Due diligence is like an insurance policy. Don’t rely solely on the agent’s information – you’re the one buying the property and you’ve got to assess its value and condition for yourself. After years in real estate, it still amazes me that less than 20 per cent of buyers get an expert’s opinion before buying the most expensive asset of their lives!

Now, don’t expect a perfect scorecard. Most properties have a few issues and this isn’t a reason to walk away. As long as you’re aware of its defects and can afford to fix them, it’s not a deal breaker. And don’t forget, you can also use them as a bargaining chip to lower the price.

You’ll need some help with your due diligence from a solicitor or conveyancer, a pest and building inspector and, possibly, a valuer. Source your support team before you start looking and get legal advice before signing anything whatsoever.

Below is a checklist that I strongly recommend you follow on every property transaction.

Due diligence checklist • Contract of sale – ask the agent for a copy and take it straight to your solicitor or conveyancer. Attempting to decipher a property contract without specialist knowledge will make your head spin. Get some expert advice.

• Building and pest inspections – The building report is designed to pick up everything that is ‘wrong’ with the property. On paper, defects can look scarier than they actually are so meet the inspector onsite to discuss any necessary repairs. Even if a property is new, a building inspection is still worth doing. It will pick up any shoddy workmanship, inappropriate materials or work done without council approval.

• Strata report (relevant only to apartments) – You can check the body corporate records yourself or get your solicitor to do it. In some states, the body corporate is called the owners’ corporation. Either way, the building’s strata management company will have these records. Check for adequacy of book-keeping; the amount of money in the sinking and administration funds; the historical frequency of special levies; the by-laws; any restrictions on usage of common property; any disputes between residents and any history of structural defects and repairs.

• What’s it worth? The toughest question of all and one you should answer for yourself, independent of the agent’s advice. The best thing to do is buy sales data from property data houses such as RP Data. For a small sum of money, you can buy a report showing all the sales in your suburb over the past year. Alternatively, a good buyer’s agent will provide you with this report at no cost as they have access to these property data houses. Firstly, look for properties with the same number of bedrooms, car spaces and similar-sized blocks of land. Then narrow your comparisons down to condition, location, aspect and views. For example, a property in a quiet suburban street is worth more than a similar property on a main road. A property with a north aspect is generally more valuable than one facing west. Adjust for differences and if you’re still not sure get a professional valuation.

Emotional appeal

As part of your due diligence process, make a checklist of all the features you love and the reasons why you want to buy the property. On the other side of the ledger, consider any downsides of the home, features you’re not so keen about and the money you’ll have to spend to make it just right. When you tally up all the pluses and minuses, you can get a feeling for the emotional appeal of the home. It’s the ‘how much do you want it?’ factor.

Many buyers add a margin onto their estimated value for the emotional appeal of a home. I’d suggest considering this before the auction, rather than in the heat of the moment as the hammer is about to fall. Go over your finances one more time and talk it over with your family – the last thing you want to experience is buyer’s remorse.

With another 0.25 per cent rise in interest rates for the first quarter, I suspect the market will remain strong over the next quarter as upgraders and investors vigorously pursue their next purchase, prior to home loan rates returning to normal levels around eight per cent. The borrowing capacity of most buyers is eroded every time interest rates rise and we’re likely to see an impact on demand in the market when we hit that eight per cent mark.

We’re in the early seven per cents now which means two or three more 0.25 per cent hikes in the second quarter may cause a slow down in demand for the final six months of the year. Even if this happens, prices may continue to rise due to the lack of supply. Time will tell.

If you drill down into the data, there is evidence that rising interest rates are affecting price growth in the more affordable Australian suburbs, but growth in the mid-upper priced suburbs continues strongly, thereby keeping the overall median prices high. In the year to end March 2010, Australia’s most expensive suburbs gained 16.6 per cent while the most affordable suburbs gained 7.8 per cent (still a very healthy growth rate!).

During the March quarter, every single capital city experienced growth in prices, although Sydney, Melbourne and Darwin were ahead of the field by a long shot. Check out the list below to see what happened to property prices in your city.

March Quarter Property Prices (houses and apartments)
• Darwin gained 6.9 per cent, median price $480,000
• Melbourne gained six per cent, median price $452,000
• Sydney gained 5.1 per cent, median price $500,000
• Canberra gained 3.7 per cent, median price $510,800
• Adelaide gained 2.7 per cent, median price $385,000
• Brisbane gained 2.4 per cent, median price $439,000
• Hobart gained 0.5 per cent, median price $323,750
• Perth gained 0.2 per cent, median price $480,000

Based on the March quarter numbers and plenty of anecdotal evidence of exceptional prices being achieved particularly at auction, I’d recommend that anyone thinking of selling this year should aim to do it in the second quarter, if they can. Selling conditions are truly prime right now and home loan rates should remain below eight per cent until Spring.

“This will be welcome news to mortgage holders who have been hit by six rate rises since late last year,” says Domain.com.au blogger and property writer Carolyn Boyd. “It will give everyone a bit of breathing space”.

Borrowers across the country have been hoping for the good news after being told by the Reserve Bank Governor, Glenn Stevens, that rates were near normal levels. Each 0.25 per cent interest rate rise adds another $50 to the monthly cost of an average mortgage. Australian mortgage holders are already paying about $300 more per month in repayments than they were in September last year.

Despite Australia facing a desperate shortage of properties, which has been putting pressure on prices, the heat appears to have come out of some of the larger metropolitan markets. The property market is still strong but there is not the frenzy that was around a few months ago. That perhaps shows the rate rises already handed out by the Reserve Bank are starting to bite.

With an unwavering commitment to provide exceptional service and deliver outstanding results, Paula Taylor and Adrian Reed are a dynamic duo. With close to ten years combined real estate experience, TaylorReed brings to the table a wealth of local market knowledge and property expertise.

Whatever your real estate needs, TaylorReed is the team you can trust. Built on integrity and honesty, TaylorReed focuses on the grassroots of the real estate industry – offering a personalised service. At TaylorReed we recognise that everyone’s needs differ and we focus on tailoring client specific solutions. Selling and buying is essentially about one thing – matching the right person with the right property. At TaylorReed we are about people and are truly excited at the prospect of helping them achieve their goals.

Servicing the Central Coast region of NSW, TaylorReed is based in Terrigal and welcomes the opportunity to assist in your residential real estate needs. Call us today or visit us at www.taylorreed.com.au

17 Panorama Terrace, Green Point – $445,000
http://www.taylorreed.com.au/1318680

12 Fiona Street, Point Clare – $325,000
http://www.taylorreed.com.au/1307498

1/10 Ena Street, Terrigal – $525,000
http://www.taylorreed.com.au/1310928

27 Britannia Street, Umina Beach – $333,000
http://www.taylorreed.com.au/1289152

34 Bayline Drive, Point Clare – $472,000
http://www.taylorreed.com.au/1286908

3 Cotswolds Close, Terrigal – $560,000
http://www.taylorreed.com.au/1299213

13 Victor Close, Green Point – $527,500
http://www.taylorreed.com.au/1288924

253A The Round Drive, Avoca Beach – Offers Over $900,000
http://www.taylorreed.com.au/1365228

510 The Scenic Road, Macmasters Beach – Offers Over $500,000
http://www.taylorreed.com.au/1360432

48 Panorama Terrace, Green Point – Offers Over $480,000
http://www.taylorreed.com.au/1356074

131C Oceanview Drive, Wamberal – Offers Over $850,000
http://www.taylorreed.com.au/1302988

Average property values have now recovered beyond their 2007 peaks, after which we experienced a relatively softer marketplace during the GFC throughout 2008/09. Things started firing up again in mid-2009 with record low interest rates and an improving Australian economy bringing major confidence back to the property market – and the share market as well.

We’re now heading into a year where property prices above $1 million should rise due to massive demand from upgrading families. Investors should be back, adding a major boost to the market under $1 million as first homebuyer numbers dwindle. The Federal Government’s original First Home Owners Grant of $7,000 remains in place, along with various stamp duty concessions provided by state governments, so first home buyers who missed out on the First Home Owners Boost last year should continue to feel confident about buying in 2010.

Across the country, the average time it takes to sell a house has dropped from around 50 days at this time last year to an excellent 31 days in late 2009 – the average length of a standard property campaign.

I concur with RP Data’s summation that we are currently experiencing “extremely healthy market conditions”. I expect to see a lot of activity in the property market in the first quarter of 2010 – at McGrath, we already have hundreds of auctions booked from mid-February onwards company wide.

If you’re thinking of buying or selling this year, spend some time at auctions next month to get a feel for the action ahead in your particular marketplace in 2010.

Be assured, should you need any advice or assistance with your future real estate needs, I am always at your service.

I would like to take this opportunity to wish you and your family a very Merry Christmas.

Thank you for your support throughout 2009 and I look forward to continuing our relationship in the future.

Should you need any advice or assistance with your future real estate needs, be assured I am always at your service.

I hope you have a safe, prosperous and very Happy New Year!

Warm Regards,
Adrian Reed

We are finding that current buyers want to secure good quality property while there still remains a small discount to 2009 prices within many price ranges, and before expected price increases in 2010.

Interest rates, while having had recent increases with several more to come, are still historically low. When you look at rates over the past 40 years you’ll find that seven to nine per cent has been the range people have become accustomed to, so the current 5.5 per cent is still attractive to buyers and investors alike.

There has been a severe shortage of property listings available for sale in the last 12 months and an overwhelming increase in buyers which is creating a wealth of competition in the market place and is resulting in prices being pushed back up. I suspect that as market confidence continues to grow, we’ll see a spike in listings in the New Year.

Market Observations heading into 2010:

- Market confidence is extremely high across almost all price brackets

- Stabilising economy and finance sector will create a price surge in 2010

- Spike in second and third home buyers over recent weeks, market no longer dominated by first home buyers in the bottom end, investors are back

- Record population growth in NSW will keep residential property prices growing well into the future

- First Home Owner Boost expires on 31 December. Interest rates are still low and the original $7,000 First Home Owner Grant remains in place along with stamp duty exemptions for properties under $500,000. No doubt that activity from first homebuyers will pull back somewhat by early 2010 but I think investors will pick up the slack

- The cash rate peaked at 7.25 per cent in March 2008 and is now currently at 3.75%. Hence, interest rates are still more than 50 per cent off their peak. The time to lock in attractive fixed rates has passed with the banks raising their fixed rates several times in recent months, independent of the RBA

- I expect rents to also increase next year by between five and 10 per cent due to the ongoing supply issues and this will keep yields strong