Are we starting to see more distressed vendors than may have been reported? Australia-wide, the delinquency rate has climbed from about 1.4% to 1.79%. It might be low in comparison to Europe and America, but it’s a figure the Reserve Bank should be paying close heed to because it seems there are other distressed vendors flying under the radar and trying to bail out before they get to the delinquency stage.
The average time Australians stay in their homes is 7.5 years (according to RPData) – although in the established suburbs of Melbourne close to the water and city it’s 9.1 years. However, there seem to be increasing numbers of vendors selling prime real estate after only one or two years of residence – something I’m seeing more and more often when I research the sales history of homes. In many cases these homes are struggling to sell, with days on market stretching into months as vendors try to achieve their “wish price” (a return on investment) in a flat conditions. These are often people who purchased when interest rates were low, and now rates have climbed, find themselves labouring to make the repayments.
Investment in real estate is long-term game plan, so trying to get a return on price one or two years down the line is a gamble no one should take, or be forced to take. Therefore in a flat market, with the possibility of interest rate rises brimming on the horizon, paying the right price and ensuring that decision by purchasing the right property is not only important, it’s crucial. Pay too much in the first place and you’ll get no short-term capital growth. Choose a “lemon” and if you need to sell in a soft market, reducing the price will be the only way to do so.