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Property investors are now buying houses without inspecting them first

Property investors are now buying houses without inspecting them first

WOULD you part with hundreds of thousands of dollars to purchase something you haven’t even seen?

It sounds crazy, but it’s a new phenomenon among Sydney property investors.

Blind-buyers are throwing their cash at real estate agents to purchase houses they’ve never seen in person, in suburbs they may not have even visited.

Brisbane agents are benefiting from this blind-buying, with investors snatching up property in dodgy suburbs, notorious for crime.

Domain reported investors were attracted to affordable properties just 20 minutes out of the city, in areas like Inala, Woodridge, Eagleby, Forest Lake and Slacks Creek.

Logan real estate agent at White Knights, Kym Whalan, told Domaininvestors made up about half of sales.

Property investors are now buying houses without inspecting them first

“Out of every 10 sales, five will be investors, and two will not have viewed the home, and that is a modest estimate,” he said.

“Often it seems as the investors have no idea about the area’s reputation. Or maybe they are overlooking them because of the good house prices.”

Lesley Waters, officer manager at Professionals Beenleigh said a whopping 70 per cent of Sydney investors were using photographs as their only guide when buying a Queensland property.

Real estate agent Daphne Orley told Domainshe even had to devalue a home by more than $7000 when an investor complained about cracks in the house that did not show up in photographs.

Property investment heavyweight Chris Gray said blind-buying was not a smart decision and investors thought of it as a get-rich-quick scheme.

“They try to just go on the latest trends or fads because they want to make a fortune overnight,” he said.

Mr Gray, chief of Your Empire, said a misleading real estate photograph earlier this week showed the huge risks involved with blind-buying.

The real estate photos showed a quaint home sitting on a grassy lawn with a clear view of the sky, but the pictures didn’t show the water tank that shadows the home.

Property investors are now buying houses without inspecting them first

Property investors are now buying houses without inspecting them first

“You want to trust the real estate agent but if you don’t look at properties and have due diligence then you only have yourself to blame,” Mr Gray said.

“If you buy off the internet you don’t know the suburb and you have to put your trust in people.”

The investment mogul said there was also a risk with buying somewhere affordable and sometimes buying one property for a million dollars could be better than buying three houses for a million dollars.

He said buying a house in a sought after area like Bondi Beach in Sydney could pay off better.

“It’s all about supply and demand,” Mr Gray said.

“If those three big houses you buy aren’t in demand, they might stay at $400,000, but there could be a massive demand for a house in Bondi and the price could double to $2 million in a short period of time.”

Property investors are now buying houses without inspecting them first

Mr Gray believed many investors weren’t playing it smart enough and not spending enough money on property valuations to determine how much a residence is worth.

“It’s disappointing,” he said.

“There’s so much education now but if you give someone 20 steps to investing they do step one and step 20 and miss the other 18.”

He said it was worth paying extra money for property reports and thorough inspections, but believed people would do anything to save money.

“Building reports cost a few hundred dollars but people will try to save those dollars, even though they are investing thousands,” Mr Gray said.

“People used to save money to make money but the new generation very much thinks you need to spend money to make money.”

Blind-buying is a mistake that can lead to catastrophic results, according to Mr Gray.

He believes an investor could end up purchasing a house in an area where nobody wants to live.

“A good situation would be the house doesn’t drop in value,” he said.

“A dire situation, which is found in many mining towns, houses are bought and in six to 12 months the value has cut in half and you can’t physically rent them out and can’t sell them.

“That’s a very costly mistake.”

Property investors are now buying houses without inspecting them first

New Image Real Estate Marsden agent, Christine Carroll, told Domain she refused to sell a property to somebody unless they’ve attended a visual inspection.

“In my view, it is the ethical thing to do, because it puts the ball into the buyer’s court,” she said.

“At the end of the day I want them to know what they are buying and it is in the best interests of the buyers.”

Ray White Balgowlah principal, Andrew White, said he had noticed a huge increase in Sydney investors blind-buying, especially on the Gold Coast.

“Sydney prices are peaking and people pay good money on their investments and there’s now a lot of talk about Queensland growing,” he said.

He said there was always a risk when blind-buying, but said technology allowed it to be possible.

“It’s really good now, you can do so much remotely like get advice and copies of reports,” he said.

“Even Google street view is helpful.”

Mr Gray said anybody interested in investing should just jump in and do it.

“Have some due diligence but don’t wait until it’s absolutely perfect, that won’t ever happen,” he said.

“Valuation is the key thing and valuers know certain areas and will tell you if property prices are too expensive.”


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Property sellers bring plans forward to beat APRA changes on home borrowing

Property sellers

Some Property sellers have brought forward their listings in hopes of getting the best price before new mortgage rules kick in and reduce the budgets of potential buyers, agents say.

Potential home buyers who are hoping to borrow the maximum amount are also rushing to get in before the cut-off at the end of October, although some will be disappointed as a few banks have already become more cautious about how much they will lend, and investors with multiple properties are already having to reduce their budgets for their next purchase.

Property buyers will be assessed to ensure they could repay their loans should interest rates rise 3 percentage points, up from 2.5 per cent previously, under recently announced rules by bank regulator the Australian Prudential Regulation Authority that are likely to cut buyers’ maximum borrowing capacity by about 5 per cent.

But with only 8 per cent of applicants borrowing their maximum, on Commonwealth Bank figures, most buyers are unaffected, meaning property prices are likely to keep pushing higher, albeit not at the same pace.

“It’s very much on the top of sellers’ minds to try to get a deal together before the market could be impacted,” The Agency Epping’s Catherine Murphy said.

Last time APRA made it harder to get a home loan, the decision preceded the financial services royal commission that threw bank lending practices into the spotlight, as well as the uncertainty of the federal election, and property prices fell.

Ms Murphy does not expect as much of an impact as last time, tipping prices to keep rising but at a more modest pace.

“If you know buyers, instead of being able to spend $2.5 million, they can only afford to be spending $2.1 million, that counts that buyer out of the game,” she said. “The more buyers you have, the more you end up selling for.”

Adrian William principal Adrian Tsavalas has seen some sellers keen to list sooner to take advantage of the unchanged borrowing capacities in the market now.

“There have been a couple of sellers who were on the fence about listing this year or next year,” he said.

“With the change in regulations and the possible change in borrowing capacity on the cards we’ve seen a number of sellers elect to list and sell this side of Christmas, just in case this has an impact on the market.

“It could possibly ease [price] growth but I don’t think it’s going to cause the market to retract.”

Foster Ramsay Finance principal mortgage broker Chris Foster-Ramsay has seen some buyers aiming to get a pre-approval quickly if they hope to borrow the maximum to stay in their preferred location, perhaps near family or the children’s school.

Some banks are still allowing new buyers, or those renewing pre-approvals, to borrow the maximum under the old rules before November 1, when the new rules kick in. Borrowers have 90 days to use their pre-approval before it expires, meaning buyers will be in the market with larger maximum budgets until the end of January.

Others such as Commonwealth Bank and Bankwest have already changed to the new rules, he said.

“Everything seems to be premium price and premium demand,” he said. “Agents foresee that happening right through until early next year when these changes kick in.”

Shore Financial chief executive Theo Chambers has been fielding questions from pre-approved clients asking how the change affects them and thinking they might need to buy sooner rather than later.

“People that were procrastinating about it are now feeling like they need to get moving,” he said.

“It’s almost a bit too late for those people because some of the banks will apply the change regardless of whether you’re already approved.”

Banks are also making their own changes, such as being more cautious about how much debt borrowers can take on relative to incomes, to reassure the regulator, he said.

Keen investors with multiple properties had been affected, although not dramatically yet, and were hoping to get in before the changes, Mint Equity director and finance broker Zac Peteh said.

One client already had a $900,000 budget reduced to $850,000, he said.

“The strategy that some of the investors had of waiting for the market to return, in terms of stock levels … there’s a little bit of a push with the investors to try and get something done now, rather than waiting until early next year,” he said.

Ray White chief economist Nerida Conisbee said the APRA changes were likely to affect real estate sentiment far more than how much buyers could or couldn’t borrow.

“For the majority of people it doesn’t make much difference and it won’t hit all parts of the market. It’s a pretty light touch overall and will make a minimal impact,” she said.

“I do think that deadline will see prices calm a bit though if only because the APRA changes are signalling that they are watching, they are not going to let it get out of control, and there will be a limit.”

Melbourne buyer’s advocate Wendy Chamberlain has not yet seen any impact on her clients, but expects that soon buyers may not be able to borrow as much money and will look at homes at a lower price point.

“I don’t’ know if it’s going to take the wind out of the market,” she said. “If you can’t afford to buy that house you’ll just drop into a lower price bracket.

“[Also,] the bank of mum and dad aren’t going to be affected by the APRA changes, are they.”

Ray White NSW chief auctioneer Alex Pattaro has not seen any impact on buyers from the announcement, with confidence at auctions still high.

“People are more keen to secure a home and get in simply because of the property prices rather than because of APRA,” he said.

“People are prepared to pay over for a property when there’s competition on auction day.”

Davidson Property Advocates’ Tonya Davidson has not seen the change directly affect her clients yet but is anticipating a flow-on effect.

“It’s been a topic of discussion and I think what that really relates to is perhaps a small shift in market sentiment,” she said.

“There’s a number of properties that have had price adjustments. I had an auction on Saturday [in which] I was the only bidder.

“A little bit of the shine has come off.”


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Queensland tenants secure more rights


The Housing Legislation Amendment Bill 2021 was approved earlier this month

Legislation has passed in the Queensland parliament that will provide more rights to tenants in coming years.

The new laws enact minimum quality standards for Queensland’s 1.8 million renters starting September 2023.

They disallow property owners from issuing a notice to leave ‘without grounds’ providing tenants with more certainty.

They allow tenants to have pets within rental properties in certain conditions. The pet clause commencement date is not yet known, but the changes to renting with pets will allow a property owner to refuse a pet on prescribed reasonable grounds that cannot be addressed by prescribed reasonable conditions.

Trellis 20 Edmondstone Street, South Brisbane QLD 4101

The laws requires owners to consider the specific circumstances or the specific attributes of a pet request and deter blanket “no pets” rules.

They extend protection for renters who have experienced domestic and family violence.

The Palaszczuk Government passed its new tenancy legislation with some amendments, calling it “striking the right balance between renters and property owners.”

Penny Carr, CEO of Tenants Queensland, the state’s tenant advisory specialists, welcomed the finalisation of the first stage of the reforms, but said they fell short of modernising the laws.

“Our focus will now be to ensure all Queensland renters understand the new laws, how to exercise their rights and meet obligations, without fear of eviction.

“Renters will find it somewhat easier to keep a pet and to have repairs attended to but they will wait until 2024 for minimum standards and will still be subjected to arbitrary evictions.


Bide 21 Longland Street, Newstead QLD 4006

“These laws are not ones for a modern Queensland as they don’t offer strong enough protections from unfair evictions,” said Ms Carr.

The REIQ says the laws had swung distinctly in favour of tenants.

“Property owners have lost the right to end a periodic tenancy by providing notice,” REIQ CEO Antonia Mercorella said.

“Unless owners can establish limited prescribed grounds (such as the sale of the property) they will never be able to terminate a periodic tenancy.”

The Housing Minister Leanne Enoch has committed to stage 2 of rental reform to begin in the first half of 2022.


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High-End Apartment Shortfall Pumps Up Prices

Upward pressure on the top end of the market looks likely to continue with a 39 per cent fall in the number of new luxury apartment projects predicted over the next three years.

The Rightsizing Report by Knight Frank showed pipeline constraints for properties above $2 million to $3 million would be most felt in Brisbane and Sydney.

Perth and the Gold Coast have more new apartments on the way which may go some way to easing the pressure for this stock.

But demand for apartments above $10 million was even more intense—sales have increased eight times the 10-year average during the first six months of 2021 in Australia.

This contrasts with the middle of 2020 when the global super-prime market took a -61 per cent hit.

Contributing to the success of the Australian market this year were Crown Resorts’ One Barangaroo and Lendlease’s One Sydney Harbour.


▲ Full-floor apartments in Luxe Broadbeach on the Gold Coast are expected to fetch more than $4.95 million.

Knight Frank head of residential research Michelle Ciesielski said although people were prepared to spend what it took to meet their requirements, it was difficult to find stock.

“The widening gap between this buyer demand and appropriate property supply remains concerning, and residential construction difficulties continue to delay delivery of new product,” Ciesielski said.

“The shortage of suitable product, particularly at the top end of the market where rightsizers play, has been exacerbated by developers unable to easily secure sites in prime locations, adding to the highly pressurised buying environment across Australian cities.”

Buyers in this demographic were increasingly looking for three bedrooms, with developers increasing the share of this configuration from 21 per cent in 2018 to 32 per cent in 2021.

“During the coming years, we will see an increasing number of rightsizers who are seeking a low- maintenance home as their main residence, given the transient global lifestyle that will return for many of the ultra-wealthy population,” Ciesielski said.

“This pent-up demand will continue while new luxury apartment delivery and sales listings remain shallow across almost every prime region of Australia.”

The number of car parking spaces was also contributing to the final sale result with apartments selling for 39 per cent more on average, at $39,800/sq m, with spaces compared to $30,200/sq m without in Sydney, while the difference in Melbourne was 9.2 per cent.


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