Whilst 65% is not the best result for vendors: it is not too shabby either. 1113 sales were reported to the REIV. Anytime selling agents can get over 1000 sales reported, it is a pretty good week.
I attended one auction on Saturday where the property was worth just over $1M. We had a good idea of what the vendor was hoping for and knew we were going to be a bit short. We would have needed there to be no other interested parties and we would have needed the vendor to be desperate to sell. Unfortunately it wasn’t to be. It passed into someone else above our level. We did not even get a chance to bid as it was passed into another prospective purchaser just above our limit.
The property sold for a couple of hundred thousand dollars more after the agent had negotiated with the prospective purchaser. This is a sensational result for the vendor and selling agent. In fact I have often recommended this agent if anyone asks me who to use to sell. With a buyer advocate the prospective purchaser would have probably saved about $100,000. This estimate is conservative.
Just because an agent tells you a property is worth $1M dollars, it does not make it so. If you are in the market for a property, you will most likely have to deal directly with a selling agent. If you have not negotiated several hundred properties in the last 12 months, you will be at a distinct disadvantage. Properties selling for about $500k are varying by up to $50,000. Over $1M a poor decision may cost you $100,000 or more. In the market we are now in, where many vendors still want very high numbers, and potential purchasers have a little more stock to choose from, negotiating one on one with selling agents is becoming increasingly the norm.
I cannot recommend strongly enough to get some type of professional advice before you embark on your next property purchase. A good, reputable Buyer Advocate will charge between 1% - 2% and the savings you can make during the negotiation usually far outweigh the cost of the service.
If you are interested in purchasing a property please give us a call. Our first meeting is obligation free
Ian James
Tuesday, June 29, 2010
Tuesday, June 22, 2010
Market Comment - Monday 21st June 2010
A 68% clearance rate was about as good a result as vendors could have expected. Anything more would show a market on fire, and the rate could easily have been much lower if the numbers of private sales hadn’t dropped so dramatically. There were only 449 private sales this week reported to the REIV and this is the lowest number since the start of the February reporting season.
With another 880 auctions scheduled for the last weekend of the Financial Year, I would expect to see a clearance rate in the mid 60%.
As we are nearing the end of the financial year, we should start to think about the next twelve months and what the property market is likely to do. If we move away from the usual “the market will drop 40%” or “property prices in Australia are double what they should be”, we can begin to look critically at what is likely to happen.
Firstly, if we make an assumption we will see about three 25 basis point interest rate rises by early next year. I believe two will come from the Reserve Bank and the equivalent of one from the banks raising their own margins. This will put the average first home buyer out of the established market and all but out of the “building new” one as well. The state government is still offering $13,000 on top of the federal $7000. This may keep some of our builders happy but not as many as we need. It is the property investors that will be the new winners in this.
We are still desperately short of the required number of dwellings we require to house our growing population. I know I have spoken about this many times, but it is still the underlying issue that will drive property prices up over the next five years. To keep the status quo we need to build about 3500 new dwellings in Melbourne each month. This will house the 2000 people (approx) per week that Melbourne’s population is growing by.
If we look at the 40,000 odd dwellings we are short, then if we increased our building by 30% (Yes!!! Build another 1000 dwellings per month) it will still take just under 4 years to catch up. We could only do this with State and Federal government intervention.
With property availability shrinking and more people coming into the city, it is very obvious where property prices have to go. And investors will be there to cash in. The small upward surge we have seen over the past 8 months will pale into insignificance over the next 5 years. Property prices are set to double over that time unless the State and Federal governments give massive incentives to new purchasers to build dwellings. Investors, who have now learnt that stock markets don’t only go up, they can also plummet to the depths which no property in Melbourne has ever seen, will be the big influence on available properties during this time.
We can expect to see a paradigm shift in property ownership; at least in Melbourne. Those that currently own property will dramatically increase there holdings and those that do not will struggle to ever enter the property market without “family” help. We will see shifts of 75% ownership (Australian average) moving steadily towards 25% property ownership (European average). This will not occur in the next five years but the irreversible trend will start unless the government steps in early. This will create the advent of longer leases, bringing its own issues to the Residential Tenancy Laws
We also need to look at the fastest growing sector of Superannuation. Self Managed Super Funds are changing the way we invest for retirement. There are now 422,000 SMSF in Australia and plenty of the trustees are moving money out of cash and into shares and property. With the recent advent of borrowings in super funds, we now see larger share portfolios and also many more property purchases.
In summary, we can assume property prices in Melbourne will go up at approximately 12% - 13% p.a. We can assume property ownership for those starting out will become far more difficult. We can assume longer leases will become far more prevalent and we should, at some stage, see new dwelling construction become a major election issue for both the State and Federal Governments.
If you are interested in getting into the property market, please contact us to arrange a no obligation meeting.
Ian James
With another 880 auctions scheduled for the last weekend of the Financial Year, I would expect to see a clearance rate in the mid 60%.
As we are nearing the end of the financial year, we should start to think about the next twelve months and what the property market is likely to do. If we move away from the usual “the market will drop 40%” or “property prices in Australia are double what they should be”, we can begin to look critically at what is likely to happen.
Firstly, if we make an assumption we will see about three 25 basis point interest rate rises by early next year. I believe two will come from the Reserve Bank and the equivalent of one from the banks raising their own margins. This will put the average first home buyer out of the established market and all but out of the “building new” one as well. The state government is still offering $13,000 on top of the federal $7000. This may keep some of our builders happy but not as many as we need. It is the property investors that will be the new winners in this.
We are still desperately short of the required number of dwellings we require to house our growing population. I know I have spoken about this many times, but it is still the underlying issue that will drive property prices up over the next five years. To keep the status quo we need to build about 3500 new dwellings in Melbourne each month. This will house the 2000 people (approx) per week that Melbourne’s population is growing by.
If we look at the 40,000 odd dwellings we are short, then if we increased our building by 30% (Yes!!! Build another 1000 dwellings per month) it will still take just under 4 years to catch up. We could only do this with State and Federal government intervention.
With property availability shrinking and more people coming into the city, it is very obvious where property prices have to go. And investors will be there to cash in. The small upward surge we have seen over the past 8 months will pale into insignificance over the next 5 years. Property prices are set to double over that time unless the State and Federal governments give massive incentives to new purchasers to build dwellings. Investors, who have now learnt that stock markets don’t only go up, they can also plummet to the depths which no property in Melbourne has ever seen, will be the big influence on available properties during this time.
We can expect to see a paradigm shift in property ownership; at least in Melbourne. Those that currently own property will dramatically increase there holdings and those that do not will struggle to ever enter the property market without “family” help. We will see shifts of 75% ownership (Australian average) moving steadily towards 25% property ownership (European average). This will not occur in the next five years but the irreversible trend will start unless the government steps in early. This will create the advent of longer leases, bringing its own issues to the Residential Tenancy Laws
We also need to look at the fastest growing sector of Superannuation. Self Managed Super Funds are changing the way we invest for retirement. There are now 422,000 SMSF in Australia and plenty of the trustees are moving money out of cash and into shares and property. With the recent advent of borrowings in super funds, we now see larger share portfolios and also many more property purchases.
In summary, we can assume property prices in Melbourne will go up at approximately 12% - 13% p.a. We can assume property ownership for those starting out will become far more difficult. We can assume longer leases will become far more prevalent and we should, at some stage, see new dwelling construction become a major election issue for both the State and Federal Governments.
If you are interested in getting into the property market, please contact us to arrange a no obligation meeting.
Ian James
Tuesday, June 15, 2010
Market Comment - Monday 14th June 2010
With the long weekend and the lack of auction numbers, the clearance reached 77% over the weekend. Sales for the week were also low at 525. These reports are made to the REIV every week. Next weekend has been labelled the biggest June weekend in history. There are reportedly over 1000 auctions due next weekend. If we assume the normal 7 -8 hundred private sales occur and the normal sales numbers this year have been around 1200 per week, then we can surmise a normal clearance rate for next weekend will be about 50%.
A 50% clearance rate will make newspaper headlines. “The bubble has burst” or ‘Property in Melbourne goes bust”. But in fact if a clearance rate comes in at around this number, then it would be normal. If it happens to come in around 60% or above, which is where I believe it will be, then it will be an enormous vote of confidence in the property market.
Craig Binnie wrote an excellent article on Saturday for the Herald Sun, showing how long it has taken for some suburbs in Melbourne to double in price. Every one of these suburbs makes sense from long term capital growth. Not one of these suburbs is an “Estate” suburb. Regular “hotspots” from property spruikers on TV and who advertise heavily through seminars will tell you Tarneit, Melton, Werribee, and other regional and fringe suburbs are the current hot spots. None of these areas are even remotely likely to double in value within the next seven years.
Most of these Suburbs that Craig Binnie has written about have the tried and tested attributes for good long term capital growth. Great infrastructure; that is good transport, good access to shopping, good access to freeways, thereby offering easy access to the CBD. They usually have good access to both good public and or private schools. And the areas are built out. Any suburb that has development options on open land is unlikely to show good capital growth until it is fully developed. This goes for open tract land in South East Queensland, or Docklands in Melbourne where there is plenty of room to build more towers. Areas such as Tarneit, Melton and Werribee: these areas will still be being developed for years to come.
When you hear property spruikers telling you that yield, depreciation and plenty of stock are the best attributes of buying property – think again. If something is easy and cheap and plentiful, do you really think this will appreciate faster than something that is limited in numbers, difficult to purchase because of the interest in it and takes plenty of time to find, assess and negotiate???? Which is likely to be worth more in 5 years; a bottle of Grange or a current bottle of red from a large commercial winery. When looking for property think about supply and demand! The more limited the supply and the greater the demand, the faster the capital growth.
There is no such thing as a free lunch. To buy good property takes time and expertise. Think about coming in and having a chat to one of our advocates before you make your next property purchase, whether it be to live in or as an investment; we can assist you. There is no obligation for our first meeting.
Ian James
A 50% clearance rate will make newspaper headlines. “The bubble has burst” or ‘Property in Melbourne goes bust”. But in fact if a clearance rate comes in at around this number, then it would be normal. If it happens to come in around 60% or above, which is where I believe it will be, then it will be an enormous vote of confidence in the property market.
Craig Binnie wrote an excellent article on Saturday for the Herald Sun, showing how long it has taken for some suburbs in Melbourne to double in price. Every one of these suburbs makes sense from long term capital growth. Not one of these suburbs is an “Estate” suburb. Regular “hotspots” from property spruikers on TV and who advertise heavily through seminars will tell you Tarneit, Melton, Werribee, and other regional and fringe suburbs are the current hot spots. None of these areas are even remotely likely to double in value within the next seven years.
Most of these Suburbs that Craig Binnie has written about have the tried and tested attributes for good long term capital growth. Great infrastructure; that is good transport, good access to shopping, good access to freeways, thereby offering easy access to the CBD. They usually have good access to both good public and or private schools. And the areas are built out. Any suburb that has development options on open land is unlikely to show good capital growth until it is fully developed. This goes for open tract land in South East Queensland, or Docklands in Melbourne where there is plenty of room to build more towers. Areas such as Tarneit, Melton and Werribee: these areas will still be being developed for years to come.
When you hear property spruikers telling you that yield, depreciation and plenty of stock are the best attributes of buying property – think again. If something is easy and cheap and plentiful, do you really think this will appreciate faster than something that is limited in numbers, difficult to purchase because of the interest in it and takes plenty of time to find, assess and negotiate???? Which is likely to be worth more in 5 years; a bottle of Grange or a current bottle of red from a large commercial winery. When looking for property think about supply and demand! The more limited the supply and the greater the demand, the faster the capital growth.
There is no such thing as a free lunch. To buy good property takes time and expertise. Think about coming in and having a chat to one of our advocates before you make your next property purchase, whether it be to live in or as an investment; we can assist you. There is no obligation for our first meeting.
Ian James
Monday, June 7, 2010
Market Comment - Monday 7th June 2010
70% clearance rates do not sound the death knell for property in Melbourne. There were over 1200 sales reported to the REIV last week with some huge results for properties under $1.2M. But if a property is poorly located or poorly marketed the selling agents will have their work cut out for them.
Whilst we can assume that property price growth will slow during the winter months, there are some very evident results that show that it is not a “buyers dream” market. Bentleigh and Ormond are still selling family homes well above $1.3M as evidenced by Somers Street last week and Queen Street this week. All our advocates saw plenty of people at opens over the weekend and whilst the long weekend next week will be quiet, the following is scheduled to be very busy.
We can also assume that the massive sales numbers of April should begin to taper off. If they do not, then we will see the clearance rate plummet into the low 60’s or below. If this occurs then we are back into a buyer’s advantage market. This is the time to get good advice. A good negotiator will save you thousands of dollars in any style of negotiation, whether the property is advertised for auction, expressions of interest or private sale. You need to also remember that it is not only the price that is negotiable.
In a buyers market it is crucial that you understand what the property you are bidding on is fundamentally worth. Just saying you want ten or twenty thousand off the asking price doesn’t mean you are getting a bargain. It might be worth fifty grand below asking price. At the same time if a property is well priced, you want to make sure you secure it before someone else works out it is already at a bargain price.
If you are in the market for a home to live in or that elusive investment property, give us a call for a chat. The first meeting is obligation free.
Ian James
Whilst we can assume that property price growth will slow during the winter months, there are some very evident results that show that it is not a “buyers dream” market. Bentleigh and Ormond are still selling family homes well above $1.3M as evidenced by Somers Street last week and Queen Street this week. All our advocates saw plenty of people at opens over the weekend and whilst the long weekend next week will be quiet, the following is scheduled to be very busy.
We can also assume that the massive sales numbers of April should begin to taper off. If they do not, then we will see the clearance rate plummet into the low 60’s or below. If this occurs then we are back into a buyer’s advantage market. This is the time to get good advice. A good negotiator will save you thousands of dollars in any style of negotiation, whether the property is advertised for auction, expressions of interest or private sale. You need to also remember that it is not only the price that is negotiable.
In a buyers market it is crucial that you understand what the property you are bidding on is fundamentally worth. Just saying you want ten or twenty thousand off the asking price doesn’t mean you are getting a bargain. It might be worth fifty grand below asking price. At the same time if a property is well priced, you want to make sure you secure it before someone else works out it is already at a bargain price.
If you are in the market for a home to live in or that elusive investment property, give us a call for a chat. The first meeting is obligation free.
Ian James
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