Whilst the reported sales by auction was down slightly on the previous week, the reported market volume in dollars was up. The market looks to be going to complete this year on a much higher note than both the previous years.
There was an article written in the Herald Sun this morning about younger buyers having difficulty getting into the market place. It talked about Generation Y buyers being held out of the market place by Baby Boomers and Generation X home owners not selling as often as people did in the past. The study was done by Craig James of the Commonwealth Bank.
If we add this to the fact we have a population growth out stripping new building, more investors coming into the market place instead of putting their money into shares and only 15% of people with a mortgage have sold their properties since 2004, then it is no wonder property prices are sky rocketing.
Every time we talk about how difficult it is to purchase a property we come back to supply and demand. Well now for some good news. We have purchased over 50 properties in the last few months. There are properties out there to buy. You need to be very focused on what you are going after. When you find the right property, it needs to be analysed for both its positive and negative attributes and also what its true value is.
People come to us having been looking for years. Last month we bought for a client and this is what they had to say:
“We are absolutely delighted with our purchase which meets all our requirements and we could not have done it without you.
From beginning to end (all of 1 week), we found the JPP team to be extremely professional, efficient and most of all friendly and easy to communicate with. We will definitely be back.” C & A
It does not take two years to find a property; in fact the market will have moved so much after just 4 months that what you were searching for at the start will be vastly different to what you are currently looking at. Searching for property is something that anyone can do. But to do it effectively and efficiently is a real art.
If you have been trying to secure your first home, your dream home or an investment property without much success, why don’t you give us a call? There is no charge or obligation at our first meeting.
Ian James
Wednesday, November 25, 2009
Tuesday, November 17, 2009
Market Comment - Monday November 16th 2009
1375 properties were reported as sold last week by the REIV. Just over 650 of these sold at auction. The market is running hot and will most likely do so for at least another three to four weeks. Enquiry levels are still high and I don’t see any other trend for property price but up. We know that rental vacancies are still at an all time low, we know that property investors are re entering the market in droves and we know that even with a couple more rate rises; money is still cheap and easily accessible for residential purchasers.
So where will the market go next year. The historical averages going back to 1980 show us that according the Valuer General’s data, approximately a third of suburbs in Melbourne have had an average median price increase in excess of 10% per annum. In ‘layman’s terms’ property prices in Melbourne’s best performing suburbs have doubled every 7 years. The best 10 – 20 have doubled every six years.
We have had tremendous competition this year for property and it has pushed our median price up quite strongly. Anecdotally, most of that growth has occurred in the last 4 months. But median prices are simply a statistical analysis tool that can sometimes be very inaccurate. (We discussed this a couple of weeks ago). It is supply and demand that will be the true indications of where the market goes.
As good property continues to sell throughout 2010, prices will rise dramatically. I would estimate an annual rise greater than 10% next year. And this will be on average property as well as good properties. As usual, there will still be the bottom third of properties that will not sell well, but on the whole I believe we will see market indicators rising between 10% & 15% by September next year. How hard the last quarter of the year runs will be dependant on the level of stock at the time.
There may be a small amount of investors that go back to shares next year as the market begins its next cycle, but there will still be ample buyers to outweigh sellers throughout next year.
If you are considering property purchases within the next twelve months please feel free to call or make an appointment to drop in for a chat.
Ian James
So where will the market go next year. The historical averages going back to 1980 show us that according the Valuer General’s data, approximately a third of suburbs in Melbourne have had an average median price increase in excess of 10% per annum. In ‘layman’s terms’ property prices in Melbourne’s best performing suburbs have doubled every 7 years. The best 10 – 20 have doubled every six years.
We have had tremendous competition this year for property and it has pushed our median price up quite strongly. Anecdotally, most of that growth has occurred in the last 4 months. But median prices are simply a statistical analysis tool that can sometimes be very inaccurate. (We discussed this a couple of weeks ago). It is supply and demand that will be the true indications of where the market goes.
As good property continues to sell throughout 2010, prices will rise dramatically. I would estimate an annual rise greater than 10% next year. And this will be on average property as well as good properties. As usual, there will still be the bottom third of properties that will not sell well, but on the whole I believe we will see market indicators rising between 10% & 15% by September next year. How hard the last quarter of the year runs will be dependant on the level of stock at the time.
There may be a small amount of investors that go back to shares next year as the market begins its next cycle, but there will still be ample buyers to outweigh sellers throughout next year.
If you are considering property purchases within the next twelve months please feel free to call or make an appointment to drop in for a chat.
Ian James
Tuesday, November 10, 2009
Market Comment - Monday November 9th 2009
The Melbourne property market retained its resilience over the weekend. 81% clearance rate for auctions has been reported by the REIV with 600 private sales, giving us a reported total of over1000 properties sold last week.
For the third time in the last month I have seen allusions to property spruikers in the press. The Henry Kaye’s of this world that preyed on people many years ago. You do not have to pay thousands of dollars to attend seminars to make good money investing in direct property.
In simple terms, property makes the owner money in two ways; rental yield and capital growth. This is very similar to buying shares where you get a dividend if the company has performed well enough and you get capital growth if the share price goes up. As we have seen in the past 2 years this does not always happen with company shares but growth has occurred with residential property.
An average property investor needs about 26% deposit to get into a direct property investment. This is because the bank will lend 80% of the value of a property and the on-costs (stamp duty, solicitors fees, loan fees etc) add up to around 5.5% + 0.5% for contingencies. This does not have to be cash in the bank. In fact it is usually equity in their own home. Equity is the difference in the value of your home and what you currently owe the bank.
Let’s say you have a property worth $500,000 and you owe the bank $250,000. You have $250,000 worth of equity in your property. The bank will allow you to use up to 80% or $400,000. Therefore, you have access to $150,000 that the bank will loan you.
If we purchase a modern 2 bedroom flat in Elwood for $500,000 plus on costs of $30,000, the bank will lend us $400,000 against the actual flat and the other $130,000 against our existing home. We know the rental return on a modern flat in Elwood is about $20,000 p.a. The bank interest (interest only loan) will cost 31,800 ($530k x 6%), we have owners’ corp. fees, rates, minor maintenance and property management fees totalling about $5000. (1% of property value). This means we have approximately $36,800 outgoing and $20,000 in income. This is a difference of $16,800 each year. An average modern apartment in Elwood will have a depreciation tax deduction of approx $8,000 p.a. and then you will get a tax deduction on the last $8,800. An average wage earner will get about a 30% deduction. This means you will be out of pocket approximately $6200. And this is easily covered by the bank overdraft on your initial home. This is known as negative gearing of property. So to purchase and hold a $500,000 property it will cost you just over $6000 in the first year and less each year as the rent goes up.
If we look back over the last 30 years of valuer general data in Victoria, we can see the top third of suburbs have doubled in value about every seven years. If we look at the above example in seven years our property will be worth $1M and it will have cost us 7 x $6000 = $42,000 to hold assuming no rental increase in seven years. We then deduct what we owe to the bank ($530,000) and we are left with $1M - $530,000 - $42,000 = $428,000. You now have over $400,000 equity which you can use to borrow for another property as well as your growth of your own home (now worth $1M).
This is not "rocket science" nor is it "property spruiking." This is just simple smart investing and utilising unused equity in your own property.
We do not charge you $10,000 for this information, nor do sell you anything. Anyone interested in purchasing property in Melbourne can call us for a free no obligation meeting to discuss this or any other property matter.
Ian James
For the third time in the last month I have seen allusions to property spruikers in the press. The Henry Kaye’s of this world that preyed on people many years ago. You do not have to pay thousands of dollars to attend seminars to make good money investing in direct property.
In simple terms, property makes the owner money in two ways; rental yield and capital growth. This is very similar to buying shares where you get a dividend if the company has performed well enough and you get capital growth if the share price goes up. As we have seen in the past 2 years this does not always happen with company shares but growth has occurred with residential property.
An average property investor needs about 26% deposit to get into a direct property investment. This is because the bank will lend 80% of the value of a property and the on-costs (stamp duty, solicitors fees, loan fees etc) add up to around 5.5% + 0.5% for contingencies. This does not have to be cash in the bank. In fact it is usually equity in their own home. Equity is the difference in the value of your home and what you currently owe the bank.
Let’s say you have a property worth $500,000 and you owe the bank $250,000. You have $250,000 worth of equity in your property. The bank will allow you to use up to 80% or $400,000. Therefore, you have access to $150,000 that the bank will loan you.
If we purchase a modern 2 bedroom flat in Elwood for $500,000 plus on costs of $30,000, the bank will lend us $400,000 against the actual flat and the other $130,000 against our existing home. We know the rental return on a modern flat in Elwood is about $20,000 p.a. The bank interest (interest only loan) will cost 31,800 ($530k x 6%), we have owners’ corp. fees, rates, minor maintenance and property management fees totalling about $5000. (1% of property value). This means we have approximately $36,800 outgoing and $20,000 in income. This is a difference of $16,800 each year. An average modern apartment in Elwood will have a depreciation tax deduction of approx $8,000 p.a. and then you will get a tax deduction on the last $8,800. An average wage earner will get about a 30% deduction. This means you will be out of pocket approximately $6200. And this is easily covered by the bank overdraft on your initial home. This is known as negative gearing of property. So to purchase and hold a $500,000 property it will cost you just over $6000 in the first year and less each year as the rent goes up.
If we look back over the last 30 years of valuer general data in Victoria, we can see the top third of suburbs have doubled in value about every seven years. If we look at the above example in seven years our property will be worth $1M and it will have cost us 7 x $6000 = $42,000 to hold assuming no rental increase in seven years. We then deduct what we owe to the bank ($530,000) and we are left with $1M - $530,000 - $42,000 = $428,000. You now have over $400,000 equity which you can use to borrow for another property as well as your growth of your own home (now worth $1M).
This is not "rocket science" nor is it "property spruiking." This is just simple smart investing and utilising unused equity in your own property.
We do not charge you $10,000 for this information, nor do sell you anything. Anyone interested in purchasing property in Melbourne can call us for a free no obligation meeting to discuss this or any other property matter.
Ian James
Wednesday, November 4, 2009
Market Comment - Monday November 2nd 2009
Even the Spring carnival couldn’t slow the Melbourne property market. Although 100,000 people were at the races on Saturday and more will grace the lawns of Flemington tomorrow, we still saw 339 auctions clear at a rate exceeding 80% and there were over 700 private sales reported to the REIV last week.
There has been plenty of talk about the market fluctuations throughout 2008 and 2009. We have seen reported figures of dramatic changes to our median prices. First, in November last year clearance rates were down around 50% clearance rate and then throughout early 2009 we saw the clearance rates move through the 70% and by May had reached the 80% range and have stayed there ever since.
But what most people are not talking about was the number of private sales and the types of properties that were selling. If we look at the median price for Melbourne homes we can see that it has moved from $450k to $423k to $403k and back to $480k in the space of 12 months. Everyone needs to remember these are very broad based statistics.
If you have been living and breathing the property market in Melbourne, all of it, not just the top end, not just the South East suburbs or the 7km circle, but the whole market, it was easier to see what was happening, and it beared little or no resemblance to the statistical data.
When times were looking gloomy in mid 2008, when everyone thought we were running headlong into the worst recession of our lives, most people were trying to divest themselves of any ordinary or poor investments in order to build up their cash reserves. This meant that a lot of very average properties were put on the market and sold at “fire sale” prices. In a statistical model, when many of the lower value properties are put on the market and fewer higher value properties are, the median will move down sharply. This doesn’t really give a good indication of where the property market is.
Even during the depths of despair in 2008, some good property was still selling above the equivalent 2007 prices. And throughout 2009 we have seen median prices “surge” forward. This is the statistical anomaly we saw in 2008 in reverse. Property prices in Melbourne will continue their 30 year trends for the foreseeable future. The top third of suburbs have averaged a median growth in excess of 10% p.a. since 1980. This data is from the Valuer General.
Property prices in Melbourne will continue to rise, despite the winding back of the first home owners’ grants, despite interest rises and despite the global economic downturn. There simply is not enough supply to meet the demand.
If you are interested in purchasing a property in Melbourne please do not hesitate to call for a free no obligation meeting.
Ian James
There has been plenty of talk about the market fluctuations throughout 2008 and 2009. We have seen reported figures of dramatic changes to our median prices. First, in November last year clearance rates were down around 50% clearance rate and then throughout early 2009 we saw the clearance rates move through the 70% and by May had reached the 80% range and have stayed there ever since.
But what most people are not talking about was the number of private sales and the types of properties that were selling. If we look at the median price for Melbourne homes we can see that it has moved from $450k to $423k to $403k and back to $480k in the space of 12 months. Everyone needs to remember these are very broad based statistics.
If you have been living and breathing the property market in Melbourne, all of it, not just the top end, not just the South East suburbs or the 7km circle, but the whole market, it was easier to see what was happening, and it beared little or no resemblance to the statistical data.
When times were looking gloomy in mid 2008, when everyone thought we were running headlong into the worst recession of our lives, most people were trying to divest themselves of any ordinary or poor investments in order to build up their cash reserves. This meant that a lot of very average properties were put on the market and sold at “fire sale” prices. In a statistical model, when many of the lower value properties are put on the market and fewer higher value properties are, the median will move down sharply. This doesn’t really give a good indication of where the property market is.
Even during the depths of despair in 2008, some good property was still selling above the equivalent 2007 prices. And throughout 2009 we have seen median prices “surge” forward. This is the statistical anomaly we saw in 2008 in reverse. Property prices in Melbourne will continue their 30 year trends for the foreseeable future. The top third of suburbs have averaged a median growth in excess of 10% p.a. since 1980. This data is from the Valuer General.
Property prices in Melbourne will continue to rise, despite the winding back of the first home owners’ grants, despite interest rises and despite the global economic downturn. There simply is not enough supply to meet the demand.
If you are interested in purchasing a property in Melbourne please do not hesitate to call for a free no obligation meeting.
Ian James
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