Chat with us, powered by LiveChatDownsizers feeling the squeeze...

Downsizers feeling the squeeze...

A shift to the inner city often comes with unrealistic expectations of home values.

New areas take off, established suburbs go off the boil and once-coveted areas become decidedly middle market.

There's nothing new about such yo-yo developments in Australia or around the world but many people blindly cling to outdated notions when it comes to real estate values that torpedo their chances of succeeding, or simply treading water, in an uncertain property market.

Buying a house or an apartment is the biggest transaction most Australians ever make, yet gut instinct, rather than sound research, frequently rules the day.

If you watch almost any episode of such popular TV shows as Selling Houses Australia, the presenter is seen arguing with home owners trying to sell their property for an inflated price. It's not what they think that determines the value of their house but market forces.

The managing director of Wakelin Property Advisory, Monique Sasson Wakelin, says empty-nesters wanting to move from an outer suburb to the inner city can have unrealistic expectations due to a lack of research. Wakelin says land prices become far more expensive the closer you get to the city.

''That's what people don't take into account,'' she says. ''They're sitting on a large block in, say, Doncaster and they're going to get a small 50-foot [15-metre] by 122-foot [37-metre] property in Carlton, Fitzroy or Clifton Hill."

"But the two-bedroom cottage in Clifton Hill has $800,000, $900,000 or $1 million in front of it. They have sold their four-bedroom place for $800,000 or $900,000 and they freak out.''

Ms Wakelin advises these downsizers to rent out their existing house and to rent a place in the inner city for a year before buying.

''What you want is for the novelty factor to wear off and to see the place in all seasons. You can start trawling the auction circuit and get to know what properties are actually selling for.''

Going to auctions and tracking sale prices is a sure-fire way to gain an insight into a market. Buying price studies of suburbs from data companies is another.

You should also be aware there are mixed views on the growth outlook for inner-urban areas. Some say the inner-city boom has come and gone.

Swinburne University's head of housing studies, Dr Terry Burke, says that even in boom times, it's possible to make losses in the inner city.

''We recently completed research on the Melbourne market in the past 15 years,'' Dr Burke says.

''It was a period of continued price increases, where you would think hardly anybody would make losses, but we still found 8 per cent to 10 per cent of properties were sold at a loss in that period. Most of those were in the inner city.''

The chairwoman of Property Investment Professionals of Australia, Margaret Lomas, also thinks buyers need to shake off the attitude that the inner city is best.

''People have been following like sheep for too long,'' she says. ''The whole premise that properties within 10 kilometres of the CBD are blue chip and grow better than others has been totally smashed in the past 12 months."

"The empirical evidence shows that over the past 15 years, they have actually been the most lacklustre performers.''

Ms Lomas argues that outlying suburbs such as Melton, Werribee and Frankston now offer better yields than the inner city.

''The trouble with city properties is they have already grown, they've already had big booms. Sure, they will grow a bit more but they won't have a great amount of growth.''

Source: The Age Domain