If anyone in the market place believes that First Home Owners will again be a market force because of stamp duty savings the Victorian State Government is offering, they are seriously deluding themselves.
Firstly, the stamp duty savings will count for anyone that has already purchased and settles after 1st July this year. Therefore there would have been a rush now! Average settlement is 60 days putting us past 1st July.
Secondly, the savings on a $565k (median house price in Melbourne) home will be just over $5700. As this is a reduction in Stamp Duty and not money that would be seen as a deposit, the banks will most likely not leverage this money which they did with the First Home Owners Grants. When $30,000 was being given to First Home Buyers, the banks looked at this as the equivalent of a deposit and lent accordingly. If you were borrowing 90% loan to value ratio, then with an extra $30k, if you could afford the repayments, the bank would lend you up to an extra $300k. This would not be the same with a reduction to a fee.
As far as waiting for further cuts through for the next 3 years in order to reach the full savings of nearly $14,500, the market will have most likely moved further than this. The best time for first home buyers, or anyone else for that matter, is as soon as they can reasonably afford to. Buying property is long term: 5 – 10 years.
As a first home buyer, if you cannot afford to purchase where you want to live, consider renting where you want to live and buy an investment property where the tenant will assist you to pay off the mortgage. Or, and this is the scary line for all you mums and dads, stay at home longer, and buy an investment property. Why don’t you join forces with your parents and buy a property together.
The sooner you get into the property market and the longer you are in the property market, the more money you will make.
If you are considering a purchase why don’t you drop in for a no obligation chat.
Regards
Ian James
Tuesday, May 10, 2011
Monday, May 9, 2011
Market Wrap - Monday 9th May 2011
Market Wrap
We’re currently in what I’d term an ‘opportunistic’ market. An agent today quoted another phrase which I thought summed it up well – an ‘honest market’
We witnessed five auctions this weekend with only one property selling ‘under the hammer’ All were quoted ‘conservatively - all had multiple bidders; however the only one to sell without negotiation was a property that reached its reserve within the quoted range. A percentage were successfully negotiated after sale, however it’s clear vendors still have their sights set too high and price quotes aren’t reflecting true vendor expectation.
Therefore the fight between buyer and seller continues, resulting in a perfect negotiators playing field. Despite sentiment being cautious, there were good numbers at all the auctions we attended this weekend and the majority had multiple bidders competing. The press is reporting bumper stock; however the figures don’t match the online data and are dubious at best. A suburb by suburb breakdown shows most of this stock is located in the outer suburban areas where demand is naturally low, or in newly developed high rise apartments which are un-appealing to owner occupiers. Quality listings will always attract competition, however in a flat market, we/re able to take advantage of some great opportunities.
23 Vunabere Ave Bentleigh is a classic 3 bedroom clinker brick house on 754 sqm of land. Quoting 790-870K the auction was fairly well attended with a lively atmosphere. Opening on a genuine bid of 650K – (a good way from the quoted range) – the agent ‘cut to the chase’ with a vendor bid of 770K. With four bidders competing, it was a fairly swift auction. At 855K bidding slowed, and the agent went inside for a ‘not so brief’ half time break. I can only postulate he was trying to persuade the vendor to put the property on the market, because after what seemed like a good 7 minutes, he eventually returned and gave no indication we were even close to reserve. The auction pushed up a little further before passing in at 892K. Failing to get any further movement from the buyer via negotiation, the vendor finally agreed to sell at the passed in price of 892K
44 Holloway St Ormond is a large corner block of land with an older style 2 bedroom property, and a vendor who was prepared to ‘meet the market’ The quoted range was 790-840K. Without even asking for an opening bid, the agent took the lead placing an immediate vendor bid of 790K. Asking for rises of 10K someone finally offered 800K. With seemingly no more interest the agent took his break to meet with the vendor. A few moments later he returned to announce the property ‘on market’. This revived things somewhat and going up in 1K moves, three other bidders decided to get involved. The price didn’t get far before the property sold under the hammer for 805K
36 Mortimore Bentleigh was another property that had been quoted conservatively but certainly didn’t have a reserve to match. A smart, modern, 5 bedroom family home, attracted a large crowd and 3 active bidders. Quoting 1.05-1.15Mil the auction opened on a vendor bid of 1.05Mil. When there was seemingly no movement from the crowd, the agent had to place another vendor bid of 1.1Mil before the action started. With healthy competition the price gradually pushed passed the quoted range. One buyer asked 3 times if the property was ‘on market’, however even though he had a pre-set reserve, the agent gave no indication market level was even close. At 1.23Mil the buyers dug in their heels and it passed in later to be negotiated for 1.3Mil
2B Evelyn St, Bentleigh is a small 2 bedroom unit the McKinnon. Quoted at 500-550K the agent struggled to get the ball rolling before finally placing a vendor bid of 500K. Only 1 bidder was prepared to show their hand by offering a bid of 510K. However with no competition the property was passed in to later be negotiated and sold for $535,000.
13 Maskell Street in Brighton – a luxury 4 bedroom town house quoting 1.7Mil + – presented the auctioneer with the unfortunate task of conducting proceedings next to a frequently traversed train line. Despite the noisy location, the auction was well attended with 3 bidders willing to take a role. Opening on a vendor bid of 1.7M the pace was painfully slow. The auctioneer had to place another vendor bid of 1.75Mil before the buyers got serious and the price struggled to 1.825Mil. Passing in at this level the property was later negotiated successfully to be sold at 1.875Mil
Catherine Cashmore
We’re currently in what I’d term an ‘opportunistic’ market. An agent today quoted another phrase which I thought summed it up well – an ‘honest market’
We witnessed five auctions this weekend with only one property selling ‘under the hammer’ All were quoted ‘conservatively - all had multiple bidders; however the only one to sell without negotiation was a property that reached its reserve within the quoted range. A percentage were successfully negotiated after sale, however it’s clear vendors still have their sights set too high and price quotes aren’t reflecting true vendor expectation.
Therefore the fight between buyer and seller continues, resulting in a perfect negotiators playing field. Despite sentiment being cautious, there were good numbers at all the auctions we attended this weekend and the majority had multiple bidders competing. The press is reporting bumper stock; however the figures don’t match the online data and are dubious at best. A suburb by suburb breakdown shows most of this stock is located in the outer suburban areas where demand is naturally low, or in newly developed high rise apartments which are un-appealing to owner occupiers. Quality listings will always attract competition, however in a flat market, we/re able to take advantage of some great opportunities.
23 Vunabere Ave Bentleigh is a classic 3 bedroom clinker brick house on 754 sqm of land. Quoting 790-870K the auction was fairly well attended with a lively atmosphere. Opening on a genuine bid of 650K – (a good way from the quoted range) – the agent ‘cut to the chase’ with a vendor bid of 770K. With four bidders competing, it was a fairly swift auction. At 855K bidding slowed, and the agent went inside for a ‘not so brief’ half time break. I can only postulate he was trying to persuade the vendor to put the property on the market, because after what seemed like a good 7 minutes, he eventually returned and gave no indication we were even close to reserve. The auction pushed up a little further before passing in at 892K. Failing to get any further movement from the buyer via negotiation, the vendor finally agreed to sell at the passed in price of 892K
44 Holloway St Ormond is a large corner block of land with an older style 2 bedroom property, and a vendor who was prepared to ‘meet the market’ The quoted range was 790-840K. Without even asking for an opening bid, the agent took the lead placing an immediate vendor bid of 790K. Asking for rises of 10K someone finally offered 800K. With seemingly no more interest the agent took his break to meet with the vendor. A few moments later he returned to announce the property ‘on market’. This revived things somewhat and going up in 1K moves, three other bidders decided to get involved. The price didn’t get far before the property sold under the hammer for 805K
36 Mortimore Bentleigh was another property that had been quoted conservatively but certainly didn’t have a reserve to match. A smart, modern, 5 bedroom family home, attracted a large crowd and 3 active bidders. Quoting 1.05-1.15Mil the auction opened on a vendor bid of 1.05Mil. When there was seemingly no movement from the crowd, the agent had to place another vendor bid of 1.1Mil before the action started. With healthy competition the price gradually pushed passed the quoted range. One buyer asked 3 times if the property was ‘on market’, however even though he had a pre-set reserve, the agent gave no indication market level was even close. At 1.23Mil the buyers dug in their heels and it passed in later to be negotiated for 1.3Mil
2B Evelyn St, Bentleigh is a small 2 bedroom unit the McKinnon. Quoted at 500-550K the agent struggled to get the ball rolling before finally placing a vendor bid of 500K. Only 1 bidder was prepared to show their hand by offering a bid of 510K. However with no competition the property was passed in to later be negotiated and sold for $535,000.
13 Maskell Street in Brighton – a luxury 4 bedroom town house quoting 1.7Mil + – presented the auctioneer with the unfortunate task of conducting proceedings next to a frequently traversed train line. Despite the noisy location, the auction was well attended with 3 bidders willing to take a role. Opening on a vendor bid of 1.7M the pace was painfully slow. The auctioneer had to place another vendor bid of 1.75Mil before the buyers got serious and the price struggled to 1.825Mil. Passing in at this level the property was later negotiated successfully to be sold at 1.875Mil
Catherine Cashmore
Tuesday, May 3, 2011
Market Comment - Tuesday May 3rd 2011
The market is changing again. The upper end over $2M is remaining skittish. Good properties will sell but the competition is much less than it has been for the past twelve months. It is truly at negotiators market at this level. This is not a market for the feint hearted. However, it is not a market to say “no” to everything the vendor offers. The trick with negotiation is to work out when to say “yes”
Negotiation in its purest form is RISK vs REWARD. Knowing when to make an offer and when to do nothing can mean the difference between securing the property for $1.95M and paying over $2M. It can also be the difference between securing the property and missing out.
Before making any offers at all, you need to set your game plan. This is more about setting goals and objectives in certain time frames rather than a dollar amount. We may decide that the asking price is well above what we are happy to pay, however we still like the property enough to purchase it. This means we need to take a long term, higher risk strategy, rather than continually increasing our offer in order to meet the expectations of the vendor. Unfortunately this can mean missing out to someone who offers only slightly more than you do.
Alternatively, you may be happy to pay a price that the vendor is happy with but the property is going to auction. You need to use a strategy that will secure the property quickly, rather than trying to save money.
You need to take into account the level of experience the selling agent has, the time the property has been on the market, the market itself and even the method of sale the vendor is using. Weighing all these factors will assist you to making good decisions.
Negotiation directly with experienced real estate agents is not for everyone, however a well thought out plan will give you a much better chance of success.
If you need help purchasing a property please feel free to contact us.
Ian James
Negotiation in its purest form is RISK vs REWARD. Knowing when to make an offer and when to do nothing can mean the difference between securing the property for $1.95M and paying over $2M. It can also be the difference between securing the property and missing out.
Before making any offers at all, you need to set your game plan. This is more about setting goals and objectives in certain time frames rather than a dollar amount. We may decide that the asking price is well above what we are happy to pay, however we still like the property enough to purchase it. This means we need to take a long term, higher risk strategy, rather than continually increasing our offer in order to meet the expectations of the vendor. Unfortunately this can mean missing out to someone who offers only slightly more than you do.
Alternatively, you may be happy to pay a price that the vendor is happy with but the property is going to auction. You need to use a strategy that will secure the property quickly, rather than trying to save money.
You need to take into account the level of experience the selling agent has, the time the property has been on the market, the market itself and even the method of sale the vendor is using. Weighing all these factors will assist you to making good decisions.
Negotiation directly with experienced real estate agents is not for everyone, however a well thought out plan will give you a much better chance of success.
If you need help purchasing a property please feel free to contact us.
Ian James
Monday, May 2, 2011
Market Wrap - Monday 2nd May 2011
Market Wrap
We have now segregated our market wrap from our market comments.
From now on each Monday morning you will see the statistics that are available and some of the auctions and properties we have attended over the weekend.
On Tuesday we will now write a more comprehensive market comment based on emerging trends and issues fundamental to buyers (and sellers) of real estate in Melbourne
SOLD under the hammer
4/13 Hawksburn Rd, South Yarra – a well located 2 bedroom apartment quoted at $430-$480K. This auction attracted a lot of interest with 5 bidders in all willing to show their hand. The agent didn’t have to work too hard to get the ball rolling - opening on a genuine bid of $430K, the bidding progressed confidently in 5K increments until it was announced on the market at $480K. At $522K - just as it seemed the steam had gone out of the bidding and all interest had been exhausted, the initial bidder who opened the auction at 430K came back into the game jumping to 525K. With a final squeeze of the remaining participants budget, the property sold under the hammer for $532,500.
At the other end of the market 9 Marlborough St, in Caulfield also attracted a good degree of interest. An un-renovated single fronted 3 bedroom Edwardian with plenty of room to add value, was a perfect acquisition for someone trying to get a ‘comparatively’ affordable foothold into this $1.350M median location. Opening on a vendor bid of $730K 3 bidders took the challenge – albeit tentatively – pushing upwards in increasingly small increments of 10K, then 5K, until it was announced on the market at a pre-arranged reserve of $810K. With 2 bidders still in the game, the house sold under the hammer for $827,500.
8/94 Lewisham Rd North in Prahran was perfect suited for first home buyers and investors alike. A one bedroom renovated apartment quoted at 350-380K attracted a crowd of around 50 onlookers, and surprisingly 5 bidders. Opening on a vendor bid of $350K, the price shifted slowly upwards in 5k increments which were gradually broken down until it was announced on the market at $384,000. It sold under the hammer for $401K – a good property gets a good result for both buyer and seller.
Passed in Vendor Bid
49 Jupiter St in Caulfield South is a 2 bedroom renovated art deco located in a street littered with million dollar plus sales. Judging by the size of the crowd attending, and the number streaming through the open prior to the auction, there seemed to be plenty of genuine interest. However after a relatively long pre-amble the agent failed to inspire anyone to raise a hand. Quoting $660-730K, the auction opened on a vendor bid of $660K and after much effort, ended up passing it in at this level.
8 Loller St, in Brighton also failed to attract a bid despite a large crowd attending. However the auctioneer valiantly worked hard for about 20 mins encouraging buyers to show their hand, before admitting defeat and passing the property in. Quoting 1.150,000 – 1,300,000, he opened on a vendor bid of $1.2 Mil. He followed this with another vendor bid of $1.250 before passing the property in.
Sold via negotiation
63 Grosvenor St, Balaclava is always a location that attracts a lot of attention. Considered one of the best streets in Balaclava the auction was extremely well attended. Despite the beautiful weather, the agent chose to conduct the auction inside which only heightened the stress for those preparing to bid. An unusual architect designed 3 bedroom townhouse stood this property out from the crowd and 3 bidders were subsequently inspired to raise a hand. After announcing the quoted range was 950K+ he opened on a vendor bid on this number. After a little effort he finally encouraged all interested parties to raise a hand. Going up in increments of 10K however obviously wasn’t fast enough, or close enough to the reserve for this auctioneer. After only two bids, he decided to place another vendor bid at 1Mil (even though it looked as if the bidding would get to this level on its own.) At 1.050 Mil – 100K above the price he quoted initially - and on not yet on the market - he went to have a chat to the vendor, later returning to proudly announce that the reserve had ‘plummeted!’ and we were now ‘very’ close to going on the market!! However another 15K obviously wasn’t good enough for the newly reduced reserve (!) and the property passed in at 1.065Mil to later be negotiated with the winning bidder at 1.1Mil.
Ian James and Catherine Cashmore
Monday, April 18, 2011
Market Comment - Monday April 18th 2011
It was great to read the excellent article from Chris Vedelago in Sunday’s Age. We have written many times since 2007 about clearance rates and what they actually mean. VERY LITTLE. If you have a voluntary system where agents are averse to letting the public know when they are not selling properties under the hammer, you can never expect to get an accurate picture of what is happening in the market place.
The majority of the properties we purchase at JPP are advertised for public auction. That is because about 75% of what we purchase is within about 25kms of the CBD. On an annual basis, JPP would purchase around 20% - 30% of the properties we buy, actually under the hammer during an auction. Of the seven properties we were going after last weekend, three were purchased Thursday & Friday, one passed in and was negotiated at auction on Saturday and two were purchased under the hammer. We were outbid on the other one. We purchased 2 from 7 under the hammer yet all were advertised as sold at auction in the papers.
The Herald Sun’s Saturday headline “Bubble Bursts”. To look at a very small segment in the quietest quarter of the year and say the bubble has burst is a beat up. There was 8.7% growth between the same quarter in 2010 and now. So over 12 months, and this is still a small time frame, we can see the market is still very resilient. Are we expecting to see growth at 20% this year, of course not! But the top third of suburbs in Melbourne will still perform at about 8% or so.
Investors are coming back into the market but will not spend money on rubbish. Smart investors are always buying when the market is flat. A property that is poorly presented, overpriced, or has a badly managed campaign may not only struggle to get a reasonable price, but may not sell at all. Most investors are looking for long term capital gain. This means they look for properties that have the best attributes that cannot be changed, such as location, good orientation and easy access to rail transport and public amenities. Investors will still pay fair money for these properties.
Population growth again was in the papers last week. And although the population growth is slowing, it is still substantially outperforming numbers of properties being built. Whilst the Supply continues to outweigh Demand, property prices will continue to rise. It is not a guess, nor is it a real estate agent talking, it is simple economics.
Is it easy to know exactly what the market will do? Of course not, if anyone knew the future, Powerball would be very boring!!
If you are considering a purchase of a property please feel free to give us a call or drop into one of our information nights
Ian James
The majority of the properties we purchase at JPP are advertised for public auction. That is because about 75% of what we purchase is within about 25kms of the CBD. On an annual basis, JPP would purchase around 20% - 30% of the properties we buy, actually under the hammer during an auction. Of the seven properties we were going after last weekend, three were purchased Thursday & Friday, one passed in and was negotiated at auction on Saturday and two were purchased under the hammer. We were outbid on the other one. We purchased 2 from 7 under the hammer yet all were advertised as sold at auction in the papers.
The Herald Sun’s Saturday headline “Bubble Bursts”. To look at a very small segment in the quietest quarter of the year and say the bubble has burst is a beat up. There was 8.7% growth between the same quarter in 2010 and now. So over 12 months, and this is still a small time frame, we can see the market is still very resilient. Are we expecting to see growth at 20% this year, of course not! But the top third of suburbs in Melbourne will still perform at about 8% or so.
Investors are coming back into the market but will not spend money on rubbish. Smart investors are always buying when the market is flat. A property that is poorly presented, overpriced, or has a badly managed campaign may not only struggle to get a reasonable price, but may not sell at all. Most investors are looking for long term capital gain. This means they look for properties that have the best attributes that cannot be changed, such as location, good orientation and easy access to rail transport and public amenities. Investors will still pay fair money for these properties.
Population growth again was in the papers last week. And although the population growth is slowing, it is still substantially outperforming numbers of properties being built. Whilst the Supply continues to outweigh Demand, property prices will continue to rise. It is not a guess, nor is it a real estate agent talking, it is simple economics.
Is it easy to know exactly what the market will do? Of course not, if anyone knew the future, Powerball would be very boring!!
If you are considering a purchase of a property please feel free to give us a call or drop into one of our information nights
Ian James
Monday, April 11, 2011
Market Comment - Monday April 11th 2011
It’s very hard to go a week without numerous reports hitting the headlines suggesting a possible market crash. Despite facts being stressed concerning our population surge and shortage of ‘useable’ housing, a minority find a public voice to beat the drum of impending disaster. No market or investment is risk free, which is why it’s important to protect and minimise risk through a carefully strategized plan prior to making any financial decisions. Weekly we witness buyers bidding at auctions with the heart rather than the head, often paying above market value to secure the house of their dreams. However the market we’re experiencing at present is a perfect ‘negotiators’ market’, and with a little patience and the right advice, its possibly the best market to step into before we start to see prices creep upwards once again as stock diminishes as it always does during the winter months.
In a balanced market, it’s important for vendors to keep expectations at a conservative level if they’re to be assured of a successful result. Agents are reporting good stock for the next month, however as it diminishes we’re likely to see competition push property prices higher (all be it at moderate levels), as our inner and middle ring suburbs suffer once again from low supply and continuing high demand.
However anyone thinking the market is about to crash would have done well to accompany us on the auctions this weekend. We attended 5 auctions – all had huge crowds, multiple bidders, and achieved above average prices which proves we’re a long way from the doom and gloom scenarios often spruiked by the bubble ‘naysayers’. Considering there has been a lot of stock on the market of late, it’s no surprise to see a plethora of second home buyer’s either upsizing or downsizing, as many sell before they purchase, and this is the main force behind
However although some of today’s results proved positive for a number of vendors, there is still plenty of stock on the market for buyers to take their pick - and with good negotiation skills - healthy opportunities are there to take advantage of.
3 Central park Rd, Malvern East – Is a beautiful 5 bedroom Edwardian house on a corner block of 925 sqm. However with a heritage overlay it was only ever likely to attract interest from home buyers rather than developers. A crowd of at least 150 people attended this auction. Quoted at 2.5 – 2.7 Mil and with such seemingly healthy interest, the auctioneer didn’t waste any time in asking for an opening bid right at the top of the range. He many have unwittingly priced out a few bidders who were hoping to start at a more conservative figure, and when no one offered to step forward, he placed a vendor bid of 2.7 Mil and invited jumps of 20K increments.
A good 7 mins later and almost looking as if it would pass in with no interest, two bidders stepped up to take the challenge. The price made its way to 2.82Mil before the action ceased. The pause to go inside and talk to the vendor’s failed to see it placed on the market despite the price being a good 100K above the quoted ‘interest’ level. The agent - giving the well-used excuse of what a hard decision it is for the owners to make a choice after 33 yrs of residing in the home, and assuring the crowd it wasn’t far from being placed ‘on market’ - enthusiasm diminished. The property passed in, only to be sold later via negotiation for 2.86 Mil. (Price undisclosed)
Just round the corner – 28 Wheatland Rd is a property that couldn’t quite match the prestige of Central Park Rd, but attracted an equally large attendance. This 3 bedrooms, 1 bathroom, un-renovated Edwardian, on 601 sqm of land, had a quote range of 1.4 – 1.5Mil. The opening bidder, who had taken time prior to the auction to question the auctioneer openly during his pre-amble on the risks of purchasing a property in case it was vandalised prior to settlement (!) - tried his luck at opening the event well below the quoted range at 1.1Mil. He was quickly outbid by the agent with a vendor bid of 1.35Mil, and from there on 3 bidders took the challenge pushing the price upwards until it was placed on the market – without pause to consult the vendor – at 1.45Mil The pace didn’t slow, and the house sold under the hammer for 1.490 Mil. (For once within the quoted range!)
29 Carlton St in McKinnon quoted at 1.020 to 1.120 Mil – is a beautifully renovated Californian Bungalow, on 460 sqm of land with 5 bedrooms, and therefore was always going to attract a large crowd of home buyers. Situated in the heartland of the McKinnon School zone – a very tightly held neighbourhood with little stock - the crowd easily bordered on 200. There were four buyer advocates in attendance, none of which were successful for very good reason. Opening on a genuine bid of 1.1Mil, this auction literally ‘flew’. In no time at all the property was placed on the market at 1.25Mil however that wasn’t the end. How any valuer will price this one is beyond me. Three buyer advocates didn’t even bother placing a bid as two buyers took the bit between their teeth to push the result way passed market value to a whopping result of 1.417 Mil. The highest price achieved so far this year in McKinnon.
Catherine Cashmore
Monday, April 4, 2011
Market Comment - Monday 4th April 2011
The market is beginning to tread water. Coming into Easter we still have a huge amount of property on the market which has been slowly selling when the vendor meets the market. The REIV has issued the clearance rate at 61% but this will almost certainly drop into the 50’s when the 117 auctions with no result are tracked down and added to the clearance percentage.
The market is fragmenting. Over $1.5M is beginning to soften. There are many properties still on the market that have failed to sell at auction and seemingly, no shortage of vendors still happy to try their luck. Whilst the best properties are still selling with multiple bidders, the properties that are overpriced, or simply presented at their best, are struggling to sell. This leaves more supply than demand and vendors in greater difficulty than they have been in to sell for the past 6 months.
The $400 - $1M market is by far the strongest. This is the investors’ market place of choice. This segment has multiple bidders going after multiple properties. This is the strongest performing segment over the past decade and should hold the least risk for investors going into the next decade.
We have seen the Australian Bureau of Statistics come out with the population statistics for the year ending June 2010. For all the naysayers who believe the housing market is about to fall into a screaming heap and drop 40 - 60 per cent, just have a look at the population increase in Melbourne and the HIA is saying the building of residential property is slowing. Melbourne’s population has increased 605,000 people since 2001. This is the fastest growth in the country, and faster growth than any other time in history.
With the supply of dwellings falling and the population increasing, rents will go up, property prices will go up, and our children will find it hard to purchase their first home, anywhere but on the fringes of the CBD. It will be up to our state and federal governments to assist these people, however it will be up to market forces to determine what a 2 bedroom apartment 5 kms from the CBD will be worth in 10 years’ time. In my opinion it will be easily over $1M
We can talk about the US housing crisis, where their unemployment has taken a beating, where their home loans are “non-recourse” and where they built a ridiculous amount of homes and then sold them to people who could not afford them, but none of this has occurred in Australia, specifically Melbourne.
This is not like a carbon tax, where you can like it or not. You can believe it or not, you can vote for it, or as in our case you can not! This is market forces on an essential element of our natural lives. Breathing, eating and then shelter. It does not matter whether you rent or wish to buy, you need a roof over your and your families head.
Property prices will fluctuate over short periods of time, however over the long term we will continue to see property prices grow at approximately 7%-10% throughout Melbourne. The top third of suburbs will be at 9% - 10%
If you are considering purchasing property please do not hesitate to call us or drop in for a chat.
Ian James
Director
JPP Buyer Advocates
Monday, March 28, 2011
Market Comment - Monday 28th March 2011
Did anyone expect anything different from this year? Clearance rates in the 60’s but sales still consistently over 1000 per week according to the REIV. These numbers are down about 15% from the unsustainable levels of 2010 but only about 8% down on 2009. The difficult question to answer is what will this do to price?
On many occasions turnover numbers give a good indication of how strong the market will grow. With sales numbers down on the last two years, I can still foresee growth, but down from around 10% to be closer to 8% for the top third performing suburbs in Melbourne. As less people purchase property and the population continues to grow, tremendous pressure will be put on tenants paying rent. Whilst rental returns growth has slowed over the past couple of years, (mainly due to the rapid rise in purchase prices, not a slowing of increased rents if interest rates rise), and growth slows marginally, landlords will still be looking for return on investment. Pressure on fewer property purchasers means higher pressure on rental growth.
There are several reasons why the purchasers have become a little skittish this year. We have had a year like no other that I can remember. Natural disasters have hit both Australia and our region; there has been pressure on the global economic climate caused by the lingering effects of the GFC throughout the European community regarding sovereign debt issues. The Middle East has had its fair share of turmoil already this year, with potentially more to come. And then there is our nation’s leaders: I don’t think anyone is doubting that the “Greens” are holding a considerable amount of power in Canberra these days, not to mention the “three amigos”; the three independents. All of these factors lead to uncertainty. Uncertainty will always affect our property market.
As far as the natural disasters are concerned, the amount of rebuilding needed both here and abroad, will actually stimulate our economy in the short to medium term. This will lead to labour shortages and wages growth. Western Australia is already starting a huge advertising campaign to bring in skilled migrants. If there is enough pressure in this area, the Reserve Bank may put interest rates up again. And if we increase our labour market by allowing immigration to increase, which we will have to do, we will have more trouble housing everyone.
The “price bubble” argument cannot be sustained whilst we have inordinate and necessary population growth. Even the biggest sceptics around would have to agree, that with our current and expected population growth, and our current levels of housing starts, there will continue to be a shortage of useable property for many years to come.
If you are considering a property purchase please feel free to call us for a chat.
Ian James
JPP Buyer Advocates
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