For many in the finance and property industries, Christmas 2008 will not be able to come quickly enough as it signals the end of one of the toughest years on record for the share market and an increasingly challenging property market.

Let’s take a minute to understand what’s happened and, more importantly, what’s likely to happen in the short and medium term.

Is it possible that this is simultaneously one of the scariest economic times of the past century and one of the best buying opportunities of the same period? 

The answer is almost unarguably yes. The current climate will in hindsight provide many people with the opportunity to make the greatest investments of their life.

Is it a good time to buy?

Now asking a real estate agent whether it’s a good time to buy is somewhat akin to asking your barber whether you need a haircut!  Having said that I think it’s possible to set aside any natural tendencies to view the property market favourably and highlight the outstanding opportunities that will come from this market.

Before we look at some of the specifics, let’s examine a few of the facts or at least things that we’re seeing very clearly, within the current market.

• The recent rate cut of another 1.00% means we’re currently experiencing the lowest interest rates in seven years, and rates are likely to fall further in the first half of 2009.
• Property prices are down in general between 10% and 20% and I believe could fall a further 5%. Those who are predicting a 40% decline are out to sell headlines rather than provide a realistic view on the likely asset revaluation.
• The recent rate cuts and doubling of the First Home Owners Scheme continue to incentivise First and Second-time Home Buyers to buy.
• Unemployment is the greatest issue at present in my opinion.  As yet we’re not finding it challenging to get the majority of our Clients set with competitive finance.  As long as you have a 10% deposit, good credit rating and stable employment the only difference from a year ago is that you can borrow money at a significantly cheaper than you could last year.
• Sydney continues to grow rapidly in population and development has slowed significantly, so the underlying shortage for property continues to grow, resulting in increasing rents. Eventually this will positively influence price growth.
• With prices down by 10% - 20%, interest rates falling by 2.5% - 3% and rents up by 10% - 15%, an investment in residential property now makes so much better financial sense than it did a year ago.
• Increasing rental yields and declining vacancy rates will remain attractive for investors. According to RP Data, average weekly rents across Sydney have climbed over 20% in the last two years.  Throughout 2009 rents will continue to rise and provide strong return for investors.  Sydney’s current gross rental yield is 5.7% with the vacancy rate still as a historical low of 1%.
• Expats are again entering the local market.  Many are returning to Australia, due to the unstable overseas markets, and are taking advantage of the low Aussie dollar (at its lowest since April 2003), and falling interest rates. Shopping with UK pounds or US dollars, they’re in a great position to snap up a premium property at a lower entry point.  This should increase demand for family homes in the $3 million-plus range and investment properties.
• The top end of the market, priced at above $15M, remains strong with high interest among overseas buyers.  Premium property in exclusive harbourside locations remains tightly held and in demand.

Best Buying Opportunities

For Buyers, there will continue to be a flight to quality, so don’t stray far from the top 50 suburbs of Sydney, most of which are located either on the Coastal belt or within 15 kilometres from the CBD.

Blocks of residential flat buildings.  By definition these are excluded from the owner occupier market and exclusively targeted by investors.  With many investors still sitting on the fence, I see blocks of 4-12 flats in prime locations providing outstanding buying and growth opportunities in 2009, as investors start to filter back into the market.

Due to margin calls, job losses and disappearing bonuses, residential property in areas that have historically been in high demand areas for financial executives will offer the best buying during the first half of 2009. 

These include Primary Residence areas such as:    

• Vaucluse
• Hunters Hill
• Longueville
• Northwood
• Northbridge
• Cremorne
• Mosman

Second home hotspots such as:   

• Avalon
• Whale Beach
• Palm Beach

These areas count amongst the best in the country, so now is the time to buy in before the market surges back, which I suspect it will in these areas by 2010.