Sydney property prices increase at boom pace Shares slump to 3 year lows, SWITCH? But whom do you trust?

The Sydney property market is fast approaching bubble territory.  This article addresses relative valuation of Sydney property and bank shares.  Should investors be switching asset classes given one asset is expensive and the other cheap?  This does raise the risk of selecting a real estate agent.  The article also covers off a new report by Property Savers that outlines nine steps to pick a good agent.

  • Sydney property yields 3% gross
  • Bank shares yield over 9% gross

The rate of growth of Sydney property means prices are now well into bubble territory. Over the last year, 3 bedroom homes have increased by 44.9%. Over the last 3 years, 3 bedroom homes have increased by a staggering 71.8%.

The yield on 3 bedroom houses is looking to breach the psychological barrier of 3% while the yield on units has now breached the 4% level. This implies that the Sydney property market offers the worst value in six years.  Further, with inflation looking low, it is unlikely that rental growth will be significant for over the next few years.

Some of you may be asking whether it’s time to sell your Sydney property holdings and switch into something else? Maybe shares?

The stock market has fallen significantly and offers true value.  For example, NAB is now offering a gross dividend yield of almost 9.5% according to Bloomberg. Most banking stocks now offer a gross yield of more than 8%pa.

The only issue is who to trust in the real estate industry?

Roy Morgan Research claims that only 9% of people think agents are trustworthy.  This is a real risk for the property owner who has spent a career building their property portfolio value.  Particularly, when looking to sell in a property bull market, the behaviour gets worse.

Much of this has to do with the business models offered by the licensee of the agency.  Some of you may have seen the recent Four Corners inquiry into 7-Eleven franchise model.  Allegation of slave labour and franchisees rorting the system and paying under the award wage have been thrown around.

The bottom line is that the operators of the stores pay away large margins to the franchise owners, leaving them with little margin to pay wages leading to this wage socially unacceptable scandal and poor behaviour.

Many real estate agents are under enormous pressure to make sales to cover their overheads after paying away a large percentage of their gross commission to licensees.

This also leads to a change in their behaviour and explains the poor public image that they have with most Australians.

Many agents do the following:

  • Give an unrealistic sales price to get sellers to sign with them
  • Once they are exclusive with them, they try every tactic to bring the selling expectations down
  • This brings more buyers into the equation but also brings the potential sales price down
  • This Increases the chance the agent will get paid
  • Many go to auction and do not even try to sell the property
  • Ultimately this makes the seller unhappy with the sales process and lowers the trust in real estate agents
  • This is a very common outcome when selling a house

However, there is a way to identify which agents are caught in this vicious cycle.  A new report by Property Savers outlines to consumers how to pick a real estate agent that will be aligned with the property sellers objectives.  That is – to achieve the highest price in the shortest time.

The free 24 page report outlines 9 steps to achieve this objective and also provides 5 tips to use when interviewing for an agent to sell yours or your clients property.  The report also explains why agents don’t return calls and why they are not trusted.

For a free copy of the report simply click on the following link.

Please let me know what you think of this recently published report.

DISCLAIMER: This post is not intended to be taken as financial advice of any kind. Please consult a licensed financial advisor or accountant for advice.