This article will refer mostly to Chinese residential buyers and sellers. While there are some similar behaviour patterns with Chinese commercial buyers and sellers, most commercial transactions are different as many involve syndicates rather than single players.

I also would like to highlight that a level of generalisation is required to write an article such as this. The observations made in this article are from years of experience in dealing with Chinese clients and from the knowledge of my colleagues who are of Chinese origins and understand the finer details of the culture.

The first mistake that many people make when discussing Chinese buyers is to group them all as one. The reality is that Chinese buyers behave very differently depending on whether they are overseas Chinese buyers, new Chinese immigrants, long term Australian residents of Chinese heritage, or even Australian-born-Chinese buyers of 2^nd generation. The main difference is due to their level of English as well as the level of familiarity, trust and comfort they have in the Australian real estate processes.

The second mistake often made in understanding Chinese buyers is to assume all buyers of ethnic Chinese origins behave in similar fashion. A Taiwanese buyer can behave very differently from a Hong Kong buyer or a mainland Chinese buyer. Chinese Malaysians, Indonesians or Singaporeans likewise all behave in their own unique manner during property negotiations.

While increasing sensitivity to Chinese buyers and sellers is becoming the norm in real estate transactions, many agents still only have a superficial understanding of Chinese clients. Many have a basic understanding of Feng Shui, or the preference for certain lucky numbers such as 8, and tend to focus on these in the marketing of properties. While this is certainly important for some Chinese buyers, it is not usually equally so for second generation Chinese Australians. Many properties with the supposedly unfortunate number 4 (meaning ‘death’) have sold for high prices to Chinese buyers. Therefore, while important to keep these cultural preferences in mind, it is not an all-consuming factor. Chinese buyers are rational and they are not buying every single property that has an ‘8’ in the number.

With this said, my colleagues and I have noticed a definite pattern of preferences with many Chinese buyers over the years:

• They like full brick homes (as opposed to brick veneer, weatherboard or fibro – unless they plan to knock it down).
• They like rectangular shaped land.
• They generally would prefer not to have a swimming pool. Swimming is not a big part of the Chinese upbringing and many Chinese-born children don’t know how to swim. Therefore a swimming pool is seen to be more a danger and a chore than a source of pleasure.
• They like level and clear land with not too many trees (especially protected species such as gum trees which are not always possible to remove).
• They like low maintenance properties (e.g. paved backyard as opposed to cottage style garden).
• They prefer high side of the street and generally dislike properties which have an entrance below street level.
• They have a preference for newer built properties and less of an appreciation for older style features such as an ornate ceiling or picture rails, etc. Therefore, a heritage listed property usually does not appeal to Chinese buyers.
• Position is important and many Chinese buyers will not want to purchase properties which are at a T-junction for example.
• Aspect is also important and Chinese buyers typically prefer morning sun than afternoon sun.
• Some Feng Shui related features are important. However, so long as a ‘flaw’ can be fixed, it shouldn’t be a huge problem. For example, some superstitious Chinese buyers believe it is bad Feng Shui to be able to see through from the front door straight out the back door. To them, this implies that money which comes into the house will immediately find its way out the door just as quickly. However, if some kind of partition or barrier can be built to disrupt this flow, then this problem is solved. This is quite unlike many non-Asian families who actually think it is preferable to have that cross ventilation and see-through aspect from the front door.
• For any Chinese buyers with school-aged children, the proximity to their preferred school is almost always the main consideration. This is not surprising given the heavy emphasis on education placed by parents upon their children.

When it comes time to buy or sell, many Chinese buyers and sellers who may not be fluent in English would show a strong preference to deal with Chinese-speaking agents. This is why many Sydney suburbs (such as Chatswood, Eastwood, Epping, Strathfield, Campsie, and Asfield etc.), which have strong Chinese demographic presence also tend to have the most number of Chinese speaking agents. Quite often the Chinese agents are not necessarily the best when it comes to sophisticated or glossy marketing. However their ability to communicate in the same language and build a relationship with the client gets them the business.

At the end of the day, while recognising that there are distinct behavioural differences between Chinese and non-Chinese property buyers and sellers, it is also important to note that there are also similarities. As with any other buyers, Chinese buyers also like to get a ‘bargain’ when buying. They tend to be savvy property investors who are risk averse and rely on the advice of their family and friends. Earning their trust is important when dealing with them, regardless of whether it is on the buy or sell side. And just like any other buyers, once they are emotional about a particular property which meets their criteria, they are prepared to pay a premium if they can afford it.

Oliver J. Stier is the Director of OH Property Group, a leading Sydney buyers agency. He studied Quantitative Economics and Finance at Cambridge University (UK), University of Toronto (Canada) and Princeton University (USA). In addition to being a licensed real estate agent, Oliver also holds the Chartered Financial Analyst (CFA) designation. You can follow Oliver on Twitter at www.twitter.com/ohproperty.

What do I think? Long run property capital gains are likely to be 4% to 5% per annum going forward (in line with wage growth) not 8+%. However, I don't expect 40% drop in prices as some doomsayers suggest. Rental yields should be higher going forward than over the last five years due to continued undersupply of housing in NSW. And interest rates are lower now and likely to remain so for some time to come, making carry cost cheaper for investors.

Unaffordability is a problem for many first-time home buyers. However, the undersupply of housing and significant store wealth and foreign wealth will support middle-class and established suburbs.

Finally, the recent news of the axing of stamp duty exemptions for first time home buyers in NSW for second-hand property may lead to a blip in first-home owner activity this spring but then will lower demand from this segment due to unaffordability. With leverage, property investment returns can still be quite rewarding.

It is of course always wise to do your own homework prior to making major life decisions (property-related or otherwise). However, if you are feeling more confused than ever as to whether you should buy or sell real estate this spring, forget for just a moment about what you have read here or in the media and just focus on answering the following three questions to help you make the right decisions:

1. Are you making a real estate decision based on the market or on your life?

Property investors are typically opportunistic buyers, whereas owner-occupiers usually buy properties based on their lifestyle needs, such as an expanding or downsizing family. If you are hesitant to make a real estate decision, ask yourself what is holding you back from buying or selling? Are you trying to make your decision based on timing the market (which you have no control over) or based on your life and needs?

If you are an investor, perhaps you are making a calculated decision purely based on the market. However, if your life circumstances demand that you make a buying or selling decision this spring, then make the most of whatever market conditions you are faced with. If you are selling one home to buy a larger one, maybe it is a good time to buy when the upper-end market is still weaker. Whatever shortfall may result in selling your property in a flat market, if you buy in the same market, you will more than make up for it on the purchase end. What you want to avoid is selling your property now and buying only later when the maker is stronger already.

2. How will you know when the market has hit the bottom?

The reality is that no one can ever accurately predict when the property market has or will hit the bottom. The only way to know for sure is to look at the data retrospectively, once the market has already made an upward trajectory and then it will be too late. It would be a waste of time and energy to sit on the sidelines to try to pinpoint a particular turn. Chances are you may be wrong with your calculations and would have by then missed out on some good opportunities in the marketplace. If you believe that the property market is most likely to go up in the medium term, focus on buying right and negotiating well, rather than on picking the bottom.

3. What are you in control of?

It is important to understand and differentiate between factors which you are in control of and those which you are not. You are not in control of the global economy or how the EU and USA are performing; and you are not in control of interest rates which are set by the RBA. You are also not in control of the quantity or quality of property stock on the market. However, this does not mean that you cannot be in the driver’s seat when it comes to buying or selling a property.

If you are selling a property, you are always in control of the agent you appoint, the method of sale, the timing for the listing, the marketing budget, etc. Likewise, if you are buying a property, you are in control of picking a solid property (that is not going to underperform), understanding its value, how much you are willing to pay and when you submit the offer or bid at auction.

Keep things in perspective and don’t be paralysed by the things you cannot control. Focus on maximising the outcome of the things which you can control. This means that regardless of whether you are buying or selling a property this spring, you should demand more and negotiate smarter.

Oliver J. Stier is the Director of OH Property Group, a leading Sydney buyers agency. He studied Quantitative Economics and Finance at Cambridge University (UK), University of Toronto (Canada) and Princeton University (USA). In addition to being a licensed real estate agent, Oliver also holds the Chartered Financial Analyst (CFA) designation. You can follow Oliver on Twitter at www.twitter.com/ohproperty.

This past Saturday alone, I personally inspected sixteen houses on the North Shore. Many property buyers in the North Shore are upsizing from near the City or Inner West, where larger blocks of land and space in general are traditionally scarce. The numerous excellent public and private schools is also a strong drawcard to the North Shore.

The North Shore offers an interesting backdrop to study the property market and what might be in store this spring for a few reasons:

• The suburbs in the North Shore are well established and therefore generally are quite stable;
• In good or bad economic times, there are always people looking to buy in the North Shore. Which is not always the case in the newer suburbs in the outskirts of Sydney;
• The North Shore offers a great variety of property types for purposes of comparison, ranging from Units, Townhouses, Semi Detached homes, free standing houses and even vacant blocks of land; and
• The Auction method of sale is traditionally very popular in the North Shore and the clearance rates are indicative of the state of the property market.

Based on my inspections of properties on Saturday and the weeks preceding, the following are my observations:

1. Inspection numbers are definitely up. Some properties were even crowded, and this has not been the case in the past few months. There was a healthy amount of browsers out there, but it will remain to be seen if these will convert into serious buyers.
2. There is still a lot of talk about the global economy. People remain worried about what the rest of the world has in store for Australia. There is still a cautious attitude amongst buyers and this sentiment is likely to linger for as long as there is global uncertainty. This conservative outlook is essentially the new norm amongst property buyers.
3. Agents (and Vendors) seem confident once again to list properties for Auction campaigns. Over the last three-six months there has been a trend in the North Shore market to advertise properties as ‘For Sale’ with a list price. This is a significant shift given the area’s pre-disposition for Auctions in the past. This weekend however, I saw the majority of new listings have come on the market as Auction listings. Once again, only time will tell whether these properties will actually be sold at Auction or whether bidders will continue to be reticent when faced by the hammer.
4. Selling Agents seemed buoyed by the turnouts, but it is obvious that they still worry if those who come to the Open for Inspections will turn into actual buyers who would be willing to meet their seller’s expectations.
5. There is a surprising amount of North Shore entry level properties around the $1 million mark launched this past week. Probably smart homeowners have decided that now would be a very good time to upgrade, given that higher end properties prices remain softer than entry level ones. These entry level properties attracted keen interest at Open for Inspections this weekend.
6. The only premium Auction I attended was Passed In with absolutely no bids. While the selling agent had gathered some 75 people to attend (many are neighbours no doubt), not one bid was placed for a property that had been quoted around the $4 million. It did not appear that there were many registered bidders. Those with interest probably still feel that the best deal can be had post Auction and through smart negotiation - which is probably true.
7. Selling agents are increasingly talking up the rental yield part of the buying equation. With interest rates set to remain stable throughout the year, the possibility of a rate fall as the next RBA move, fixed rates having been lowered by the major banks, and the flattening yield curve, it is only to be expected that we will see the return of investors to this market. It is more a matter of ‘when’ rather than ‘if’. These investors had started to nibble in early 2011 and are in my opinion likely to return in force within the next 6 months.

All in all it was a good day out there. The lacklustre supply of good property over the last 6 months is fading and buyers are starting to consider buying again. Many risk-averse Sydney property buyers have been waiting on the sidelines since the beginning of the year, fearful of a severe downturn that has not eventuated. Many are now starting to realise that Australia in general and the property market specifically are still quite resilient; and that any downturns are in fact windows of opportunity to either enter the market, upgrade, or invest.

The reality is that fear is often paralysing. Once the fear subsides, buyer confidence will return. It won’t happen overnight. But it will happen.

Oliver J. Stier is the Director of OH Property Group, a leading Sydney buyers agency. He studied Quantitative Economics and Finance at Cambridge University (UK), University of Toronto (Canada) and Princeton University (USA). In addition to being a licensed real estate agent, Oliver also holds the Chartered Financial Analyst (CFA) designation. You can follow Oliver on Twitter at www.twitter.com/ohproperty.

Prior to the finale, Josh and Jenna seemed to be the favourites to win with 37 Cameron Street. And when they got to choose to be first off the blocks at Auction, the scene seemed set for an easy victory. However, the final outcome at Auction could not be further from the hype leading up to the event. Despite the amount of money spent to ‘glam up’ the properties and a marketing publicity campaign that most vendors can only dream of, only 1 of the properties (39 Cameron Street, by Polly and Waz) actually sold at Auction. And even then, it only just barely hobbled over the finish line - at a meagre $15,000 above the reserve set by Channel 9. Hardly a spectacular Auction day by anyone’s standard.

Viewers (and I’m sure, the contestants alike) were stunned that the only property which saw enough interested bidders to meet reserve was that by self-proclaimed renovation rookies, Polly and Waz. After all, surely Rod and Tania’s number 43 Cameron Street, which had a very similar reserve ($850,000 vs. $840,000) to Polly and Waz, was a better property? Both are two storeys with the master bedroom and ensuite upstairs. Both have been criticised by the judges for not having a proper dining area. Polly and Waz had the ‘man cave’ and extra storage. But on the other hand, Rod and Tania seem to have a larger and better backyard with the extensive decking and bonus spa. So why did Polly and Waz manage to get a sale and Rod and Tania did not? On the surface, something seems amiss.

So what went wrong exactly? Why did just one of the four properties sell under the hammer? And why did the two supposedly best properties (Number 37 and Number 43) not sell while the other two supposedly lesser properties did? (For those not aware, Katrina and Amie did sell their property post-Auction for the reserve price of $860,000, netting them zero profit to pocket.)

There are many theories that have been thrown around to try and make sense of what happened:

The market is what the market is. TV can do wonders. But it cannot change market sentiment overnight. For all of 2011 so far, property buyers have been very extremely cautious, and this is reflected in Auction clearance rates hovering around the 50-55% for most of this year. There are still lots of serious buyers out there, but they are taking their time and watching their wallets carefully. Buyers are not willing to be drawn into a competition scenario for fear of over paying.

A sale is a sale regardless of when the deal is done. In the current market, many properties are passed in at Auctions (often with no one bidding) only to be sold soon after. At the end of the day, it really does not matter whether the property is sold before, during, or after Auction. It’s the price that counts. No doubt, the remaining two properties of The Block should sell in the near future.

Too much publicity can be a bad thing.I have come across many properties which attracted large crowds at Open for Inspections and seemingly overwhelming interest. However, surprisingly enough, on many such occasions, I find that the buyers end up losing hope – thinking that there’s no way they could be the winning bidder in the face of stiff competition. So they either don’t even show up to the Auction or simply set a very realistic cap to prevent themselves from getting emotional in the bidding process. While there are silly buyers who want to win at all cost just for the sake of winning, there are also many who react in the opposite way. The more competition they think they are likely to face, the more they talk themselves out of getting into the rat race and overpaying. Time and again, I see extremely popular properties sell for an underwhelming price for this reason.

Many serious buyers who otherwise would have been interested in The Block properties may have been discouraged or intimidated by all the media hype. Instead, the Auction probably attracted some ‘bidders’ who were mainly interested in being in the limelight, and not genuinely attempting to buy the property.

Is the price right? It’s pretty clear to most that Channel 9 overpaid for the four properties in the first place. Add to that the cost of stamp duty, 2^nd floor additions to three of the properties, and the renovation budget and it seems unlikely that a profit could ever be made from the properties. Of course, this is a secondary concern to the show producers - relative to the ratings success. But the moral of the story is that buyers are not stupid. They will not overpay just because it is a TV show. Rational buyers know that once the cameras are turned off and packed away, they will be left with a very real investment. They would be asking themselves whether there are better buys out there than what The Block has to offer.

Buyers’ agents/advocates take the emotion out of buying. As viewers would have observed, there were many buyers’ agents (or buyers’ advocates as they are referred to in Melbourne) doing the bidding. As buyers’ agents and advocates, we are mandated to represent our clients who are property buyers. This means that we have to look out for their best interests. A good buyers’ agent and advocate would have done a thorough due diligence on the properties. How is the location? What is the rental potential? How good an investment is it? Is there a better property out there (for example, ones with parking)? Are the properties over-priced relative to their merits? What is the maximum price that the client (the buyer) should pay for the property?

If the client (buyer) decides to go ahead and participate in the Auction, then the buyers’ agent and advocate should do everything they can to enable their clients to buy the property for the lowest price. This may involve not bidding and competing if the property is not likely to reach the reserve anyway; or if it becomes evident that there is not that much interest or serious competition. After all, a good buyers’ agent and advocate would know that sometimes the best time to strike a deal is after a property has failed Auction. Unfortunately for Channel 9, experienced buyers’ agents and advocates are calculating bidders, and not likely to be drawn into an emotional bidding frenzy which would have made for more exciting television!

5 Lessons to be learnt from The Block

1. Don’t overpay when you buy. Many people assume you make money when you sell. But you actually make your money when you buy. Hire an experienced and professional buyers’ agent and advocate to minimise your risk of making a costly mistake.
2. Renovation is much harder than it seems. The high entry and exit costs (stamp duty, agent commissions, capital gains tax etc.) make it very difficult to make a profit.
3. Understand your target market for the suburb when you renovate so that you don’t over-capitalise.
4. Auction is NOT the only way to sell a property. The Block has to use this method because it generates the most drama for television.
5. The best property does not always get the best selling price. The interplay of a combination of factors such as the skill of the selling agent, sales method, level of buyers’ motivation, etc. all contribute to the final outcome. It comes down to finding the right buyer for the property – the one willing to pay the most for it.

Oliver J. Stier is the Director of OH Property Group, a leading Sydney buyers agency. He studied Quantitative Economics and Finance at Cambridge University (UK), University of Toronto (Canada) and Princeton University (USA). In addition to being a licensed real estate agent, Oliver also holds the Chartered Financial Analyst (CFA) designation. You can follow Oliver on Twitter at www.twitter.com/ohproperty.

Developers sell off the plan because this is usually a requirement for them to secure upfront construction financing from a lender. A certain percentage of the development usually has to be pre-sold prior to the release of funds by the bank. Buyers would pay a deposit to secure the property, with the balance payable upon settlement.

Below I consider some of the pros and cons of buying off the plan in NSW.

Pros

• Brand new. Everybody likes the feeling of ‘newness’ – be it new cars or new houses.
• Developer discounts. Developers may sell some units at a discount if they need to meet sales targets to get the construction underway.
• Extended settlement period. With delivery usually over a year or two away, it gives you time to sell your place or to obtain financing (or even to increase your income before financing needed).
• Stamp duty concessions. Over the last 5 years, various concessions on stamp duty have been offered in NSW such as for retirees and first homebuyers.
• Customisation. It is often possible to provide input on final design if a property is purchased before construction (e.g. to merge two apartments into one large one or to choose certain fittings and fixtures).
• Warranty periods. All builders are required to provide 7 year warranty on building structure (in addition to a preliminary period covering finishes defects). However, note that home warranty insurance (with a third party insurer) is only required to be taken out by builders on residential projects valued over $12,000. Larger developments (buildings of more than three stories) are exempt and the purchaser must rely solely on the builders’ warranty. Clearly this presents a significantly greater risk to buyers. The certificate of insurance, when issued, must be attached to the contract of sale.
• Lifestyle. Newer units are built to reflect today’s tastes and preferences such as open plan living areas, larger balconies and amenities such as pool, gym and concierge services.
• Potential for capital gains before settlement. Many investors are speculators and love to bank on off the plan properties going up in price before the property is even finished. Beware however, that the reverse is also possible.
• Leveraged investment. The down payment is usually low for the construction period (i.e. it can be a leveraged investment without the need for bank financing).

Cons

• Final product is unknown. Buying something on paper without having seen the item is a significant risk. The finished product may not live up to your expectations (e.g. aspect, quality, etc.)
• Premium price for newness. Just like cars, brand new properties have a certain premium. This is partly due to the newness factor, but also due to Australia’s Foreign Investment Review Board (FIRB) regulation which stipulates that foreigners can only buy brand new properties and not second hand ones. There is a larger consumer base for new properties (as foreigners can also buy) and consequently new prices are higher than in the secondary market. When this property is later sold, it cannot be sold to foreigners (lowered demand possibly leading to a lowered price).
• Lower land to asset ratio. New homes and units alike are usually built at much higher density than those built 25+ years ago. Since land value is the primary influence on capital gains for property, it is not uncommon for capital gains associated with a new property investment to be lower.
• Developer bankruptcy risk. There is always a risk that the developer goes bankrupt before completion (with loss of deposit if the legal structure is not sound) or during the warranty period.
• Expected financing may not be available in the future. While Banks may be lending on attractive terms today, and while the buyer may have the capacity to borrow the required amount at the time of purchase, this may be very different in the future when the financing is actually needed.  At settlement, when the property is completed, banks may not be willing to lend the same amount (LVR), the valuation may be lower than the purchase price, or the buyer’s income and circumstances may have changed. In all these cases, the buyer would need to come up with a larger down payment than expected. In addition, the interest rates at time of settlement may be very different from those prevalent at the time of purchase.
• Lower capital growth can be expected (at least in the early years) as depreciation is high. The new property will depreciate significantly in the first few years as it goes from new to second-hand – just like a car when you drive it off the dealership.
• Defects can be extensive. There is often a 1-5 year period in which building defects materialise and become visible. In the best case scenario, a very good builder will address these with minimal inconvenience and hassle. A bad builder however, may not fix the defects properly. In which case extensive time and cost is required to address the defects through negotiation, mediation and possibly even court.

Tips for Buying Off the Plan

• Buy from trusted developers with a proven track record. Established developers obviously have much more experience and resources than small developers. Reputable developers tend to make fewer mistakes (which can be extremely costly in the long run) and when problems occur, they tend to be in a position to rectify it more effectively and efficiently. Although many new development projects have mandatory 7 years structural warranty with an insurer as back-up, it is not uncommon for developers to simply go bankrupt before this period is over. It then becomes much more complicated to claim for defects from the insurance company. 
  Where possible, try to inspect other properties which the developers have completed so you can gauge the quality of the workmanship first hand.

• Understand exactly what you are buying. Read the fine print and seek legal advice before signing any documents. Don’t make assumptions as to quality based on promises made by the salesperson or model/showroom. If detailed specifications are not provided, don’t be afraid to demand more information in writing or to provide you own list of requirements/specifications.
  
  For example, even if the shower screen for the bathroom is specified as ‘glass’, this does not tell you whether you will be getting 5mm thick semi-frameless glass screen or 10mm fully frameless ones. There is a significant difference both in quality and price. Most developers know that buyers look at the quality of the kitchen appliances and they tend to splurge on high-end brands. However, most buyers are not as educated or discerning when it comes to accessories such as tap ware, cornices, skirting boards, balustrades, etc. You need to understand whether your money is going towards quality German tap ware or cheaper Chinese ones, for example.

• Understand your rights. What modifications or substitutions are possible without additional costs to you? Can the apartment be on sold by you prior to completion? Where is the down-payment being held (i.e. is it in a trust account? Can the builder use it for construction?). Are you able to get out of the contract if the property is not finished on time? Are you able to visit the site during construction? What is the process to ensure that defects are fixed in a timely manner?

• Have a contingency plan. Few developments are completed according to schedule and you need to make sure that you will not be overly inconvenienced should this occur. In addition, make sure you are financially prepared and able to pay a higher strata levy (where applicable) than what the developers calculate in order to appeal to buyers during the sales process.

• Consider your exit strategy. When it comes time to sell, will it be easy to offload your new property? Without the newness factor, will it still appeal to many buyers? Has the property been well designed to have a timeless appeal? Will there be lots of other similar properties to compete with yours (in the area) when you want to sell? Will buyers be attracted or put off when they find out who the developer is?

At the end of the day, the logic of buying an off the plan property is similar to other investments. You need to weigh the pros and cons as they apply to your life and circumstances. You will also need to understand your level of appetite for taking risks and your ability to mitigate them; because buying off the plan means that you are buying something you can neither see nor touch. You are essentially buying a promise.

Oliver J. Stier is the Director of OH Property Group, a leading Sydney buyers agency. He studied Quantitative Economics and Finance at Cambridge University (UK), University of Toronto (Canada) and Princeton University (USA). In addition to being a licensed real estate agent, Oliver also holds the Chartered Financial Analyst (CFA) designation. You can follow Oliver on Twitter at www.twitter.com/ohproperty.

Although excited at the time of the purchase, once they've spent a lot of money, many people feel a deep regret and concern that they made the wrong decision, referred to as buyer's remorse. In this blog, I'm going to specifically discuss the buyer's remorse associated with buying a property.

Buying a property is an emotionally-charged process. I tried to briefly capture this range of emotion in the chart above.

During the initial search process, many buyers may go from feeling excited to frustrated when they realise the constraints of their budget. After some time, it is not unusual for many buyers to see a property they like but then miss out on it for one reason or another. This may result in a feeling of disappointment and loss.

When buyers eventually exchange contract on a property, many may feel a sense of relief and euphoria.

However, this feeling of elation often does not last long, as many buyers naturally begin to feel a sense of remorse over their purchase as they grapple with a series of fear and anxieties such as:

• fear of having made the wrong choice;
• fear of having over-paid;
• fear of over-indulgence or living beyond one's means;
• fear that other people may later question the purchase or claim to know better alternatives;
• fear of buying at the wrong time;
• fear that a better/cheaper property is around the corner (also known as Fear of Missing Out or the FOMO factor);
• fear of the financial implication to ensue (i.e. debt); or
• fear of having been pressured by the sales agent.

It is also not uncommon for buyers to compare their purchase with those of their friends and families. Buyers need to be careful when doing so because no two properties are like. For example, just because a friend/family purchased a property at $800,000 as opposed to your $850,000 does not automatically mean that they got a bargain whilst you over-paid. So be cautious not to have a knee-jerk reaction to price only.

Another common trigger for buyer's remorse is the pre-settlement inspection. Many properties have been scrubbed clean, landscaped and styled within an inch of its life just prior to sale. So it comes as a shock to many buyers to see the property empty, slightly dirty and with overgrown yard for example. The gloss of the marketing campaign is over and buyers are faced with the reality of a vacant property which does not seem as glamorous as in the brochure.

The good news is that, based on our experience, buyer's remorse doesn't last too long. Acceptance and contentment soon follow - especially once the buyers are able to start putting their personal touches to the property (such as painting).

So if you are a property buyer experiencing buyer's remorse, just stay calm and have faith that all your due diligence and research will stand the test of time.

Oliver J. Stier is the Director of OH Property Group. He studied Quantitative Economics and Finance at Cambridge University (UK), University of Toronto (Canada) and Princeton University (USA). In addition to being a licensed real estate agent, Oliver also holds the Chartered Financial Analyst (CFA) designation. You can follow Oliver on Twitter at www.twitter.com/ohproperty.

1. Hiring the wrong agent

One of the most critical decisions early in the process is the selection of agent (if you choose to have one). Not selecting the right agent can significantly affect the outcome of the sale.

Be careful not to select an agent based on commission alone. Afterall, the cheapest agent is the one who can get you the highest net selling price. Sellers should also be wary of selecting an agent based on an inflated appraisal of the property; this practice is commonly known in the industry as ‘buying a listing’. Another very common mistake sellers make is to select an agent who is out-of-area, usually due to a personal relationship or recommendation. Property markets vary greatly and out-of-area agents often lack local knowledge and the ability to interpret market nuances.

Look for an experienced agent who has a proven track record of selling properties in your neighbourhood. Ask for and personally verify references from past clients. Find out how many listings the agent will have in addition to yours and who will be present for the Open Inspections? You must pick a selling agent that you can trust and can communicate openly with. They are your representative and should work in your best interest at all times. If you don’t trust your agent, then any negotiation with a buyer will be a three way one and won’t lead to an optimal outcome.

2. Unrealistic price expectations

All properties can be sold. It is just a matter of price. Too often, sellers are fixated on a target price based on the net proceeds. This pricing strategy often leads to an overly ambitious price expectations. While a seller can have whatever asking price they want, buyers reserve the right to disagree. At the end of the day, the market value for a property comes down to what the buyer is willing and able to pay today; not yesterday and not tomorrow.

3. Not understanding your rights and obligations as a vendor

It is important that all sellers are fully educated about their rights as well as their obligations as vendors. Be thorough in reading the fine print in legal documents (such as the Agency Agreement) and don’t hesitate to seek advice from the Office of Fair Trading or your legal representative if necessary.

4. Not selecting the appropriate method of sale

There are two main methods of sale: Private Treaty or Auction. All sellers will have to make the decision on whether to put a sticker price on the property and sell it via Private Treaty or take the property to Auction. Both methods have pros and cons and neither are foolproof. Much depends on the prevailing market dynamics, which may favour Auction in a sellers’ market and Private Treaty during a buyers’ market, for example. Whether you choose to sell by Private Treaty or Auction also depends on the type of property being sold. Agents also often have a preference for one method of sale over another and sellers should discuss both options with the appointed agent. At the end of the day, sellers need to make an informed choice and be fully comfortable with the chosen method of sale.

5. Not doing own research and homework

At every step of the process, sellers need to invest time and effort to do their own research. Prior to selecting an agent, go around to nearby Open Inspections and Auctions and see how the agents conduct themselves. Interview at least three agents and be strategic with the questions you ask them. Throughout the selling process, attend as many Open Inspections and Auctions as possible in your neighbourhood. This will help you to get timely first-hand information on market sentiment as well as enable you to analyse competing properties.

6. Not taking presentation seriously enough

When you are selling a property, you are not merely selling bricks and mortar. You are also selling a dream. Therefore the property needs to be presented in such a way as to appeal to the targeted buyers (be they owner occupiers or investors). While staging or styling is increasingly common and can be very effective, it is still possible to present a property nicely without a substantial budget. Some of the best return-on-investment can come from de-cluttering, mowing the lawn, improving the curb appeal of the property, painting, etc. Investing in strategic cosmetic fixes can also be rewarding. Be careful though not to over-capitalise on any pre-sale renovation.

7. Poor marketing

You can't sell a property if nobody knows about it. Marketing (of which advertising is one key component) is essential to getting people through the door and needs to be managed strategically according to your budget. The amount of money spent on advertising can often be indicative of how motivated the vendor is to sell. The more a vendor spends out-of-pocket on advertising, the more invested they are in the selling process.

Due to the costs, vendor-paid advertising can be a controversial issue as some sellers feel they are paying to promote the branding of the agent/agency. As advertising outcome can also be difficult to track accurately, many sellers are not convinced of the return-on-investment. The good news is that more and more people are searching for properties online and Internet advertising is a cost effective option.

Irrespective of whether you have a mansion, a Unit, a renovator’s delight or just a piece of land, do invest in professional photography to make sure your asset is shown in the best light.

8. Getting too emotional and not listening to market feedback

Every home owner thinks their property is better than their neighbours’. Sometimes the emotional attachment to the property can cloud your judgement as a seller and prevent you from listening to genuine market feedback. A property ceases to be a ‘home’ and becomes a commodity as soon as it is placed in the marketplace. It needs to be marketed as a commodity and priced relative to competing properties to be attractive to buyers.

While it is not possible to be entirely objective, sellers need to try to take a step back and assess their situation in a business-like manner and take into account opportunity costs involved with a drawn-out sale. Time is money and there can be significant costs if a property lingers on the market.

9. Not timing the sale

Many sellers want to sell their property when it is looking its best. Hence spring and summer often see more listings than winter. However, timing the sale is not just about picking the nicest season. Sellers also need to consider the level of competition for their property at any given time. Keep in mind also that in peak selling periods, your agent is likely to have more listings to look after and may not be able to focus 100% on your property.

10. Not having a Plan B

Sellers are optimists and often make the mistake of not having a Plan B. Make sure you know what your options are if your property does not sell. Having a Plan B is all about control and can prevent you from getting too emotional and from making knee-jerk decisions.

Oliver J. Stier is the Director of OH Property Group. He studied Quantitative Economics and Finance at Cambridge University (UK), University of Toronto (Canada) and Princeton University (USA). In addition to being a licensed real estate agent, Oliver also holds the Chartered Financial Analyst (CFA) designation. You can follow Oliver on Twitter at www.twitter.com/ohproperty.

1. Not enough research

Buyers need to do their homework. Unless you have physically inspected 50-100 properties in the target area, you will not be able to accurately gauge what is a ‘good price’. Merely browsing through photos and floor plans on the Internet is simply not sufficient and cannot compare with a physical walk-through. Likewise, many buyers rely heavily on data and statistics which tend to be historical in nature. The only way to accurately gauge the market sentiment at any given point in time is to see as many properties and attend as many Auctions as you can. No report you buy can be a substitute for this legwork.

2. Too much research 

For most people, a property is the single largest purchase and investment they will ever make in their lifetime. So it is understandable that you would want to be as thorough in your research as possible. However, if the research takes too long, you could well miss some really good buying opportunities and end up chasing a market that no longer exists.

3. Spread too thin

It is important to condense the search process to a specific geographical area and time frame. Otherwise you could end up searching across 10 different suburbs over a 12-18 month period – which would give you neither an accurate nor reliable picture of the market.

4. Lack of confidence

Some buyers are paralysed by the fear of making such a large purchase decision that they end up not being able to commit to any property. For most buyers, there is also an element of ‘Fear of Missing Out’ (FOMO) which is driven by the fear that something better may be out there. This fear of making a mistake is a reflection of a lack of confidence, and renders buyers unable to analyse all the information they have gathered in a decisive manner.

5. Not seeing the big picture

With more and more properties being styled for sale, it is easy to fall for the presentation rather than the product being sold. Buyers need to pay attention to details and focus on the important but less glamorous things such as where the sewer is located, whether there are any easements, whether the property is in bush fire or flood prone land, the zoning of the property, whether there are any planned developments in the area etc. Likewise, many buyers get fixated on small issues which are easily fixed instead of looking at the big picture. Focus on the things which cannot be changed (such as the location, position, aspect etc.) and not on cosmetic flaws (such as an old kitchen or bathroom).

6. Comparing apples and oranges

No two properties are ever like. At the most basic level, property value is determined by the size of the property (land size and number of bedrooms etc.) But beyond this, there are so many variables than can even cause two properties (with same land size) on the same street to vary greatly in price. For example, even numbered houses on one particular street may be worth more than similar houses on the same street which are odd numbered. The reason could be that one side of the street may be the high side or may fall into a highly sought after school catchment. One side of the street may have the highly desired north-facing backyards whereas the houses on the opposite side have south-facing backyards. Or one side may be in bush-fire prone land but the other side is not.

Since most buyers cast a wide net when searching for their dream property, many do end up making the mistake of comparing apples with oranges. This typically happens when buyers compare properties in adjacent or neighbouring suburbs without taking into proper account the subtle differences in demand vs. supply, capital growth and rental potential etc.

7. Not having a good Auction strategy

It is always surprising how many buyers show up to an Auction with either poor or no strategy at all. Just knowing what your maximum limit is going to be is not sufficient as a strategy. Amongst others, you will need to have a strategy for dealing with other bidders, the Auctioneer, as well as the selling agent who will no doubt be there to put the pressure on. There is no single ‘ideal’ Auction strategy. Every Auction is different and requires a different approach depending on who the players are on the day and whether the Auction will be in-room or on-site. Buyers should not be bidding at an Auction unless they have attended and watched at least 15-20 other Auctions (both in-room and on-site) to see the myriad of ways it can unfold.

8. Overly focused on getting a bargain

It is always better to pay a fair price for a premium property than to get a bargain for a sub-par property. In the current buyers’ market, too many buyers are focused on getting a bargain rather than on securing the best property possible within their budget. It is not uncommon for a buyers’ ego to get in the way of securing a great property! Holding out on that $5,000-$10,000 may end up costing you a terrific property that will generate much more return in the long run than any savings you might make in the purchase price.

9. Not asking for help

The most dangerous property buyers are the ones who think they know it all and do not seek appropriate advice. An example would be bidding at an Auction. One single mis-bid could cost you much more than the fee to hire a professional to bid on your behalf.

10. Herd mentality

Property buyers are generally cautious about acting when no one else is. At Auctions, there is often silence as the Auctioneer tries to coax the first bid. It is only when others start bidding that some buyers feel confident enough to join in. Likewise, many buyers are hesitant to submit offers until the selling agent puts the pressure on by saying that there are other interested parties. Savvy buyers are accurately educated, confident, decisive, able to see the big picture and do not subscribe to the herd mentality which is holding back many buyers.

Oliver J. Stier is the Director of OH Property Group. He studied Quantitative Economics and Finance at Cambridge University (UK), University of Toronto (Canada) and Princeton University (USA). In addition to being a licensed real estate agent, Oliver is also a Chartered Financial Analyst (CFA). You can follow Oliver on Twitter at www.twitter.com/ohproperty. 

Selling & buying

Properties are still selling. It just takes longer and more are selling prior to or post auction. Sellers with sensible offers prior are more willing to accept them and buyers are less willing to bid up at auction (and will often negotiate to closure post auction).

Understandably, many opportunistic buyers are making lowball offers, citing declining market conditions. Vendors who need to sell may choose to accept below market prices, thereby negatively affecting the prices of neighbouring properties. However, vendors who are able to wait will either hold out for a higher offer or simply take their property off the market. Not surprisingly, the time-on-market for properties right now is longer than a year ago. Many selling agents are now also advising their vendors to sell by private treaty rather than auction.

Time to consolidate

The data may seem ominous but is in my opinion a necessary consolidation on the above average (and un-sustainable) gains of 2010. It comes at the same time that Australia has experienced its biggest quarterly contraction since the early 1990s recession, with gross domestic product (GDP) falling 1.2 per cent in the March quarter. This macro data can be attributed largely to the flood impact on Queensland and it is believed by many that the data indicates it should be a one-off fall in GDP.

So property markets are down in line with GDP which is expected to rebound shortly. I would expect the same of the property market. Keep in mind also that winter also tends to be a slower season for the property market. As the weather warms up, property action also tends to follow.

The fundamental undersupply of housing in Sydney remains (and may now even be exacerbated by the repeal of the Part 3A of the Environmental Planning and Assessment Act 1997 (NSW) by Barry O’Farrell in April). Part 3A granted the state planning minister discretionary ability to grant approval to major projects deemed to be of state significance. This allowed NSW state to approve major projects and save them from getting stuck on the desks of overworked local council assessment officers. With decision back in the hands of local councils we are likely to see a slowdown of development approvals for major residential projects.

Numbers look good for investors

Rental yields are now rising (largely due to undersupply of housing). Sydney’s gross rental yield for units is now 5.01% (2.3% Quarter-on-Quarter growth) and houses 4.38% (2.7% Quarter-on-Quarter growth) according to March 2011 APM data. We can expect this to continue and it will bring more investors into the market as the negative cashflow burden (net carrying cost) on property investment lessens.

While I do not expect on average 10+% capital returns to property ownership over the medium term, I think we can count on a more moderate 6-8% which can be added on top of rental yields of 1-2% higher than they have been in the recent past. The cash rate at 4.75% has not been raised by the RBA since November 2010 and recent GDP figures are likely to postpone any rise for a bit longer. This combined return on property investment will be attractive to leveraged property investors and will no doubt pull them back into the market. As a reflection of this, the level of inquiry we have received from investors has increased considerably in recent months.

Crisis of confidence

Despite media reports and sensationalisation of data, what we are experiencing right now is far from a crisis. The only crisis I am seeing is a crisis of confidence as buyers are more risk-averse than before. The herd-mentality of buyers also means that many are hesitant to make a move for fear of buying during a downturn (no matter how mild). Many buyers therefore choose to simply sit on the sideline and watch what unfolds. Unfortunately, by the time the market does bounce back, it may well be too late for many buyers who would have missed out on some genuinely good opportunities.

In a changing market, it is important to stay rational. For example, there have been several news articles on homes which have been heavily discounted (some by nearly $1 million apparently). One might interpret this as the market going into a total collapse. But a more likely reason behind such heavy discounting is that the property was seriously over-priced to begin with.

Ultimately, if you believe in Australia’s fundamentals, then the current property consolidation phase should be taken as a positive. Nobody likes a bubble that bursts. It is better that we have a pause now and robust growth in the future.

Oliver J. Stier is the Director of OH Property Group. He studied Quantitative Economics and Finance at Cambridge University (UK), University of Toronto (Canada) and Princeton University (USA). In addition to being a licensed real estate agent, Oliver is also a Chartered Financial Analyst (CFA). You can follow Oliver on Twitter at www.twitter.com/ohproperty. 

In this e-newsletter, the sales agency was introducing its free homefinder service (which is increasingly being offered by other sales agencies also). The agency claims to offer the services of their 2 full time home finders: "All they do is simply look for homes. To find that special property you are looking for."

I thought this was most interesting and worthy of a blog for two reasons:

1. The fact that many real estate franchises are now offering a buyer-dedicated service is a clear reflection of what we have been saying for a long time: that in Australia, the market is significantly biased towards sellers. There is obviously a strong consumer demand for a more equitable representation of buyers in a real estate transaction.
2. That these homefinder services can be provided FREE of charge to buyers is quite problematic because of inherent conflict of interest. Afterall, how can an agency (or any of its agents) claim to work in the best interest of the buyers if it is being remunerated by the sellers?

It is precisely to avoid such potential conflict of interest that the NSW Office of Fair Trading stipulates in Buyers Agent Rules of Conduct #11 that:

An agent must not accept an appointment to act, or continue to act, as an agent if doing so would place the agent’s interests in conflict with the client’s interests.

Furthermore, the NSW OFT Buyers Agent Rules of Conduct #22 also stipulates that:

An agent is to use his or her best efforts to obtain the best possible purchase price, without breaching standards of ethical conduct or engaging in conduct that is contrary to good agency practice.

Clearly an agent who works for a sales agency (even if it may be in a 'home finder' capacity) is not in a position to be able to obtain the best possible purchase price for the buyer if he/she derives his/her commission from the seller!

The peak real estate industry body in the state, the Real Estate Institute of NSW has also been cracking down on agents who are employed by sales agencies, yet simultaneously promote themselves as Buyers Agents. To avoid any confusion by the public, the REINSW uses the title Exclusive Buyers Agents to refer to agents who are genuinely representing buyers on an exclusive basis.

So... how can you make sure that you are working with a legitimate Buyers Agent? There are 3 easy tips to quickly figure this out for yourself. Read more in our earlier blog post "Buyers Agent - The Real Thing".

Oliver J. Stier is the Director of OH Property Group. He studied Quantitative Economics and Finance at Cambridge University (UK), University of Toronto (Canada) and Princeton University (USA). In addition to being a licensed real estate agent, Oliver is also a Chartered Financial Analyst (CFA).