Forget FHBs, Focus on Upgraders

Families looking to upgrade to a bigger house have been noticeably absent from the Sydney real estate market for much of this year but that might be about to change, experts predict.

Agents are starting to see more of these buyers at open houses and in some of the more affordable upgrader areas – where these properties sell for less than $1 million – they are very active. This is in contrast to more affluent suburbs, where interest has been much more subdued.

“The top end of the market is generally the one that suffers in an increasing market,” says Harry Charalambous, “as they are the last to go up in price. They are also the first to feel the pinch in a declining market, as they are the first properties to be hit, and usually with significant decreases.”

The chief executive of LJ Hooker Real Estate, Janusz Hooker, says the catalyst for upgraders re-entering the market has been the Reserve Bank’s interest rate cut. This recent interest rate cut has put more money in the pockets of existing first home owners. ”So at our open for inspections over the past couple of weeks since the RBA’s announcement, we’ve seen an increase in activity of about 10 per cent [in these buyers], which is pretty significant,” Janusz Hooker says.

The principal of Belle Property Mosman, Tim Foote, says upgrading is the ”number one opportunity” for buyers at the moment because selling and buying in the same flat market means ”the difference between what your property is worth and what you can buy is smaller”.

Upgraders tend to follow the pattern of first-home-buyer to mid-range property, then upgrading their mid-range to top end when considering their next property purchase. This is the reason that this group are being identified as being active on the market now. They can get a decent return on their existing property, and look for larger homes in similar areas for a relatively marginal increase in pricing. Previously these larger homes would have been priced outside their budget.

For those that are seeking to subdivide and renovate in the current market, looking at the needs that a home must meet for upgrading to be attractive is a key part of your investment strategy – ensuring that value is provided to these potential buyers. Room numbers and sizes, fittings and fixtures, proximity to key amenities are all considerations with regards to the upgrading market.

Before starting a development project understand who your buyer is – are you targeting a family, downsizer or an out of area buyer?  Along with the different buyers comes a new set of must haves. You must always provide value and meet the market to receive the best results.  Speak to local trusted agents about the demographic of your suburb and design your property to meet these buyers needs.