612 auctions delivered a 70% clearance rate with 575 properties selling privately last week. Another week of over 1000 reported sales to the REIV. Investors are still a strong influence on auction outcomes in the lower end of the market. Good investment properties between $400k and $600k still remain the strongest contests in the market due to their potential good value.

Everyone is comparing this year to last year and talking down the “spring” selling season. It hasn’t even started yet!! Has everyone forgotten the AFL final series? Traditionally the busiest weeks of spring are the third week of October, skipping Melbourne Cup weekend and then flowing through to about the second weekend in December.

This weeks 70% clearance rate compared to last year’s 83% is noteworthy for another reason. Total reported sales numbers were down 24% on this time last year, yet $turnover was down only 11%. We should see a relatively quiet 2 weeks whilst Collingwood makes its way to the AFL premiership, followed by a flurry of listings in the first two weeks of October. If stock levels don’t pick up then we must assume property prices will rise toward Christmas.

The Domain put out its “Property Review” over the weekend. And, as I have already had a number of enquiries about the worst performing apartments over the last five years, I have contacted The Age for a “please explain”. I do realise these figures are supplied by the REIV, but it would have been thoughtful to check at the very least the suburbs that you are going to use in your highlights page. I have not been through all the figures, but the summary on page 7 showing the least 5 year growth for apartments is totally inaccurate, if they are trying to show annualised growth.

For Toorak to have had an annualised growth over five years of -17.3% and to have a current value of $681,000, the median in 2005 must have been $1,760,433. Considering in 2004 it was $562,500, this would have represented a jump of 212.97%. I think somebody may have noticed this. Overall, all 10 of the suburbs listed with negative growth, have according to REIV published figures had a positive growth.

Statistics can be extremely useful and we use them all the time, but never take every published figure for granted. It could mean something completely different to what you thought. If you are interested in purchasing a property in Melbourne, please do not hesitate to give us a call for a chat.

Ian James

What a mixed week!! 72% clearance rate over the weekend and nearly 1000 sales for the week. The turnover exceeded $600M for the second week in a row. Sounds like people are moving on with their lives despite the AFL finals and the absolute farce our federal election process has become.

Whilst the election of the century progresses to see whether Julia Gillard will out bid Tony Abbot to form government for what will probably be less than 12 months, investors have begun buying strongly again. There is an old adage to remember when purchasing Real Estate: When you know you are going to lose, stop bidding!! You are only elevating the next comparable to the property you go after next. I wish Julia and Tony understood this concept.

According to RP Data, Victoria has around 40,000 dwellings on the market, with about 10,000 new each month. This would usually mean with the expected lift in stock levels in October, prospective purchasers may have an easier time than usually. But anecdotally, after speaking to many Melbourne Real Estate Agents within the 20km radius of the CBD, there is nowhere near enough stock coming onto the market to supply the usual influx of purchasers.

We know the oversupply of stock in the $750k – $1.5M during winter has rebalanced itself due to lack of new listings, and the inner city apartment market under $500k, a staple product for first time investors, has all but dried up. If we do not see a dramatic influx of new property, we are likely to see price increases of 3- 5% on 1 and 2 bedroom units, that are well located, during October and November.

The massive jump in March/April and the rebalancing in July/August have basically wiped each movement back to neutral and this means a further jump of 5% during the spring selling season would not be abnormal. As an unfortunate consequence we will probably see another interest rise from the RBA, probably October or November. I would be very surprised if we see a rise this week as unemployment figures and housing finance are not out until after the RBA meets.

If you are considering a property purchase please do not hesitate to give us a call or come in for a chat. There is no obligation and our first meeting is free.

Ian James

When there are over 1100 sales reported to the REIV, more than half of them auctions, then the clearance rate can be seen as one indicator of how the market is fairing. 71% of 687 auctions reported to the REIV cleared over the weekend. Volumes were above average at $366.23M and even private sales chimed in with over $300M worth of sales last week.

Over the weekend good properties attracted a lot of interest. 41 Silverdale Road Eaglemont sold under the hammer for $1.167M. Whilst the number represented very accurately what the property was genuinely worth, it was of some note that there were six bidders willing to be in the contest, 4 of them within the last 20k.

Good properties are still selling extremely well. Do not think a hung parliament, the “train wreck” US housing market or the ridiculous talk of a price bubble will stop switched on investors taking over the market place. Most investors are looking at the benefits of the Melbourne property market, not media headlines designed to sell newspapers.

The Melbourne property market has performed very well over the last fifty years, and if you look at all sensible indicators it should continue to do so. The talk at the coalface from most agents is the stock levels should have their natural increase come October and with a few more investors hitting the market we should have a good balance spring season.

Look for a rise in the top third of suburbs in Melbourne of about 5% over the next three months, followed by the Christmas hiatus and then a balance steady growth throughout next year. Factors to watch out for are unemployment rate and the immigration figures as well as housing starts and any increases to first home buyers schemes.

If you are interested in buying property think about attending one of our many seminars or call us for a no obligation meeting.

Ian James

There was a 75% clearance rate according to the REIV over the weekend. This was on very low stock levels due to the Federal Election. There were 550 private sales and 300 auctions last week. And over 10% of these auctions sold prior.

Neither vendors nor prospective purchasers should read anything special into the rise in clearance rate. Whilst it is nice to see the rise, it is on very low volume. We should see a rebound in volumes next week. This is not to indicate an upward trend, simply a balancing of numbers due to the Federal Election. The auction numbers are likely to begin there slow climb from winter levels into the spring frenzy. Apart from Grand Final day at the end of September and Melbourne Cup weekend, we should see turnover numbers breaching the 1000 per week mark.

Whilst the uncertainty of the Federal Election will probably concern the stock markets dramatically, the property market is usually far less volatile. Volumes may stay down a little as some investors may choose to see who will be running the country in a couple of weeks. However, neither party has really put any policies on the table that would affect the Melbourne residential property market that differently. Owner occupiers will certainly not be perturbed any more than the average Australian is.

So, if business runs as usual, then I would foresee the increase in stock coming into spring assisting prospective purchasers. As long as the stock levels do not dip, prices should remain relatively flat for the rest of the year. It would be unlikely to see any further drops from the highs of March and April. Whilst the market began to climb out of the doldrums in November last year, it picked up to freight train speed by mid-April; it has again slowed to a sustainable pace. If we average the growth over the past 12 months, we are probably in a sustainable range for long term growth.

There will be some angst whilst the Election is worked out and Victorians have another election coming up in November as well. This will also add to the stabilisation of price growth. The Reserve Bank is unlikely to keep interest rates on hold for too long, unless the banks raise their rates independently of the Federal Reserve, and this will also mean a more stabilised growth for property in Melbourne.

Rental yields will also factor into price movement in Melbourne. Melbourne has the lowest rental yields of any capital city in Australia according to RP Data. This is caused somewhat by the strong capital growth over the last 12months. During the stabilisation of price growth, yield will naturally creep up, making Melbourne residential property both a good long term growth prospect with a growing rental yield.

Overall, buying good property in Melbourne over the next five years will depend as much on property choice as it will on your negotiation skills to earn excellent growth and good yield with your investment. We are running several seminars over the next couple of months. We will be looking at market trends, property assessment and negotiation skills. We will also have experts in finance and accounting at different seminars.

If you are interested in attending one of these free seminars please register at our website or call us on 9523 1054

Ian James

With Clearance rates well and truly entrenched in the mid to high 60’s for the past several weeks, I think it is safe to say we can expect these levels to continue until the spring selling season begins in October. The REIV is reporting an increase of nearly 40% in turnover this year compared to this time last year.

In a robust economy, if we don’t see a slowdown in property price increases then inflation will run rampant. We have already seen increases over the past 12 months above 20% but if you look over 5 years the rate is less than 10%. When looking at property price increases or decreases for that matter, you must look over a reasonable time frame.

To assume to buy somewhere that has not done well in the past 6 months on the assumption it must do better over the next 6 months is fraught with danger. This is what many property “spruikers” will tell you. They sometimes show you how easy it is to buy in a place where others are not purchasing or where there are a lot of people selling because they paid far too much. Think the reasons through very carefully before committing to a strategy like this.

With the market the way it is now, negotiation becomes your key to short term capital gains. Properties can sell 10% below comparables or 10% above comparables depending on how well the deal is negotiated. Once you have established what the property is worth, your ability to negotiate with the agent will become the most important part of whether you will be ahead of the capital growth curve, or behind it.

In a sellers’ market, the selling agent will try to run to auction or wait until he has multiple offers and then try to play one prospective purchaser off against the other. In a balanced market he or she does not always have the luxury of waiting for multiple offers. When a selling agent is calling you on a Thursday before auction, to see whether you want to purchase the property prior to Saturday, you know he can’t have too much competition. If you do not buy prior to auction and the property passes in then you are in a very good position, as long as you know how to press the advantage. If, however there is another competitor that the agent didn’t even know about, then you may be in a much worse position than you would have been if you had started negotiations on Thursday. This is where a seasoned negotiator will save you tens of thousands of dollars.

Some selling agents have been practicing their craft for many decades and if this is only your tenth or fifteenth property you have negotiated, then you will probably be a distinct disadvantage. However, there are some ways to balance the playing field. I regularly speak at seminars and Home Buyers Expos about negotiating one on one with Real Estate Agents. We have three upcoming events across Melbourne that are free to attend. (See our home page at www.jpp.com.au )

Property purchasers should always be looked at as long term investment and as such the performance should be looked at in the same way. If you are interested in buying property please do not hesitate to come in for a chat or alternatively come to one of our upcoming seminars.

Ian James