highs & lows. The richer people in our society own property as part of their portfolio, why not consider the benefits to you & your family of retaining & renting, but get a good property manager to manage the property for you. If you are interested in finding out what a property would rent for call Kevin Jut, (Property Manager at Seniors Property Management) on 0401-328530.

Posted: 20-Sep-2015. Author: Kevin Jut

 

 
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