Weekly Melbourne Property Market News - Archive

June 28th

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

June 21st

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

June 14th

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

June 7th

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

May 31st

No surprise over the weekend. The Melbourne market continues to defy doom and gloom. Even with a record number of auctions, clearance rates remain above 70%. But the real numbers to look at are the total number of sales. Up over 1300 reported sales amongst unprecedented volumes of property on the market.

This categorically shows that the underlying factor of massive demand with a dramatic undersupply of total available properties will mean property prices in Melbourne will continue to steadily climb over the next five years. At the next state election in another four years I can foresee housing being a, if not “the” key election issue that will decide who will govern the state.

Whilst we may see the RBA leave rates on hold tomorrow due to consumer sentiment and other states property markets not fairing as well as Melbourne’s, it will not be long before the underlying pressure puts rates up again.

Investors who are looking for the safety of property need to watch out for property spruikers; Those “advocates” who will tell you “you can have your cake and eat it too”. I was reading an article last week where an advocate said there was no correlation between high rental returns and potential capital growth. What she forgot to mention is risk! If there were properties that have a positive cash flow, excellent capital growth and were “as safe as houses” then every one of these would instantly be bought by every major superannuation fund in the world. No non institutional investor would ever get a look in. The only way to get high rental yield and high capital growth is increase risk: i.e. Buy where capital growth is not usually found and hope for the best (regional areas, mining towns, outskirts of major capital cities etc)

Can some high rental return properties achieve good capital growth? Of course! Do some long shots win the Melbourne cup? Yes! But you are strongly betting against the odds. You may end up tying up your deposit funds in areas that “may” start to return capital growth in ten years, but more than likely will not. Does this mean you have lost money? No, it just means you have not made any.

Take the example of two different suburbs and their respective 30 year history of growth. Elwood has long had stable rental returns and good capital growth. If you purchased a property for $500k and received rent at $350 per week, even with no rental increase for 10 years, whilst you would have an average shortfall of $200 per week, if you sold the property, paid Capital Gains Tax, agents fees and the shortfall in rent each year etc you would pocket a little over $920,000.

Conversely, Melton has an average annual growth of around 7%. And whilst you could never get it, let’s look at a rental return of $700 per week, double that of Elwood (this is simply to show a positive cash flow, no matter how unlikely it is to get it). If you used the same purchase price of $500k, or bought 2 properties at $250k, you would be looking at about $10 per week positively geared (in other works you would not have to find any money each week). After 10 years if you sold the property and paid Capital Gains Tax, agent’s fees, the extra money you have received each week in rent, you would have around $407,000.

If you go for the high yield option, you will miss out on two things. Firstly, whilst you have not lost money, it is the opportunity cost that hurts; you will be $500,000 worse off. Secondly it is very difficult to grow your property portfolio, as your equity is growing very slowly. If you had the Elwood property, most banks would lend against this property within a couple of years. As the rental return grows, this would allow for a further property whilst costing you no more out of pocket. The exponential effects are astounding.

The argument that most “advocates” will use to go after high yield is the fact they can get you finance easier. They can buy these properties very easily: WHY!!! Because the smarter investors are not buying them!! If you can get high growth and afford to negative gear then you will be substantially better off in the long run.

If you are think about purchasing a property either for investment or to live in please feel free to contact our office. There is no obligation and the first meeting is free.

Ian James

May 24th

It doesn't take a rocket scientist to know there is a change in the market. It does however take an astute property analyst to work out how to take advantage of the situation. Most people are worried about the proverbial "bubble" and when will it burst. The stock market is bananas and property has to be next. This is absolutely wrong. Steven Keen was promoting the 40% decline in property prices after the stock market crash in 2008. Everyone is now saying the market will crash similar to the latest stock market "correction". The catalyst for each is totally different.

The stock market runs far more on confidence, politically intrigue, yields, tax credits, profit & loss statements and balance sheets. These are more international than national as well and are far more intangible than record of fact. The Melbourne property market is about population, number of properties and number of people per dwelling. In other words physical attributes.

Whilst May has been one of the busiest on record, the clearance rate has remained well above 70% and this, in 2007 and 2008 this would have seemed great, but for some commentators they are seeing this as part of a crash. There are enough people trying to purchase property at the moment to keep the number of sales well above 1000 per week. It doesn't really matter whether this is by auction or private sale. We will see total sales carry through at or above 1000 per week until about August when they may start to trend back up. However for the time being the buyers will have it a little easier than the vendors for a while.

For those of you who are trying to purchase without the help of a trained, professional buyer’s advocate, you need to understand how much “wriggle room” there is in a deal. This does not mean you throw down a number to the agent and walk out hoping he calls you in a few hours or days to accept our offer of 10% below market value. He probably won’t. Negotiation is a two edged sword. Whilst pass ins at auction are now becoming extremely prevalent, vendors still have relatively high expectations for their properties. If you think that you are the only person who is interested in a property because it passed in to you, then you will be wrong most of the time. Whilst you are in the “box seat” for a short period of time, it does not mean you have a guaranteed purchase at any price.

If the property has passed into you after an auction, most agents will offer up a reserve. This number is either acceptable or it is not. This is your "first right of a deal at the vendors reserve" This number may not necessarily be the absolute minimum number the vendor will accept, however refusing it can allow an agent to speak to other parties. Be very careful how you handle the initial offer / counter offer after the auction. This is usually where the tone of the negotiation is set.

If you are not 100% comfortable negotiating a deal with an agent, consider using a professional on your side. Just remember the other team, the vendor, is. If you are thinking of purchasing property this year please feel free to give us a call for a no obligation meeting to discuss how we can assist you.

Ian James

May 17th

The clearance rate has taken up residence in the 70% zone. The whole market is faltering. Economists and market analysts will soon be talking about 40% drops in the market place again. AND AGAIN THEY WOULD BE WRONG!!

There were over 1100 sales for the week and although this was down on the 1300+ last week, it is still a huge transaction week for May. There are still two more weeks in May to go and I would expect the clearance rate to remain below 80% but if the sales numbers continue at this rate, then the market is actually not cooling off.

Whilst we have seen a lessening of the ridiculous bidding at auctions seen throughout March and April, properties are still selling, and selling well. If a property is worth $1.2M then it is highly likely to sell around $1.2M. not $1.3M which occasionally happened earlier this year. For both Vendors and Buyers alike, the calibre of your agent will now become paramount.

More and more property will pass in. More properties will have one buyer not four. Selling agents will be left sorely wanting if they are not prepared to negotiate. Buyers however, need to understand the real value of the property they are going after. If they do and they are adept at negotiation then the number of sales will continue to set records this year.

If you are considering purchasing a property you should consider the advantages of using a buying agent. We have access to property data that members of the general public cannot access, such as private sale data (ie properties that were not auctioned). We can give a very accurate appraisal of the property you are considering. We are also professional negotiators. Most people will purchase maybe 2 or 3 properties in their entire lives, we are involved in hundreds every year.

Please feel free to call for a no obligation first meeting.

Ian James

May 10th

Some of the market commentators have seen a 78% clearance rate as a sign the market is faltering. There were over 1300 properties reported as sold to the REIV last week. This only happened 8 times last year and only 3 times in 2008. The last time there were 1300 sales in a week was before Easter.

It is true the very top end is becoming more difficult for vendors. Anything over about $2M is unlikely to be attracting large numbers of people bidding. There are usually one or two interested parties for each property and the selling agents who know their "stuff" are seeking to negotiate privately more and more.

Properties under $1M the still had exceptional clearance rates. The private treaty sales even higher! Whilst most of the outskirts of Melbourne in the new estates may take a hit due to interest rates rising, the inner city properties out to about 15 – 20km will continue to grow regardless of the interest rate increases. I have stated this before, and I will state it again: the only statistic that will change the level of demand for inner city dwellings will be the Unemployment Rate. This, and the job growth is the major factor that controls immigration and therefore by extension, population growth. This is the major factor causing dramatic increases in house prices.

It is more and more important to get good advice when purchasing property in Melbourne. Many vendors have dramatically unrealistic expectations for their properties. As a purchaser you must keep yourself informed as to the current trends in the market place.

Please call if we can be of any assistance to you buying a property in Melbourne.

Ian James

April 19th

With the expected fall in median house price issued by the REIV and reported by all the papers, we saw a lacklustre weekend. We know there was still a clearance rate of 84%, but of most of the auctions our advocates attended there was a decided lack of enthusiasm. Even some of the agents were a little unsure at the lack of bidding. Most people who read the papers tend to have a knee jerk reaction whenever there is a drop in the Median house price.

This one, however, was expected. With the scaling back of the First Home Owners Grant, there are less low end property purchasers. The interest rates also affect the lower end of the market first. This has the effect of lowering the median house price decisively. If we look at the top third of suburbs in Melbourne, however, there has been significant growth and there will be for many years to come.

As interest rates climb toward the average home owner paying about 8.5% the suburbs on the outer areas of Melbourne will slow significantly and we may see another drop in the 2nd quarter median as well. Conversely, I would think there will be a small growth in the inner 20k ring of suburbs over the same time frame. If you break down the figures that have been released, whilst the house price median dropped slightly, the unit median went up.

Investors don’t need to have a huge yield (rental return and depreciation and tax benefits) to make plenty of money in property. It is all about capital growth. And there is still plenty of growth to come in the top third of suburbs in Melbourne.

If you need any assistance in purchasing a property in Melbourne, please do not hesitate to give us a call.

Ian James

April 15th

I don’t need to tell anyone the market is hot at the moment. But what most media commentators report about and many people in the public believe, is that the market will slow down. Therefore it is better to wait until this happens and then purchase. Unfortunately, this is incredibly unlikely to occur.

The market is in a very imbalanced state. Whilst there are plenty of properties on the market there is a far greater number of people trying to purchase. This imbalance will be in effect until there is a paradigm shift in the thought process of local and state government. We simply need to be able to house more people. We do not have enough dwellings to house our growing population.

And the answer is not to stop immigration. If we stop immigration whilst we have low unemployment and job advertisements climbing as high as they are, then we will simply fall back into recession or worse. Our economy in both Australia and this State are in excellent shape to be able to repay the massive debt the federal government has racked up in the past three years.

The answer is not raising interest rates. If Glenn Stevens continues to raise interest rates then he is simply hurting the people we need most. We need small property developers building new dwellings. We need developers building more dwellings at sites like the Camberwell Railway Station. We need more medium to high density housing.

We cannot simply house one million people somewhere out near Melton. We cannot afford the infrastructure. We cannot shut off the influx of migrants to our city because we need them to fulfil job vacancies. But we need to alleviate the speed with which property prices are rising.

Justin Madden, our embattled planning minister, may not be perfect, but he is simply being targeted as a scapegoat. Someone needs to make the tough decisions and whilst I have not looked at everything he has done, nor do I fully understand all the way some of the decisions have been made, we need a planning minister who will make development happen.

We are not looking at property prices doubling from what they are now in 10 years. We are looking at these figures in around five to six years. For those of you who have children and think they will be moving out anytime soon: think again. If the average house in Melbourne is $1M then the rent an investor needs to make the investment worthwhile is about $40,000 p.a. or nearly $770 per week. If an investor doesn’t get this sort of return then we will find slums being created. An investor will protect his dollar return before the tenants needs.

Our housing price crisis is not just going to affect those who wish to purchase a property; it will be affecting those who need to rent as well. Whilst basic human instinct is to first get food, the second survival instinct is for shelter. People will spend money on food then everything they have left on shelter.

There are two ways to avert slums and ghettos being created in Melbourne. The first, which is not very palatable, is to keep raising interest rates. This will stifle business growth, raise unemployment and therefore trigger a massive reduction in immigration. It will also cost many of us our livelihoods and our futures. But it will create a balance between supply and demand in the housing market.

Alternatively, the state and federal governments can actively and “intelligently” promote greater density development within the current boundaries of the Melbourne Metropolitan area. We need to see red tape slashed, we need to see incentives for investors to purchase investment properties such as the First Home Owners Grant for investors. We need to see grants given to developers to assist them to get finance so they can build more developments. “Mum and Dad” investors need to be given incentives to develop the “quarter acre block” they have owned for thirty years, into four townhouses. They can retire into one and the other three will be available for our growing population.

Mr Brumby needs to act NOW! By the next election in four years it may be too late. We need to keep Melbourne as the world’s most liveable city. It will no be so within the decade. Very few people will be able to afford to live here.

Ian James
Director
JPP Buyer Advocates

Monday April 6th

It has been a few weeks since my last comment and for this I apologise. March was the busiest month on record since I have been a buyer’s advocate. Whilst we purchased a great many homes, we have also had record enquiry rates. It seems there are a great many people who have finally worked out buying a home is an enormous financial decision and without professional advice it is fraught with dangers.

March has also showed us that the market is not “out of control.” If you are selling and your selling agent says to you “I have no idea what your property is worth” then get another agent. However, if you are buying and the selling agent says “The property is worth what someone will pay” or “we will see what happens on auction day” but they are quoting substantially below what you eventually see the property selling for, this is still not under quoting.

Of the 50 plus properties we went after during March we had better than 60% success rate. Of the properties we missed only a few went well past our expected range. This is not to say our expected range was the same as the agent’s quote range. Our ranges are based on accurate comparable sales, our years of experience in buying properties and our attention to detail. A buying advocate is there to assist the buyer; a selling agent is there to assist the seller. It is the selling agents’ contractual obligation not to assist the buyer to save money.

Property prices are definitely going up in Melbourne. They will for at least the next 4 years. The prices will not go up at 7% – 10%pa. The rate will be much higher. I would foresee a rate of between 9% – 13%pa. on all good property, until at least the next state election. At this point I can see one of the major election issues will be that of housing. We are growing our population, which is absolutely necessary, at a rate far outstripping housing supply. This means it does not matter whether you wish to rent or buy, there are simply not enough houses to keep our average of 2.6 people per dwelling down.

The state government needs a mandate to increase the supply of housing. And hopefully not in a woefully inept way the federal government handled the stimulus packages. The insulation debacle, the school funding mess and now the federal government wants to wade into hospital funding!!!!! The state government needs to make it easier for the subdivision of blocks within the existing metropolitan boundaries. We cannot simply extend the boundaries of Melbourne. It is not as simple as kicking some cows of some land, subdividing and building houses. We cannot afford the infrastructure needed to house half a million people 30+km West of Melbourne.

We need to do what the current planning minister, Justin Madden, is trying to do. Whilst I do not like high rise developments such as the Camberwell Station proposal, I do believe we need to encourage subdivision of larger blocks into smaller townhouse allotments. Whilst most local councils do not want to see these changes and actively oppose them, I think the state government needs to step in and do something to alleviate this situation.

Over the next few years our land within 20 – 30kms of the CBD will dramatically increase in value. This will also cause angst among those who do not have any land and can no longer afford to purchase. Within 6 years I believe the median price in Melbourne will have easily exceeded $1M and the top third of suburbs will have medians above $1.5M. If you are able to, start thinking about how your children will be able to afford to purchase their first home. You may want to think about investing in a couple of properties now.

If you are in the market for a property please feel free to call us for a no obligation first meeting.

Ian James

Monday March 1st

We have survived our first "Super Saturday" for the year. Over $1 Billion dollars worth of property was reported to the REIV. And of course this is only a percentage of the actual volume that changed hands over the past week. If we look at past annual results from the Valuer General and the annual figures put out by reporting agencies like the REIV, we can assume the reported numbers make up maybe two thirds of the sales in Metropolitan Melbourne.

Whilst the clearance rate was at 86% this week, as always it is the total of auctions and private sales that really tell the story. Just short of 1500 reported sales for the week. This is a little short of the levels achieved in 2007 and 2008 but way up on 2009 for the same period. The biggest issue is that demand has dramatically risen. Whilst first home owners may be struggling to keep pace with the market, investors have come out of the woodwork.

When looking at capital growth averages, investors can put plenty of reasonably well leveraged funds into direct property investment and not have to do anything but buy well. Capital growth is so consistent, unlike the stock market, that many people are also looking at property with their own self managed superannuation funds.

Buyers should not panic that the "train has left the station". It hasn’t. In my opinion property is just starting on quite a long climb in value. Even if our state government got serious about building more homes today, it would still take quite a few years before any noticeable change between supply and demand would occur. When the government does become serious the most likely outcome for building more dwellings will be to dramatically increase density patterns within the current Melbourne metropolitan boundary. This will mean a sharp increase in land prices in Melbourne as well.

When media outlets are talking about the "lack of stock", this is a relative term. In actual fact the stock levels available for purchase have not dropped that much. The difficulty for most potential buyers is that the competition has increased dramatically. For the average buyer this is a dreadfully difficult situation. It creates distress and panic amongst buyers with little experience.

For the experienced purchaser having a little or a lot of inexperienced competition does really matter that much. If you can follow the market, if you are accurate with your estimates of value and you are exceptional with your negotiation experience, then being in front of two competitors or twenty two doesn't real change much.

If you are having difficulty purchasing a property in the current market, come in and have a chat. It is obligation free and maybe the biggest stress reliever you find.

Ian James

Monday February 22nd

It doesn't take a rocket scientist to work out everyone believes the property market is the place to invest. With an 85% clearance rate on 771 reported auctions and over 1200 properties sold last week, we can see there has been a slightly upward trend on last years results.

We have spoken about how long this will last and also about the "bubble" theory. This myth that 10% - 11% p.a. is not sustainable is just ridiculous. The better suburbs in Melbourne have been averaging this since 1980 according to the Valuer General data.

Even if we think about that fundamental "average" that everyone uses. The fact that "on average" properties will double in value every 7 - 10 years. This equates to between 7 & 10%. If this is true, then let’s assume 8.5% is the average for all property around the world. This means some countries will be higher and some lower. I am confident in saying Australia will probably be above average and therefore closer to 10%. If 10% is the average for Melbourne then there will be some areas above this point and some below. The top third of suburbs usually sits around the 11% - 12% mark.

If we assume this theory has merit, then all we have to do is choose properties that will perform in the top third of properties in Melbourne. This is again where we go back to historical data. We look and see what suburbs have performed well. We look at any changes to infrastructure and we look to the fundamentals that are relevant to all properties; such as proximity to cafes and shops, proximity to parks and gardens and train stations, access to road networks and major shopping centres etc.

People ask me every day: "When is the best time to buy property?" My response is always the same: "Yesterday". I will say this today; I will say this tomorrow, next week and next year. Property prices rarely drop dramatically, they tend just to stagnate occasionally between bursts of excellent capital growth.

For the investors, there are tremendous advantages of safely leveraging your money, reasonable rental yields and attractive tax deductions as well. Direct property investment is not at all difficult if you get good advice. Be extremely weary of anyone offering free advice. Any advocates that say they charge the vendor whilst helping you would be at the very least a massive conflict of interest and at worst illegal.

Hire an advocate whose only purpose is to assist purchasers buying property. Call us anytime to set up your no obligation first meeting. You will learn more about buying property in Melbourne from people that buy property in Melbourne every week.

Ian James

Monday February 8th

The autumn selling season is just starting to pick up pace with 832 properties reported as sold by the REIV last week. Volume is still very low and the first real test of the market will be February 20 in two weeks time. Anecdotally we have seen the huge surge of interest in property already. Every agent you talk to says they have huge numbers through open houses. The media is portraying property prices are “out of control” and that they are unsustainable. "Melbourne’s property market is on track to produce similar heat to last year". "When will the bubble burst?" Most tabloid newspapers are simply looking for "sound bytes."

The growth is sustainable!!!! And if your family does not purchase property soon it may be very difficult to get in the market over the next couple of decades.

Our Reserve Bank Governor, Glen Stevens has spoken often of the lack of dwellings in Australia, coupled with the increasing population growth as being one of the major factors of rising property prices in Australia. His deputy, Ric Battellino, gave an assessment of the Australian economy's future prospects on 25 November 2009. In doing so, he reviewed the much-discussed ratio of house prices to household income. He surmised that most articles are written about the different ratios of Australian and North American house price to income ratio. He spoke of the huge differences in non housing costs to people in North America, in particular health care and the much lower gearing of loans in Australia.

The amount of raw materials China will import from us over the next ten years will be greater than the total cumulative amounts they have taken in history. Our unemployment rates keep dropping. We are going to have to increase our population and whilst property investment remains at all time highs, nearly half of it is spend on refurbishment and alterations to existing dwellings.

We need to build more houses!!! We are not sustaining supply!!!

On the demand side, investors are not enamoured by the stock market at the moment. Over the last couple of years there seems to be one setback after another. The latest of course is the potential for a couple of European countries to be unable to pay their debts. This is driving investors to direct property investment in droves.

Buying a property, renting it out, refinancing it to utilise its equity seems all very simple, but it is not. You need to have a goal that makes sense. You need to have a good team, starting with a financial planner, accountant and mortgage broker. And of course you need the best advice you can get regarding the actual property and how to purchase it. You need to use a professional buying advocate to assist you with your purchase.

If you buy property without professional guidance in the most difficult property market in a decade then you might as well stick your money in the bank and let their fees and charges erode your savings.

Without professional advice you will spend more time looking at the wrong properties, ones you cannot afford or cannot secure. Without professional advice you will most likely over pay. And without professional advice you will be most unlikely to win the negotiation battle.

Have you noticed that people selling all hire professional real estate agents!!

If you want to secure property in the Melbourne property market this year come in and have a chat to one of our advocates. The first meeting is complimentary and obligation free.

Ian James

Monday February 1st

The REIV website tells us there were 960 sales in the week ending 31/1/2010. Of these 84 were sold at auction. This represents over $450 million worth of property.

Our 9 advocates were out and about on Saturday looking at over 30 open houses. In the range of $400k - $600k there would have been about 50+ people at each open. One agent we spoke to this morning said he had 90+ groups on Saturday and another 40+ groups on Sunday for a 2 bedroom unit in St Kilda East.

Enquiry levels on our website and phones have reached new records! Investors and owner occupiers alike!

It is fairly obvious that most potential property purchasers are heeding the media warning. “IF YOU DO NOT BUY SOON YOU WILL BE OUTPRICED BY THE MARKET.” We are not in a price bubble. Property prices are not about to spike and then do a “share market” 48% drop (All Ordinaries index dropped from 6492.4 to 3338.4 December 07 to March 09)

The Melbourne median house price is currently at $540,000. The media is generally saying that it will only be ten years before the median house price in Melbourne reaches $1 million. In my opinion we will be there by 2016 – 2017. (This would be an average of around 10% each year). Median units will probably be there by around 2020. At that price point if the banks keep their current lending criteria, the average person will need $255,000 as a deposit to be able to pay stamp duty and avoid lenders mortgage insurance.

Even with interest rate rises on the cards this year, starting with a probable rise tomorrow, don’t think that will affect the established property market. There are simply not enough dwellings to house our growing population.

We will have a better feel of price movement by the end of February, once we have seen three or four substantial weekends. But anecdotally, most agents are saying, whilst they have listings in the pipeline, there are not a huge amount ready to begin auction campaigns. If this is true, we will see property supply dwindle more than last year, whilst demand seems to have stepped up another notch.

If you are looking to secure property this year, I would strongly suggest at least talking to a Buyer Advocate. They are professional real estate agents who will assist you with property selection, assessment and negotiation. Be sure when talking to a Buyer Advocate to ask if they only BUY property.. & Not sell as well (Vendor Advocacy).

If you would like to make an obligation free appointment with us please give our office a call on 9523 1054.

Ian James

Monday January 18th

We have all read or heard about the property shortage. But the average people, including most media commentators believe that the issue is that not as many people want to sell their properties. This is only partially accurate. The true reason for the stock shortage is the fact we are not building enough dwellings.

Looking at the stats:
The Australian Bureau of Statistics (ABS), in their census in August 2006, showed that in Victoria there was an average of 2.6 people per dwelling. The ABS also showed that the population of Victoria was 4,932,422. This would mean we would need about 1,897,085 dwellings. There were 1,869,384. This was a shortage of 27,701 dwellings.
We can then look at the quarterly changes to June 2009 since the Census and see that on average there were 7659 building approvals and the population increased just over 25000 per quarter. If we add up the actual changes it equates to a population of 5,233,563 and assuming all approvals were complete then we would have 1,963,823 dwellings. For the population estimate we would need about 2,012,909 and this is approximately 52,804 dwellings short.

AND IT IS GETTING WORSE.

Even if we began building at double the current rate it would take at least 5 years to reach a break even point. And this is assuming population growth does not continue to increase. And this is incredibly unlikely as we do not have the available tradesmen to fulfil this.

If we add this to unprecedented low unemployment rates, meaning we really need to increase immigration, it means we can assume property prices in Victoria will sky rocket over at least the next 5 years. And interest rate hikes will have only a very small effect!

Everyone has to live somewhere! The shortage of property will affect every type and style of property on the market today. Everyone will be pushed to find a few extra dollars because of the perpetual competition on each and every property on the market.

If you are considering buying a property soon, you must seek assistance. Think about a buyer advocate. We can assist you with property selection, price and negotiation skills that have taken years to learn. Call and make an appointment to see one of our fully trained and qualified advocates. There is no charge for the first meeting nor is there any obligation to continue.

All statistics are from the Australian Bureau of Statistics

Ian James

Collapse Section

Monday December 14th

With the December market firing on all cylinders and still around 1000 auctions to go before Christmas, I think it is time to take stock of what has happened this year and also look into the crystal ball again to see where we are going next year.

Sales exceeding 1000 reported to the REIV almost every non holiday week since February Clearance rates in the 80% range almost all year. Properties under $500k have increased in price week in week out. Both first home owners and investors have flooded the market and are still ringing for help with one week to go before Christmas. The higher end of the market began recovering in May and by October we began to see record prices back into the over $2M mark.

Let’s look back to what we said this time last year:

Extract from Market comments 15th December 2008

‘All in all, properties that are in good locations that show a history of good capital growth, have an improving yield and are under $500,000 will be the hottest property for the first six months of next year. In the later half of the year, depending on the economic outlook and what consumer sentiment brings, properties between $500,000 and $1M will be the next bracket to move. Once the economy begins to recover, properties above $1M will rebound extremely well. If you are in the market for this type of property, spring 2009 may well be the last time to buy at reduced prices before a recovery in early 2010.

It has been a tumultuous year throughout the world. Next year will probably be easier to read than this one. Although some downsizing in nearly all industries is a fact that we will need to get used to, it will also be a time for opportunity. Don’t look back in 2010 and say “why didn’t I buy property last year”’

If we go back to October 2008

‘In my opinion, this can only lead to a growth in property prices. It will start in the sub $700k category and then move, slowly, into higher price brackets. Within the next 6 - 12 months, properties below $700 will begin to sell strongly. And, if we add to this the government incentive of doubling and / or tripling the First Home Owners Grant, we should see very good growth in this sector. Properties over $1.5M will always sell depending on whether the agent and vendor pitch to the correct price. Good property always sells well; average or poor properties sell at the right price and tend to fail when marketed above their correct price range.’

Even in the depths of despair during 2008 we could see that population increases, over 1000 reported sales most weeks and rents increasing steadily, were keeping the market buoyant. 2009 has shown us that quintessential elements of price movement are supply and demand. All other forces will cause a change to these fundamentals. The biggest single force is the unemployment rate and as this is slipping down again, I do not think we will see the 10%+ numbers that economists were throwing around in 2008. Interest rates tend to have a positive effect on the upward movement of price in the property market. Assuming the RBA knows what they are doing the more they raise interest rates, the better our economy is doing and the more people will pay for houses.

Overall, 2010 will bring us a fresh round of record prices. I think we will see at least 10% - 15% upward movement in the inner city and established suburbs around Melbourne. I think this is a conservative estimate as well. I think 2009 will be seen as an average growth year for Real estate in Melbourne over the coming decade. We may see a much lower rate of increase or even a slight decrease in the new “estate” suburbs as the First Home Owners Grants decrease.

Over the next decade, I believe we will see generational change in home ownership in this country. If you are an owner of property within the next decade, you and your family will always own; If you do not it will take generations to buy a family home and the deposit needed will take a lot more than a single wage.

I would like to thank all the readers of this column for their feedback and support throughout the year. I would like to wish you and your families a very happy festive season and we will be back early in the New Year.

Our office is closed on Tuesday 22nd December 2009 and re-opens on Monday 4th January 2010.

Ian James

Monday November 30th

We have seen the first weekend since May that the clearance rate has dipped under 80%. And it only dropped to 78%. It has taken the biggest auction weekend of the season to do it. There were over 1500 reported sales to the REIV last week. This equates to about 50% more than normal. AND STILL THERE WAS A 78% CLEARANCE RATE.

The market is not slowing down; in fact it is picking up pace. Agents are already starting to book auctions for February. This, at a time when there are still 2500 auctions gazetted to occur before the end of the year.

There is quite a bit happening in the world at the moment and most of these things will impact heavily on rising house prices. Joe Hockey is primed to take over the Liberal Party, Reserve Bank Governor, Glenn Stevens, is set to give all the mortgage holders in the country a Christmas gift they do not wan to see. Interest rates will probably rise by another 0.25% this month. On top of this all our utilities are about to get substantially more expensive thanks to Mr Rudd.

Don’t forget the Emissions Trading Scheme (ETS) is simply a way to increase our cost to purchase anything that relies on fossil fuels to a point that will make alternative fuels economically viable. In other words, raise the price of fossil fuels by extra taxes to such a point that people will switch to renewable energy because it will then be cheaper.

People are not selling houses as often as they once did. Immigration is also still increasing as is our natural population growth. Our kids are staying home longer than ever. More young urban professionals want to live in smaller dwellings closer to the cities however those wanting a family are looking for the “McMansion” out in the new estates. These areas will be the ones most impacted by rising interest rates and the lack of average capital growth.

All of these things will impact on price of property over the next five – fifteen years. In Europe they have a home ownership near 25% unlike Australia which has historically been around 75%. But this will change, and I think it will change this generation. Young professionals will start to look at long term leasing rather than renting. People will need generations to purchase homes. The average young family will simply be priced out of the market.

Over the next 5 – 10 years those who can afford to purchase property should do so, and buy as many investment properties as they can. This could be the start of the “haves” and the “have nots” When our kids need $200,000 as a deposit for their first flat, if the parents do not have equity to cover this, it will be almost impossible to save this money. On top of this rents will increase rapidly in line with ownership percentages. The lower the ownership percentage, the faster rental prices will rise.

All in all, the Melbourne property market is in for another boom era. As we were saying in our market comments early last year, during all the gloom and doom; Prices of Melbourne property will grow at about 10% per annum, doubling every seven years for the next five to ten years. The exception will be in the new estate areas where growth is usually limited to less than 7%, and considering these areas have been given the artificial stimulus with the increased First Home Owners Grant, the next 5 years will probably be less than 7%

If you require any assistance in purchasing property, please do not hesitate to call us for a free no obligation meeting.

Ian James

Monday November 23rd

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

Monday November 16th

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

Monday November 9th

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 over 1000 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

Monday November 2nd

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

Monday October 26th

What A Huge Week

The last week of October is renowned to be very busy & this year has been no different! Sales this week were high not only in Auctions of which the REIV reported 882, of which 723 were sold and there were also 741 private sales. This makes last week the biggest for the year.

Our advocates were involved this week in 7 Private sales through out the week, & 9 auctions of which we successfully purchased 4 prior to Saturday!.

Buying a property prior to auction will always give a good negotiator a much better chance to secure the property than going to auction. There are less emotional offers before auction and therefore a skilful negotiator may be able to purchase the property for a lower amount.

If you have let the property go to auction the emotion on the day is huge, your partner or friends all push you along & the auctioneer doesn’t help you think clearly when you are listening to his jibes such as “ What is another $5000.00 going to do to you”....... WELL what it can do is make you feel very ill that you have over spent. It can make you wonder if the property was really worth those extra $$$$ that I spent. You will be hoping that the bank is going to value the property at that price you paid, otherwise they may not loan you the money you thought they would. (OOPS didn't think of that one) This can & does happen; we have had calls from a couple of people who went to an auction with little or no experience and apparently got caught up in the heat of the day & were the successful bidders on the day, THEN after the auction has settled they have realised they have over paid & there finance will not cover what they have done!.

Unfortunately if you bid at auction you are bidding unconditionally & in the terms that the vendor wants, with the contract that has been on display prior to the auction.... If you are thinking of attending an auction do set a limit, & do be comfortable to walk away if you are unsuccessful...

Back to the current market. This is still ruled at the moment by the demand vs. supply, we saw many properties being sold well above the agents quotes while understanding this was not underquoting, this is caused by buyer demand. Each auction we attended had at least 4 bidders, moving the price well above the reserve..We do not see any change of this happening in the short term & even longer as supply is still very scarce.

The Real Estate Institute of Victoria released the September growth figures in the Herald Sun on Saturday for each Suburb. This is no shock as we have been saying for months that property in good location, with public transport nearby, shops & good schools close will perform well & continue to show excellent returns for capital growth.

The REIV has released its September Quarter Property Update which shows the median price of a house in Melbourne reached $480,000, an increase of 6.7 per cent since the June quarter. REIV CEO, Enzo Raimondo said that improved confidence in the Victorian economy combined with ongoing population increases has resulted in a new record quarterly median price. The improved confidence in the economy has revealed the underlying issue; a lack of supply, both for purchasers and renters. Unless there is a sustained increase in supply the REIV expects further pressure on prices.

REIV Melbourne Median Prices
REIV 1 August 2009
	Sep Qtr 2009	% chg Jun-09 to Sep-09	Jun Qtr 2008
House Median	$480,000	6.7%	$450,000
Unit/Apartment Median	$410,000	5.1%	$390,000

Reports like this one above have been seen in every paper, magazine & news show, we have seen this coming since very early February this year, Even with the interest rates going up, the supply issue will continue to cause the prices to increase.

The old question - When is the right time to buy property?? The correct answer is yesterday, however if you did not buy yesterday & you have the ability to do so, then do it today!!!

History shows property is a good investment, when bought well.

The market closer to the CBD is always the strongest, followed by the 15 - 25 klm radius... As the government opens up the land further afar, they will need to ensure all the infrastructure to be built & up & running & fully developed before buyers will see little capital growth in these areas, so when buying further afar look to it as a longer term plan!!

Sam James

Monday October 19th

There were just over 600 auctions at the weekend and 4 out 5 sold. On top of this 734 properties sold by private sale according to the REIV. With over 1000 auctions scheduled for next weekend agents all over Melbourne are busy shutting down as many sales as possible.

Whilst selling agents enjoy the street theatre of an auction and the publicity amongst the neighbours (their next potential clients), they also know that with a finite pool of purchasers it can sometimes be better to shut down a sale rather than only have one or two bidders.

For purchasers the equation is similar. If you can secure a property at a fair and reasonable price before auction you should; especially this week. If you are lucky and most potential purchasers go to other auctions then you might pick up a bargain. But if you are looking at good property there may be a huge amount of potential bidders at your auction. There are always risks as to which way to go.

The next 6 weeks will be a frantic lesson for the uninitiated in real estate. With our interest rates going up due to the unbelievable performance of our economy, the only way for property prices to move seems up. I would assume we will see a massive jump in prices during February and March next year and this will be on everyone’s mind between now and Christmas. For those who can buy this year, they will be able to both relax from the hunt and also bask in the upward tilt of the market.

If you are in the market for a property to live in or as an investment, give us a call for a no obligation appointment.

Ian James

Monday October 12th

After another week of 1250 sales The market may seem a little repetitive. The interest rate rise this week did absolutely nothing to dampen enthusiasm at auctions or negotiations. In fact, it has more than likely solidified the belief that the economy in Australia has turned the corner. More than slowing the property market down, I believe the next couple of interest rate hikes will push prices even higher.

The stock market is recovering but is still largely dependent on global events. This is still making the smaller, average investor a little nervous. There is still plenty of bad news coming from the US and Europe, albeit not as bad as last year. However, the property market, especially in Melbourne is being driven by very local factors; people entering our shores and a very large majority of these heading for Melbourne. There seems to be no change to these characteristics on the market in the foreseeable future.

Supply and demand are the leading factors driving price and this will continue for a very long time. Whilst the world economy will recover slowly and even the Australian economy will take time to get back to its peak, everyone needs somewhere to live. Whether renting or buying this means house and apartments will become much more valuable than they are now.

Over the next ten years or so we will begin to see density patterns change. Although most local councils tend to make life difficult for developers even doing simple dual occupancy sites, I can see this changing in the future. The cost of perpetually expanding Melbourne will simply be too much to bear on those 50+ kilometres from the CBD. This means we will see colossal increases in prices on apartments within the 10km radius and also on properties with over 600sqm of land up to about 30kms from the Melbourne CBD.

It will also mean that Geelong may see its largest price growth for a very long time. Some of the other larger regional centres may see some increased growth but it is unlikely to exceed that of the properties within 30km radius of the CBD.

Nobody can determine what will happen in the future, we can only look at historical trends as well as where we find ourselves now. The top third of suburbs in Melbourne have had median price movements of 10% per annum or more since 1980. I believe these will be higher over the next ten years.

But even if they remain at 10% then the average investor who has 20% equity in a current property or $100k cash deposit can have a property with equity (value of the property minus any loans) worth over $800k. For all you maths buffs out there, this is effectively over 20% per annum and about as safe as any investment can be. This assumption is made as a simple one off investment of one property, leasing it out at an average level and then having it valued with a rise in price of 10% per annum.

The above example is very simple; you can increase this exponentially when you begin to reinvest equity as soon as possible. If you wish to have a chat about any of the above please do not hesitate to call and make a no obligation appointment.

Ian James

Monday October 5th

Thank you to all those who came to see us at the Home buyers Show in Melbourne over the weekend. Finally after so many months of indecision, there were almost no industry experts predicting a fall in property prices over the next 12 months. In fact almost all of the talks I listened to were talking about a dramatic increase in property prices throughout Melbourne.

We saw the results for the last weeks sales go back to over 1200 sales for the week, with the clearance rate on nearly 500 auctions remaining over 80%. Over the next 9 to 10 weeks there will be a frenzy of activity. We should see plenty of new stock, but with vastly greater numbers of purchasers the key strategy to success will continue to be “Pay a fair price for a good property not a good price for a fair property”

Many of the experts talking over the weekend were assuming rates would rise but slowly. We are still coming out of a slowing economy and although Australia did substantially better than every other country in the world, our economic growth is still slow and will take time to get back to normal. Our trading partners are also dealing with their own economic issues. And although the property market may seem over heated the Reserve Bank has many other factors to think about before pushing rates up substantially. Any rate increase would be extremely detrimental to our unemployment rate. And whilst this has remained in an excellent position, it is still poised delicately on a razor’s edge. Any slow down in domestic spending will adversely affect unemployment.

To all those who attended my talk over the weekend on negotiation, my notes are available as a PDF. We are sending them out to all those that left their email address with us at the stand, but if you weren’t able to you can send us an email at chris@jpp.com.au and request the notes.

Ian James

Monday September 28th

Congratulations to the Geelong Football club and commiserations to both the St Kilda team and their fans. It was a fantastic game and I think both teams deserved to win. But only one can. The same goes for buying real estate. Each property can only be bought by one person; the rest can come back next week.

If you want to learn more about how to negotiate, see us at the Home Buyers Show at the Melbourne Convention and Exhibition Centre on Friday Saturday and Sunday this week. I am speaking each afternoon around 3.30 on the Home Buyers Stage.

Over the weekend there were 135 reported auctions. This was 5 times as many as last year with a better clearance rate. There were a total of 728 properties reportedly sold last week. This is the first drop under 1000 since the last long weekend in June.

We can expect to see at least the demand level remain high throughout the next two months. Do not expect the lowering of the first home owners grant to make any significant change to demand, except, maybe a slight drop in the outer “new purchasers’ estate market”. The key to the next two months in the Melbourne Real Estate Market will be supply.

Many of the agents I have spoken with have indicated, a healthy, albeit, not huge increase is expected. The vendors’ enquiries have increased but not in the normal huge numbers that are usually seen around this time of year.

We also saw the release of Australian Bureau of Statistics (ABS) population numbers for the quarter ending in March. Again Victoria had the largest population increase. Whilst Western Australia increased 3.1%, and this was the largest percentage increase, this equates to only about 69,000 people. Victoria, at 2.1% equates to an increase in excess of 110,000. And the unemployment figures reported in the Age this morning also give us an indication that we are unlikely even to reach 1,000,000 unemployed.

So where is the property market going?

• We have tremendous demand and limited supply.
• People in Victoria are feeling very secure in their employment.
• Interest rates are low and are going to remain there for a very long time. We may see a small increase next year if “big business” really takes off.
• People are flooding into Victoria at a greatly accelerated rate.
• Whilst the European and U.S. housing markets are floundering, those of the Asian communities are not. And this is where there is plenty of excess cash at the moment.

It is not hard to see why Melbourne property prices are going to keep increasing for a very long time.

We hope to see you at the Home Buyers Show over the weekend.

Ian James

Monday September 21st

After a huge weekend of auctions with the clearance rate remaining above 80%, there seems no end in sight to the upward migration of price in the Melbourne property market. The Age on Sunday reported that Residex have announced that Melbourne median house price has surpassed $500k. So we can assume the current flood of buyers are not necessarily all first home buyers.

Of the ten auctions our team attended on Saturday and two on Sunday all went within a few thousand dollars of our price recommendations. But there were no singularly outstanding results. To sum up the weekend results, all auctions went just about where we thought they would go. However there was one auction that stood out. And not because of the price it achieved.

We made a prior offer on a property well above the price quote. In fact it was nearly 20% above the lower end of the range. This offer was made more than a week prior to the auction on exactly the same terms and conditions we were allowed to bid at auction. The fact the offer was turned down was no shock to us but the surprise was the fact the agent didn’t change the price quote. When we questioned the Officer in effective control at the agency we were told they had no legal obligation to adjust the price quote as the reserve was within the quoted range ($380k - $420k). When asked at the auction after a bid of $430,000: “Are we on the market?” the response was “No!” The property was not announced on the market until $455,000 (slightly above our original offer).

During the auction when the auctioneer was trying to drum up another bid she remarked to a group of gentlemen: Have you driven all the way from Warrnambool not to even make a bid? (Or words to that effect). As I was leaving the auction one of those gentlemen made a remark to me and I stopped to talk to him. I asked if they had driven all the way from Warrnambool just to bid and they said yes. I asked them if they were told anything about the offer prior and they had no idea. Whilst the auctioneer thought this was a funny quip, I thought it simply one of the rudest and most despicable acts I had seen in Real Estate in a very long time.

And The Real Estate Industry wonders why it has such a low standing in the community as a whole. This is truly underquoting. This should be stamped out. Licensed, reputable agents should not stand up for the ridiculous antics of the few. If the REIV cannot stop its members doing this, then hopefully Consumer Affairs Victoria can. This goes way beyond getting the best deal for your vendor. There were plenty of potential purchasers that were going to bring the price up to high $400’s which is what it finally sold for. The comparable sales in the area showed the property would most likely go into the high$400’s – which it did. The agent had a written legally binding offer well in excess of their asking price that met every condition identical to that which we were allowed to bid on (in other words it was declined on price) more than a week out from the auction. If the agency can’t sell real estate without doing irreparable damage to our industry, then I think it is time they find a vocation they are more suited too. Real Estate Agents are one of the least trusted professions according to a stack of newspaper polls and it is operators like this that add to that standing.

On a lighter note: we may not have yet reached the highest point in the unemployment cycle and big business still has some consolidating to do so this does not make it an obvious choice for the reserve bank to raise interest rates anytime soon. Yet many people are feeling fairly confident about starting to spend and invest money again and there are many more spending it on property investment than before. There are a lot of people who are still a little "gun-shy" about jumping back into the stock market, and therefore direct property investment seems a good option. There are also many more "fee for service" financial planners recommending direct property as part of a balanced investment strategy. Previously many financial planners did not recommend direct property investments because they received no commission for doing so (and this was how they earned their living). Another factor that came up last week is population growth. Each year demographers say it is slowing down or give estimates that are wildly out of date within 12 months. Our population is growing and we have to house everyone. Supply is not keeping pace with demand; therefore we can assume this will also put upward pressure on property.

Next weekend being AFL Grand Final weekend, and the middle of the school holidays, we will probably see fewer new property listings. However, the following week is usually one of the largest weeks of the year for new listings. It will certainly give us an indication of how the spring season will shape up.

If you are interested in buying a property and want some professional advice, do not hesitate to give us a call for a free no obligation meeting.

Ian James

Monday September 14th

1328 properties sold last week. 674 auctions reported with an 83% clearance rate. This weekend there could be as many as 900 auctions. Whilst this spike may be caused by the AFL Grand Final, anybody thinking the market is going to slow down need only look at the figures. There is nowhere near enough stock to placate the demand.

Buying property is not as easy as putting up your hand at an auction. Although knowing how much to pay, as well as when to make an offer, is paramount in securing the property, there are many other things to check prior to "signing on the dotted line"

The vendors' statement is only part of the documentation that you will need to have checked by a solicitor. This document, commonly called a "section 32" as it involves section 32 of the Sale of Land Act. It summarises 8 key points about the property for sale and is the minimum piece of information that is required by law to be given to the prospective purchaser.

The main items in a vendor’s statement are:

• title details
• any restrictions including covenants and easements
• Planning and road access details
• Building approvals and owner building insurance
• Services
• Outgoings and Statutory charges
• Owners Corporation details
• Notices

Many solicitors will put proof of this summary in the form of certificates but they do not have to.

The second and sometimes more important document is the contract that, with the vendors statement, forms the Contract of Sale. Sometimes this will be a standard law institute or REIV contract. These both use very standard clauses that most solicitors think are adequate for the job.

The contract will have a place for both parties to sign, a particulars page specifying names, amounts, settlement dates, solicitors’ details, goods to pass with the property, terms, encumbrances and few other details.

However, some solicitors will present many special conditions. These can be simple, onerous to the prospective purchaser or ridiculously one sided in favour of the vendor. To not get these checked and get a "legal opinion" would be absolutely flirting with disaster. There have been clauses that have stated that if the purchaser has not paid the deposit within ten minutes of the fall of the hammer, the vendor has the right to sell the property anytime, to anyone up to settlement without compensating the purchaser. I don’t think I have ever been to an auction that we have signed the docs and paid the deposit within ten minutes of the fall of the hammer. Whilst the reason for the clause is simple, the winning purchaser must "immediately" sign the docs and pay the deposit, not wander off for a couple of hours and this is fair, the way the clause is written, it would be ludicrous for a purchaser to sign the document.

This is just one example and there are plenty. Most contracts are written to be so one sided in favour of the vendor that they should be deemed unconscionable. Unfortunately not enough prospective purchasers complain and therefore nothing is usually done.

This is just one very small part of purchasing a property. If you are purchasing yourself, make sure you have the docs checked by a solicitor or a licensed conveyancer.

Ian James

Monday September 7th

Melbourne’s property market keeps surging through week after week. Another 80%+ clearance rate after 567 Auctions reported to the REIV, with the usual 700 odd private sales as well.

After securing 4 from 6 last week, noting that all 4 successful purchases were prior to auction, we can see the last quarter of this year building in a similar fashion to the December quarter of 2007. The REIV reported a 12.8% rise in the median price of Melbourne property in that quarter. This was on the back of interest rate rises in both August and November which had the RBA rate 3.75 percentage points above where it is now.

We have low interest rates, we have solid demand due to population growth, and we have low unemployment and an outlook that looks like we will go back to a labour shortage not an unemployment problem. We do not have enough homes and those who own property are not in any rush to sell. Property prices in Melbourne have nowhere to go but up.

Looking for bargains in Melbourne does not mean looking for the cheapest purchase. The media simply look for cheap property not good long term investment. Carlton units are very affordable with a median of $225K but if we look at the Value General median movement of units between 2003 and last year, the average growth was negative. In 2003 the unit median for Carlton was $282,000 and last year was only $233,125. On average the property dropped about 3.5% pa. Even with the colossal growth we have seen this year in prices RP Data’s median of $225k (not the same data source as Valuer General) is down again. This is university student living areas. You will always get a very good yield but always very limited growth. If we look back to 1980 we can see there has been an average growth of about 6%pa. We target areas that have achieved 10% or higher or have had major infrastructure changes and therefore may increase ahead of historical values.

Don’t buy property because it is cheap. Make a plan, look at historical growth or a change in infrastructure that can bring about change to the historical values such as a freeway extension or investment in the area.

If you do not have time to do the research call someone that has already done it. We would be happy to sit down and have a chat without obligation.

Ian James

Monday August 31st

The number of properties on the market is rapidly increasing. But so is the number of buyers. Of the 7 auctions we were bidding at on Saturday only one passed in after genuine bidding. All these have sold at or above market expectation.

1 St George Grove Parkville was an extremely unusual property which was custom built in the 1930’s to have a tenantable unit downstairs and a residence for the owner upstairs. Its location was unique and the opportunities were varied as to what to do with the property. It could have been tenanted out to multiple tenants, turned into an executive residence or bought by an owner occupier. With few comparables in the area, the agent struggled to really put an accurate price on the property. Under competition the property sold for $1.320M which was a little over our estimate.

We have the highest recorded stock levels for this period since 2003, according to The Age newspaper yesterday. The REIV have reported there are 600 auctions scheduled for next weekend and then 775 the week after. Although we had an increase this week of 36% in the number of reported auctions to the REIV, the clearance rate still climbed 3 % to 85%. What happens over the next couple of weeks will certainly set the stage for the spring selling season due to start in 5 weeks.

The increase in stock will hopefully continue through October because the increase in potential purchasers is huge. If we analyse the current price increases vs comparable sales over the last three months, the numbers of people bidding at auction, the clearance rates, and most importantly the total number of private sales, we can see that without the continual stock increases through spring, prices will rise very sharply. There are more potential buyers than sellers and simplistic economics tells us this will relate to a price increase.

This may well be different in new estates where developers and builders are reaping huge rewards servicing the first home buyers. Once the grants taper off, we should see a relaxing of price in these new estates. If the interest rates do rise significantly early next year, this may also scare the first home buyers off a little.

With a slow down of first home buyers, we should also see the continuing resurrection of the property investor. A property in Reservoir over the weekend had eight people bidding for a very average house on excellent developable land. Most of these people were apparently investors. Rental returns are still very good, historic capital growths now look better than stock market returns over a long period of time and interest rates are still at historic lows.

All in all we are in for a sensational spring season. At this stage the only segment of the market place that may ease off is the brand new estates in about March next year. All the well serviced, established areas of Melbourne look set to continue with their price strengthening in the foreseeable future. Interest rates will have to jump three or four times (25 basis points each) before I think it will significantly affect the established market Just remember 2007 when the rates were 3% higher than now and the market prices were still increasing. And even during a Global Economic melt down our property prices in Melbourne simply levelled out.

If you are thinking about buying property this year please feel free to give us a call to make a no obligation appointment at our office.

Ian James

Monday August 24th

It has been a couple of weeks since my last market comment and not too much has changed in the market. The media is still worried about underquoting, there is still some talk in a couple of papers about the “property bubble” bursting yet the stock market is still going up very strongly.

Clearance rates are remaining over 80% even with numbers of auctions climbing and private sales are still strong; over 1200 sales of property in Melbourne last week. The talk from the agents is also quite upbeat about numbers of properties coming on the market in spring. But this will only have an effect on price if the demand slows and I doubt it will. If anything I think we will see an increase in demand and this will all but mitigate any increase in supply.

No matter whether agents underquote, or the government legislates to attempt to stop them; No matter whether a lot of property comes on the market or only a little does; the key to buying well starts with accurate property assessment.

If you want to buy a property in the current Melbourne market, spend the time going around to as many properties as you can. Take copious notes and remember as much about them as you can. You must note all their pros and cons. Then attend the auction and note the number of bidders and the final price. If you do this enough and gather enough data, you can begin to get an idea of what properties in the area are worth.

You need to take into account, land size, location relative to transport, shops, parks and gardens. You need to take into account age of the original house, style and size of the house. When the renovations were done, how much work still needs to be done to bring it up to spec.

Then you need to analyse how many people were bidding, when the property went on the market and how many bidders there were after it got to the reserve. Once you have done this consistently for about three months in all the areas you are looking, then you will start to get an idea of what the vendor will want regardless of the quote offered by the vendors agent.

It is no use spending your time preparing for an auction which you have no chance of succeeding at. Doing pest inspections, building inspections and legal checks only to find out the bidding is starting just above your limit for the property is no fun. It can also be quite expensive. If you cannot accurately appraise a property on your own, it does not matter how good a negotiator you are. You will not know whether you have done a good deal or not. This is the key to avoiding “Buyers Remorse”

If you do not have the time or the inclination to do all this research perhaps you should think about having a chat to a Buyer’s Advocate. Feel free to give us a call and set up a no obligation first meeting.

Ian James

Monday August 10th

The clearance rates, interest rates, stock levels, underquoting, Vendor Advocates, the list goes on and on putting difficulties in the way of prospective purchasers.

The Reserve Bank has decided to give an unprecedented “crystal ball” style thought on interest rates. They are assuming over the next couple of years to see the cash rate climb slowly but steadily by about 2%. This will match our slow and steady economical capital growth. Whilst this may well help the share market to recoup some of it’s losses over the last 18 months, it will push property prices to new heights. As our economy strengthens so will our property prices.

We have seen the latest results from the government regarding unemployment figures. I think it is now fairly well recognised that we are not going to reach double digit unemployment anytime soon.

And this leads us again to touch on underquoting! The market price is increasing rapidly. Figures out this week show us that any losses over the past 18 months have well and truly been surpassed and that prices are quickly climbing again.

The market is moving profoundly. What might be a foreseeable price at the start of a campaign may not be accurate 6 weeks later. If a large volume of similar property came onto the market all at once then the price the agent set six weeks before auction maybe too high. If all similar properties have sold well within a few weeks the price for a particular property may go up substantially.

Selling agents are there to do everything legally in their power to maximise the sale for the vendor. That’s who is paying them. The government will never be able to legislate anything that will force the selling agent into a position that assists the prospective purchaser to do a better deal. THIS WOULD FORCE THE SELLING AGENT TO BREAK THEIR CONTRACTURAL OBLIGATION TO THE VENDOR.

If you are a prospective purchaser you need professional advice in order to save yourself time and money.

THE FACTS ARE: Selling agents work for the vendor and professional buying agents work for the purchasers. Can anyone remember the last time you were told “Don’t take a solicitor to court to represent you – SAVE SOME MONEY – DO IT YOURSELF!!!!!” There's an old courthouse adage: A person who represents himself has a fool for a client. Nothing could be more accurate in purchasing Real Estate.

We do not waste time complaining about selling agents tactics. We do not waste our time reporting on specific property transactions, unless they set precedence. Our advocates only attend auctions when we have a client to represent. We do not worry about an agents’ quote, we make our own determinations because we are professional Buying agents. We always listen to what an agent has to say, and sometimes we have to translate this from “Agent’s Speak” to English for our client, but in the most part, Selling Agents do their job and Our Advocates do ours.

If you are considering purchasing property and don’t want to throw away money and effort. If you want to make a good long term purchase and feel good about the process come in and have a chat to JPP Buyer Advocates. We don’t sell any property, nor do we do any vendor advocacy (Selling property). All we do is look after people who are purchasing property. We are the experts. It is what we do!!!!

Give JPP Buyer Advocates a call and set up a no obligation appointment with one of our professional buyer advocates.

Ian James

Monday August 3rd

Two weeks ago we were asked to give a comment for the Neil Mitchell radio show. We were then asked about three properties. One sold prior to auction and with an undisclosed price. The other two sold on the weekend.

Manningtree Road: Sold $1.92
We estimated between $1.9M - $2M and would have refined this after property inspection.
2/156 Dean Street Moonee Ponds: Passed in VB $580K reserve $600k
We assumed this was worth mid $500’s maybe a little higher, but as the location was poor we assumed a good chance of a pass in.

Without even visiting the properties it is not difficult to know what is likely to occur.

The issues here are did the agents do the wrong thing. The answer is simple: They had no choice but to do exactly what they did.

Had Jellis Craig marketed Manningtree Road at $1.9M - $2.0M they would not have got anywhere near as many people to the auction. The bidding would not have been as strong. If the bidding had stopped the vendor would have sold at $1.48M (On the market).
How else could the agents have quoted this property? Should they have been telling people that $1.48M will buy it but we expect it to go to $1.9M?????????????.

If buyers genuinely want to be at the right auction at the right time then they should be hiring a buyers advocate. We would have told our clients, Dean Street is a very ordinary property due to its location and that its right price would be around mid to high $500's. We would have counselled to wait for the auction and hope it passes in.

Manningtree Road - We would have counselled any client to offer strongly - somewhere in high $1.8's on the Wednesday or Thursday last week. This may or may not have been accepted, but at least we would have forced Jellis Craig to adjust their quote to above our offer and hopefully, for our buyers’ sake, scared off some of the competition. Remember it is our job to work for the buyer!!

At the moment the media and the government, as well as a few agents are saying they wish to control how an agent deals with purchasers. There are already guidelines in place for this.

Would you suggest to someone to go to court without a solicitor on their side so they can save some money?????????????? Especially when they are going to be going up against a "Queens Counsel"

You will never be able to legislate that the vendor’s agent is to assist the purchaser in any way shape or form. They have a contractual duty to their vendor and the vendor is shelling out a considerable amount of money for the agents’ expertise. It's not feasible and it's not fair to the vendor.

This is an issue I believe very strongly about. In my opinion, selling agents are hired by vendors to assist them to get the best possible outcome for their property sale. A purchaser, who is going to make the biggest financial decision of their life, who doesn’t get independent professional advice, has absolutely no reason to blame anyone but themselves if they continually miss out on the good properties.

To get a loan, most people will ask a mortgage broker, their accountant, their financial planner or at least go to a bank branch and ask for some help. When a property is purchased most people will seek assistance from a solicitor for their conveyance. If the building they are buying is old many will spend money on a building inspection, but the quintessential piece of information and the most difficult questions of all: “What is this property worth and how will I secure it against all the competition” is left to asking the counsel for the seller to answer.

How can our government continue to stick its head in the sand? The REIV is a peak industry body that exists to help the well being of selling agents. The media seems to think if under-quoting becomes a legislative issue then it will be fixed. If you wish to purchase good property, and pay a good price in a reasonable time frame then hire a professional buyer’s agent (Buyers Advocate). They will make sure you know where all the available properties in your search area are, they will be able to appraise a property with a great degree of accuracy and also be able to professionally negotiate on your behalf. Be careful that your advocate is a licensed professional, who specializes in purchasing property and doesn’t work for any vendors and that they give you a professional report showing comparable sales and their reasons for recommending a price on a given property.

Come in and have a chat or give us a call. If you are thinking of buying property it will do no harm to talk to a professional buyer of property.

Ian James

Monday July 27th

Whilst another week goes by, another 1000+ properties were reported to the REIV. The auction clearance rate across the weekend remained at 86% on 383 reported auctions. The number of private sales this year to date has now exceeded both 2008 and 2007 year to date figures. In December and January we predicted a big year and we also predicted it would be without the huge auction numbers.

As we said last week, we need to talk about the “price bubble” and we will. But first, a quick note to finish off from last week about under quoting. Over the weekend, our advocates visited about thirty properties and three auctions. The variety of responses from the agents when asked “what’s it worth” was almost farcical. Some agents went to great lengths to explain they didn’t give out quotes anymore. Others explained that we needed to make our own determination based on the comparables given. And still others didn’t know what all the fuss was about and continued to underquote by about 20%.

This is the merry go round that won’t stop anytime soon. Agents have a fundamental duty to get the best possible price for their client, THE VENDOR. If the agent is not breaking the law he or she is required to do everything in their power to maximise the result for THE VENDOR. If the government legislates as it did about 6 years ago to fix the under quoting, it will probably take the same amount of time to “get around” these changes as it did last time. ONE DAY!!!!

The new authorities introduced an appraisal range and then retained a field for vendor’s amount which most of the time is “TBA” or to be advised. This allows agents to quote at their appraised numbers as they can make claim that the vendor will decide on a reserve when offers or an auction takes place.

I actually agree with this. It is always good to get some buyer feedback before making the final decision on a reserve. If agents are forced to set a reserve at the start of a sales campaign, the vendor will probably be asking themselves, “Will the agent work as hard after he has achieved this figure, Will he continue to strive for the best price or simply think he has done his job when they reach the reserve?”

Again, all this is a moot point if a purchaser simply hires someone to act on their behalf. The REIV would cease to be the butt of jokes from the media and its own members, the ACCC wouldn’t need to be worried about any potential purchasers being misinformed and CAV could amend its website and guidelines for potential purchasers, simply by recommending anyone representing themselves in a property negotiation should understand they are covered under “CAVEAT EMPTOR” (Buyer Beware) and if they wish to be on a level playing field with the vendor they should hire the services of a professional buyer advocate.

All this would render, underquoting, potential dummy bidding, some dubious tactics some agents use, and any other complaints that are floating around as moot.

PRICE BUBBLE

The “price bubble” assumes that property prices will drop at the same speed that they have risen. In other words the price growth will “BURST”. Whilst this may have some merit in the new estates where builders may be taking advantage of the very large First Home Owner Grants for those who are building, in the established areas closer to the CBD, I believe investors will take over as the First Home Owners diminish.

As the interest rates remain on a par with rental returns many people are simply buying their next home and not selling their existing one. Instead of selling your existing home, keep it, borrow the deposit for your new home from the equity of the first and then the tenant pays for your first mortgage and you pay for the second one. Most properties in good suburbs of Melbourne, where you have a mortgage of only 80% of the property value, will be revenue neutral thanks to the rental income.

We are about to see a fundamental change in property ownership over the next generation. I believe we will see people who have property, increase their holdings, and people who never have the opportunity to get into the market. We will begin to see long term leases on residential property. Some of these will become 10 and 15 years and will be traded similar to property ownership.

If interest rates rise again quickly, I believe it will be a long time before property ownership could be accessible to this many people. If you would like to get started on your next property purchase, please give us a call.

Ian James

Monday July 20th

I think everyone has got the idea that the property market in Melbourne is going “Gang Busters”. Another 86% clearance rate and another week of more than 1000+ sales within the metropolitan area have been reported to the REIV. There were two issues doing the rounds of the media over the last couple of days. Is this a property price bubble and should agents and vendors be fined for underquoting. We will deal with the “bubble” principle next week.

As far as underquoting is concerned: by law the agent cannot advertise a property for sale (or auction) with a number that is below the vendors WRITTEN RESERVE. Nor can the agent advertise below their own appraisal. Where the vendor does not give the agent a reserve (probably 90% of the time) then the agents’ appraisal is used as the basis of the quote price or range.

If we assume the vendor is paying the agent to get the best possible price then we can also assume the agent will market the property to the best of his or her ability within the limits of the law. This being the case, the government will have a very difficult time legislating anything different to the current rules.

If Graeme Samuels (ACCC) or Tony Robinson (Minister for Consumer Affairs) believe one advocate paid by one party should assist both Buyer and Vendor, then I have no doubt there next mission should be to overhaul our legal system. Why would each side need their own legal representative? “I don’t need a lawyer; if I don’t understand the law; I’ll just ask the other sides’ Queens Counsel to help me out”

When one party is paying for advice and counsel, why should the other side of the contest expect any assistance whatsoever? We are talking about hundreds of thousands of dollars. A good selling agent can make the difference in getting a good sale, not selling or getting a record price. Conversely, a Buyer’s Agent can make the same difference for the purchaser.

Any potential purchasers looking to the REIV to solve the dilemmas of unhappy potential purchasers should seek other advice. Enzo Raimondo’s comment (Herald Sun July 20 2009 page 2) about being the fault of a few Buyer Advocates must have been taken out of context. Nobody could possibly be that stupid. The REIV are the Estate Agent’s peak industry body and to think there CEO would disparage its own members would be thoughtless. Mr Raimondo made himself clear over the weekend when he was quoted in the Herald Sun, “Consumer Affairs Victoria needed to take action against agents who were breaking the law.” The REIV exists to assist the Real Estate Agents not do the job of Consumer Affairs.

Purchasers seem to be complaining that they are wasting huge sums of time, money and effort. And this is specifically the selling agents fault. There is a simple solution: Hire a Buyer Advocate!!

A reputable buyer’s advocate will be a licensed estate agent. You can check this at the Business licensing authority website: justice.vic.gov.au A good Buyer Advocate will not sell any property. They will not assist any vendors. They will not do any Vendor Advocacy. A reputable Buyer’s Advocate will assist buyers to purchase a property.

This past weekend we successfully purchased 2 properties at auctions for the price we had expected the properties to be sold for. On both occasions our clients had all the correct preparation done for them by JPP Buyer Advocates, understanding the current market, with little of no stress..... one overseas client & one local client. Different suburbs, different price ranges.

As a Buyer’s Advocate, we do not need to worry about the “quote price”. A good buyer advocate will assist you in property selection, property sourcing, property assessment and the negotiation. You should be charged a fee by the advocate. If you are not it means your advocate is being paid by someone else (usually the vendor or developer).

Call us for a free no obligation meeting and we can help you save time effort and MONEY.

Ian James

Monday July 13th

The sales data in Melbourne continues to prove beyond doubt that the property prices in Melbourne are not a 'bubble'. Since the week ending February 23 this year the only time there have not been over 1000 sales reported to the REIV each week, have been holiday weekends. 5 months of data showing 1000 sales per week is not an anomaly or a bubble it is a trend.

'Too cheap – and you can quote me' Herald Sun Saturday July 11
'Can I quote you' Herald Sun Sunday July 12
'Price discrepancies anger home buyers' Herald Sun Monday July 13

There have been several articles and comments in the Age newspaper as well.

Underquoting seems to be the catch cry of many media and professional commentators. I attended an auction two weeks ago that was quoted as 'over $830k'. This beautiful property was on excellent land, was soundly built and had everything you would want from a home in the area. As I walked from the open for inspection 3 weeks prior I had said to the agent I would give him $1M right now for the property. He explained to me that his vendors wanted to go to auction. He didn’t think he would get that figure. The property sold for $1.260M. I did not think it was worth that the evident comparables put good buying around $1M - $1.1M easily, but two people fought out the auction to the final figure. Most other purchasers fell away between $1M & $1.1M.

Was this property underquoted? Would the vendor have taken something close to $830k on the day? Had they quoted $830 - $900k I would have thought the quote a little low but not enough to warrant even a comment. The property was on the market in the low $900’s. So if nobody bid over $950k then the property would have been sold for that amount. And it may have sold cheaper than this if the bidding had not reached $950k.

If competition takes a property well above the asking price, this is due to the good work of the selling agent. The selling agent is working for the vendor not the purchaser. If a purchaser wants to save money on needless inspections for properties they have absolutely no chance on, if they want to know what is likely to purchase a property then they should hire an expert to work for them. A good buyer’s advocate who is constantly buying property all the time will know what is likely to happen to any given property they are looking at.

I do think if an agent has received an unconditional offer above their advertised price they should change their quote if they don’t accept. This happen everyday and I think this is unfair. I am also not sure that a 20% margin is an expected amount for the quote to be below the reserve. But it is extremely rare for a property to sell more than 10% away from the expected price of a professional analysing the market; whether that be a selling or a buying agent’s appraisal.

Just because you see one result, this does not mean you understand the market. There was a very strong result at an auction I attended in Sandringham on Saturday. Approximately 2600sqm of land with a derelict house sold for $3.350M. This would make people think the land value in the area was worth about $1290 per sqm. It is only on further investigation you would find out there was a covenant on the land limiting the property to only 2 house sites and therefore substantially lessening the value per sqm. Sandringham property sells for $1400 - $1500 per sqm for large house sites of approximately 1000sqm.

There are also plenty of agents out in the market at the moment that genuinely do not have the experience to know what the property will sell for. There are some properties that are difficult to estimate, such as the example above. Other properties are difficult because the agents do not realise that they may have the only property of its type in a much broader area than they are used to dealing in. For example, if there were a distinct lack of single fronted period homes in Northcote, an agent may realise he has a good property and has the only one in Northcote and Thornbury, but he may not realise he has the best single fronted home in Northcote, Thornbury, Preston, Fitzroy north, Carlton North, Fairfield and Alphington. He may not deal in these areas, but a good buyer advocate will take all this into account.

Unfortunately, there are plenty of selling agents who will put a bait price out to the market simply to gather names for further marketing, either to on sell them or to use in their own future campaigns. These are the unscrupulous agents that should be stopped by Consumer Affairs Victoria. Any selling agent that is breaking the law, or doing anything that simply benefits the agent to the detriment of both the vendor and other purchasers should be stopped.

You must remember selling agents work for the vendor. It is a bit unrealistic to expect a professional negotiator, who is being paid by the vendor, to do anything to assist the purchaser. If purchasers want to save money, be successful at auctions and in private sale negotiations, find properties that are not yet advertised on the open market, or simply want to save time, they should engage a buyer’s advocate.

Any good negotiator in any sales field anywhere in the world will tell you: 'Never let the salesman deal directly with the decision maker'. If you do not know what this means you really do need an advocate working for you. If you do know what it means call us for a free no obligation meeting and we can help you purchase your new home.

Ian James

Monday July 6th

The clearance rates have firmly entrenched themselves above 80%. The market is moving relentlessly upward. Whilst the first home buyers, who are building new dwellings, may be eligible for up to $35,000, the smart purchasers are looking for good long term growth investments.

These will not be found in new estates. These will be found in good pockets of firmly established suburbs with good amenities. All the papers this week are talking about “unfathomable” results. They are talking about how the new estates are leading the way forward with growth. This will last only as long as the grants do. Most of the commentators go on to say this was inconceivable to think our property market would move the way it has.

This is almost comical. It was so obvious what was happening in our Melbourne’s property market late last year and certainly January and February this year. In December last year we wrote in this column – December 15th 2008

“All in all, properties that are in good locations that show a history of good capital growth, have an improving yield and are under $500,000 will be the hottest property for the first six months of next year. In the later half of the year, depending on the economic outlook and what consumer sentiment brings, properties between $500,000 and $1M will be the next bracket to move. Once the economy begins to recover, properties above $1M will rebound extremely well. If you are in the market for this type of property, spring 2009 may well be the last time to buy at reduced prices before a recovery in early 2010.”

The only change to exactly what has happened is it was a little quicker than anticipated. Anyone wanted to be in the Melbourne property market in the next few years needs to think about purchasing NOW!!!!

Supply and demand are the two elements of price movement. All contributing factors have a bearing on either supply or demand. If people decide not to purchase now for any reason that will affect demand. Conversely, if people decide not to sell property or sell because they are forced to, then this affects supply.

We currently are tens of thousands of dwellings short of what we need in Melbourne now. It does not matter whether buying or renting you still need a place to live and we do not have enough dwellings. Even if people become unemployed in droves – even if it reaches 10% and people start selling their houses. The extra supply will not exceed demand. And all of the people who are selling will still need to rent. This will push up rental returns and therefore bring more investors to the market increasing demand.

The only thing that will slow price growth in the Melbourne property market is interest rate increases. If the interest rate rises faster than rental returns, which is not in our foreseeable future, this would slow the investors and all but stop the first home buyers. If this occurred it would also strangle businesses and plunge us very sharply into the recession the rest of the world is currently experiencing. The Reserve Bank is highly unlikely to do this.

Short of massively rising interest rates or Armageddon, I can’t see property prices falling anytime soon. In fact property prices will increase more rapidly over the next decade than they did over the last. People with lower budgets have to buy much further from Melbourne CBD. This will have an impact on everything from government infrastructure planning to the effect on the environment.

If you want to secure good long term wealth creation you should think about direct property investment. Call us now and we can assist you with your next purchase.

Ian James

Collapse Section

Monday June 29th

With a clearance rate of 87% on 450 reported auctions and a further 675 properties sold by private treaty negotiations, the market is simply moving from strength to strength. It is not simply first home buyers fuelling this market. Unfortunately the people reporting the property news are not necessarily the ones working in the day to day negotiations of property.

We all remember the article from The Age 10/6/2009 “Global crisis hits Toorak property”

This article explained how property prices in Toorak have plummeted by $205,000 and the “Bargain Hunters” were “circling at a mortgagee’s auction” in Hopetoun Road. The article also went on to say financiers were hoping to cover losses if the property fetched about $6.5M.

Most people who actually know anything about the property market in Melbourne would tell you there is a distinct shortage of stock especially in the range of $800k - $1M and the range well over $2M. The above property sold for $7.075M. There were 5 bidders in all. There are 4 other people out there with money in this level to spend.

The majority of our clients above $2M are not selling their existing homes. They are keeping them as investments. This will have an enormous impact on the future of property prices. With supply getting tighter and tighter, we know that as demand increases, property prices will go up. Our enquiry levels for buying services are now far stronger than anytime in 2007.

I noted a comment from a leading Melbourne real estate agent on Saturday afternoon. He thought it was generally accepted that a quote range being 20% under reserve (what the vendors are hoping for) would be seen as normal in the market place now.

The market at the sub $600k level has maintained its current upward movement as well. Whilst most commentators are talking about First Home Buyers being the only reason this market segment is moving; they are forgetting the “Mum & Dad” investor. Most conservative people are not ready to dive back into the stock market just yet. Therefore, direct property investment is seen as a strong alternative for investment.

The only market segment I see not sky rocketing forward over the next two years is in that of new homes. With the government offering $32k within the metro area until October and then dropping $7k until the end of the year, I think this market will be artificially increased. And in February next year prices may fall a lot more than the drop in the government grants.

When Adrian Jones, president of the REIV, was reported to have said “it may be more sensible and less trouble to rent than buy” He qualified this by saying buying might be better for regular snow bunnies. This was reported in Saturday’s Herald Sun. This was a quote in response to the question “is now a good time to buy” I can only suggest the market that Mr Jones was talking about was the new home market. Otherwise he may have been misquoted or he may be a little out of touch.

Good property is scarce. There is a huge demand which is growing daily. If you are in the market for property you should seek professional advice. JPP Buyer Advocates are the market leaders in this field. Call now for a free, no obligation meeting to discuss your needs for your next property purchase.

Ian James

Monday June 22nd

Finally, even the media has acknowledged we are in a strong upward movement in the Melbourne Property market. Since the third week in February, there have been more than 1000 reported sales to the REIV every week. This week was no exception, with 1249 sales, 426 sold under the auction system.

The biggest difference of the last 4 weeks is the sales data from properties over $1M. Properties that have been on the market for a very long time, properties that have failed in 2008 to sell and properties that were priced too high have now begun to gather interest. Anything with prime land content is now being looked at for development and long term holdings.

The market above $1M is now gaining momentum. Good properties are attracting 3 and 4 bidders. A property which we bought in Collingwood over $1M last Saturday had 9 people bidding. Throughout Bentleigh, McKinnon, Hampton and Sandringham, family homes just under $1M have all but disappeared. There is a greater amount of “off market” transactions in this level as well.

There are plenty of vendors “thinking” about selling, or just haven’t quite made up their minds to put something on the market. If you know who to ask there may be other options out there apart from what is being advertised.

If you are looking for property please feel free to call us and have a chat.

Ian James

Monday June 15th

Another week of over 1000 sales with a clearance rate over 80% again. 1109 total sales, 447 sold under auction and 662 private sales according to the REIV. This is up about 20% on the same weekend last year.

After last Thursday’s Age article talking about gloom and doom in the Toorak market and then this mornings, article on www.news.com.au about property prices rising across Australia, it is not difficult to understand why the average potential buyer is confused.

Unemployment is nowhere near the levels that were being forecast this time last year, retail sales did not slump over the last six to eight months, interest rates have not continued in free fall, in fact the Commonwealth has just raised their rate, and even the share market is showing a very good indication of resilience. We have not been in a recession, like most of the other countries in the world and we do not have the same issues that many other countries have, relating to some of the above indicators.

Property prices have also remained incredibly resilient throughout the Global Financial Crisis (GFC). Many properties in all levels of the market have actually sold at a higher price than in 2007. Victoria Street in Williamstown was bought in 2007 for $1.775M and was snapped up as soon as it went on the market last month for $1.97M. according to the REIV.

The majority of properties offered to the market this year have been of a lower quality than those offered during the 2007 peak market. So, whilst we can compare specific properties, it is far harder to look at general statistics. Median prices statistics are made up of the properties that have been sold during the period under investigation. It is the change in these prices that some very uninformed commentators will say prove a market that has serious problems. For instance, the Williamstown median price in September 2007 was $795K and the March quarter this year showed us $780K. Therefore with this limited data I could say that property prices in Williamstown have dropped 1.8% in value. But we know good property has not!!

The issues that face purchasers today are simple. There are many properties on the market that are OK. These will and should sell at OK prices. There are a few properties that are good to excellent. It is these properties that are reaching exceptional prices in the market place. There are two reasons for this. Firstly, and very obviously, they are good properties. They are well located, well presented and well marketed. Secondly, and far more importantly, they are scarce. Banks are not forcing that many people to “fire sale” their properties. This would actually be detrimental to the banks. Over supply will bring property prices down and not assist to pay out bank loans.

Supply and demand are the factors that decide price. It is the forces on each of these factors that decide what the balance will be. We have had a substantial increase in turnover from 2008 and although the number of auctions is lower the total sales has easily exceeded the levels of last year. The choice that potential purchasers make when buying this year will be far more crucial than the final price they pay.

We can also see the lack of good stock mirrored by the way some Real Estate Agents are handling themselves. We have heard the rumours, just like everyone else that many agencies are battling to keep their doors open. It is these difficult times that we can see unlicensed, unscrupulous and or unethical people make things difficult for uninformed purchasers. People can make very poor decisions when faced with dilemmas they know little or nothing about.

I believe it is high time the government step in and push for better representation for both buyer and seller. When only one party has someone acting for them and may be purporting to be acting for both then there will always be issues. In the legal system everyone is warned to get representation on both sides, whether it is criminal or civil. I believe the same should be done within the Real Estate Industry. In most cases the purchase of a property is the largest single financial decision a person makes in their life. If you are buying property you should have someone on your side (exclusively).

Call us for a free no obligation meeting to discuss your next property purchase.

Ian James

Monday June 8th

928 reported sales to the REIV this Queens Birthday holiday weekend is up just under 50% on last years reported numbers. This typifies the overall trend for the year to date. There has been a rise of well over 15% in turnover numbers this year to date according to the published REIV figures.

If we then listen to most of the real estate agents in Melbourne and Geelong, we find that there is also a dramatic increase in buyer demand. Fuelled by the First Home Owners Grant, Bonus and Boost which, thanks to the Victorian State Government, will be around a lot longer than anyone imagined, as well as our escape from the ‘technical’ recession, demand for property is going through the roof.

The stock markets have had a long sustained rally, and this may been seen as the turning point for the Australian economy. If so, more and more people will want to get their money out of bank guarantees and back into earning better returns. There has already been an upsurgeance of investors into the property market in the lower end around the $300k – $500k range. When you add this to the first home buyers in this range, it has pushed prices up in the vicinity of 5%- 10% this year already.

With the resurgence of the stock market we also expect to see a further push back to the mid range market $800k - $1.5M. Families that have sold their homes in the $500k range, and who are feeling quite secure in their employment future are flooding into this mid range family market. With little exception, throughout Banyule, Manningham, Moreland, Stonington, Boroondara, Port Phillip and Bayside there have been very few times in the last 3 months that multiple family homes have been on the market at any one time in this range. When these individual properties do hit the market, competition is fierce and prices are being driven up dramatically.

Even the market over $2M has come back strongly over the past 3 months. Each property we have gone after that has stacked up as a good property, on good land, in a good location has seen three four and five people vying for the purchase. If we look back twelve months, selling agents were ringing us weekly with properties to sell as they had no enquiry from prospective purchasers.

So where to from here!

We assume there will still be plenty of fallout from the Global Economic Crisis later this year. We assume unemployment will rise above its present level. And we assume people are still nervous about jumping back into the stock market at the moment. That leaves direct property investment still on top of most people’s “safe investment” lists. The FHOG might continue to elevate the new estate prices in the outer suburbs, thanks to the State Government Bonus for first home owners who are building, they will not have the same net effect on the inner suburbs. This will continue to be dominated by buyers of second and subsequent homes and property investors. Whilst we can continue to develop huge tracts of land out past Pakenham, Craigieburn and Werribee, there are no more such divisions happening within 20km of the CBD. Property prices in these areas, whether flats, units, townhouses or large blocks of land must rise and continue to do so for the foreseeable future as the demand massively outstrips supply. It would take a reversal of all of the indicators (stock market, unemployment, growth of our economy) to change this.

Properties in areas such as North Melbourne, Collingwood, Richmond, Prahran, Windsor, Elwood, East Melbourne and South Melbourne will show tremendous growth with small flats in smallish complexes.

Banyule, Manningham, Moreland, Stonington, Boroondara, Port Phillip and Bayside will continue to show a resurgence for $million family homes. However, I see the biggest upward movement to be potentially sub-dividable land in the suburbs that have great infrastructure, parks, gardens, good shopping precincts and public transport. Plenty of families will be buying homes that in 5, 10 or 15 years will be subdivided down to townhouses.

The ABS has shown us the average amount of people per dwelling is down to 2.4 and if there is no change to this trend I can see a lot more townhouses in our future.

If you are thinking of purchasing a home to live in or want to buy an investment property, feel free to give us a call for a no obligation chat.

Ian James

Monday June 1st

The papers are again talking about dropping property prices over the weekend. They continue to write about the imminent bursting bubble; the media has a “love affair” with gloom and doom. There were 1453 properties reported as sold to the REIV last week. You need to go back to March 2008 to see this many sales. Unlike that week when the clearance rate was 67% this week’s clearance was 82% from 667 properties.

Our company has purchased 7 properties in the past 4 days and although they ranged from first home buyers at $450k to families up scaling over $1M all of them had multiple interest. Good property always attracts multiple interest when the property is well marketed.

RP Data and Rismark International’s Home Value Index released on Friday showed all mainland capital cities recorded an increase in the first four months of the year, except for Perth. Victoria had a rise of 4.5%. The ABS has released data for Jan – March for established properties and this showed a drop of 2.2%. If the market continues similar to what is currently happening and if we take into account the plethora of sales of new houses and sales in April, I think there will be an abrupt increase in Price shown in the next quarter’s figures.

Ask any Real Estate agent about stock levels. This is the real gloom and doom story. Stock levels are so low agents are sacrificing commission percentages to get the small amount of business that is out there. With a distinct lack of stock and an abundance of potential purchasers, prices of good property have nowhere to go but up.

Over the next few months when there would normally be a winter hiatus, I expect to see continuing high numbers of sales. As the World Economic Crisis worsens before the eventual upward move, there will be some more forced sales of property. Many people have already begun to divest themselves of there weaker performing properties and this will continue through the next 6 months. For buyers, this will not cause an all important “price crash” as the demand is so far outstripping supply, that more property may simply slow down the inevitable price growth.

Buying property is and has always been one of the safest and most secure investment choices. With rental prices on the increase, interest rates at a generational low, lack of quality stock and not many other viable investment options, direct property investment has never looked so good.

If you are considering purchasing a property, please feel free to give us a call to organise a no obligation first meeting.

Ian James

Monday May 25th

We need to go all the way back to the first reporting week in February before we find reported sales to the REIV dipping below 1000 (with the exception of public holiday weekends, Labour Day, Easter and Anzac Day). Even the number of auctions is on the rise with 475 reported to the REIV this week. A clearance rate of 81% is neither here nor there, it is the fact that we can assume that in excess of 1000 properties a week are being reported as being sold (there will be a lot more that go unreported).

What we need to look at, however, is the quality of what is on the market. We successfully secured 3 properties on the weekend and were out bid at another 3. Every property had multiple bidding after the each was declared on the market. Only one property sold lower than we expected. All other sold for ranges with 2-3% of expectation.

If we digest the above information, we can assume there is plenty of property and that it is easy to buy. This is incorrect. Most property currently on the market is what I would call – average or below average. Locations that are not fantastic, properties that are not finished and or need a substantial amount of work, or the vendors are not being realistic. The smaller amounts of great property that are on the market are the ones attracting huge prices above reserve.

The other key indicator that we have a fickle market is the fact that none of the quote ranges are similar. At the moment, $550k - $600k can mean the agent is after low $500’s, Low $600’s or has a reserve of $700k. If you are currently attempting to purchase property you need to choose wisely. Once you have chosen a property you need to assess it accurately. If you base your bidding or offer on the quote range you could easily be $100k out from what the property is actually worth. This is not as much of an issue if you are short of the final bid. That just means you wasted your time in going after the property. What would be many times worse is if you overpaid by $100k.

Just remember if you have a pre approval from your bank this is always subject to a valuation by the bank. If you have overpaid and the property is valued far less than you purchased it for, the bank may not give you finance. Alternatively, you could be up for tens of thousands of dollars in Lenders Mortgage Insurance.

Before you purchase any property give us a call. We offer a free no obligation first meeting. Whether you decide to use a professional Buyers Advocate or not, that meeting may save you many thousands of dollars alone.

Ian James

Monday May 18th

The weekend clearance rate exceeded 80% for only the second time this year. Whilst overall stock levels remain lower than this time last year, the official clearance rate is reported at a strong 82% of 434 properties that went up for auction. In addition, there were 762 private sales, taking the total number of properties sold for the week to well over 1000 yet again.

With news that the First Home Owner Grant will continue and the First Home Owner Boost will be phased out rather than stopped immediately, there is continued strong demand in the first home buyer market. And not surprisingly, the better properties regardless of the price tag are more often than not exceeding vendor expectations and their reserve with multiple bidding to try and secure the property.

As always, good, well positioned established property located within 20km of the CBD continues to do well and will continue to do so. Let's not forget that the population in Melbourne continues to grow and we have very low interest rates - two significant factors that impact on the market.

If you are thinking of buying or have found a property you are wanting to purchase, give us a call or send us an email and we would be happy to have a chat.

Antony Bucello

Monday May 11th

This weekend saw what has become the typical clearance rate: 76% on around 440 homes that were set for auction. Of course, as we have been talking about for the last three months, there was again a very healthy private sale volume for the week. There were only 14 occurrences last year where the REIV reported that total sales exceeded 1000 properties in a week. We have already had 9 occurrences this year.

Whilst we wait to see what will happen with tomorrow’s federal budget, the market continued to move full steam ahead. Of the auctions we attended on Saturday, all sold under the hammer after spirited multiple bidding well in excess of the reserves. The auctions covered the ranges from $500k to well over $1M and all were hotly contested. Even the market over $2M seems to be picking up interest from many more people than most commentators believed would be the case.

We can see from the figures that are currently being reported that Private Sale negotiation is quickly becoming the most common method of sale, either because the property has passed in or the agents have decided that it is the preferred method of sale. Either way, anyone wanting to purchase a home over the next six months had better get some good advice or be ready to take on some very professional negotiators.

If you are thinking of purchasing or have already started looking please feel free to call and have a chat.

Ian James

Monday May 4th

With a 77% clearance rate and over 1000 private sales last week we are certainly not in the doldrums as most commentators would have us believe. In fact we are moving along reminiscent of the pre GFC times during February and March 2008.

Wasn’t it fantastic to find out that our property market had fallen by 15%? Isn’t it great that you can now buy property $75,000 cheaper than you could before? What the Herald Sun’s headline on Saturday says is very true. In the December quarter of 2007 at the absolute peak of the market, in one quarter our median jumped by 12.8% to $485,000. It had been $430,000 the previous quarter. This was an abnormal jump and if you use this as the benchmark instead of an anomaly then it looks like Melbourne property is in freefall.

Nothing could be further from the truth. In fact if we look at September 2007 until now the fall has been only 4.6% according to the REIV figures. And these figures are very different from RP Data’s figures. RP data is used by the Australian Stock Exchange and their figures indicated a rise last quarter to $426,423 which would equate to a rise of 2.4%.

Last week there were 1000 private sales. Looking back through REIV data, there has not been this many private sales in one week in either 2008 or 2009. There were 1298 total sales last week and you would need to go back to March 2008 to see that many sales in one week. Even the total turnover of $572M is reminiscent of the heady days of 2007.

When the market turns south as it has throughout the world, people tend to sell off anything they do not hold near and dear. This means properties that are average or below average tend to be sold off earlier than those seen as above average. This will reflect in the total figures put out by any research institution. Good properties will always return good prices; “less good” properties will always return “less good” prices. If there are more “less good” properties on the market then the statistics will show a lower median price.

In an upturned market everything sells well. People will pay over the odds for all property whether it is good or “less good”. It is now those who payed over the odds for a “less good” property will feel the pinch. It is these people that may find themselves in a negative equity position. It is these people that will struggle to sell their properties for even what they paid.

If you are in the market for a property, now is a fantastic time to buy good property. So was yesterday and so was last year. Good property will always lease out well, it will always sell well and will usually show a better capital growth than a “less good” property.

You must identify good property from “less good”, work out what the right amount to pay is, and then secure the property before someone else does. This is what JPP Buyer Advocates does for our clients. We do not work with vendors, we are not paid by any real estate agents; all we do is assist people to purchase good property.

Please feel free to contact us for a no obligation meeting if you are considering buying any property throughout Melbourne metropolitan area or Greater Geelong.

Monday April 27th

Over the weekend some agents defied protocol and ran open for inspections and even auctions before 1pm on Saturday. I would have preferred to give the day its due recognition but others didn’t. I think this is disappointing.

For the full week however sales were up dramatically over the same week last year. This year REIV has reported 865 sales and the corresponding week last year only 694. This is just short of a 25% increase. We can assume this trend will continue during the foreseeable future.

Last week there was talk of the First Home Owners Grant (FHOG) not continuing, then it was going to continue, then it was going to change form, then only the “boost” was going to change!!!!! When dealing with politicians, who knows what they will really do until its done, and then who knows what they will change when they have said they won’t!!!!!

It is easier to work out what is likely to occur if the FHOG stays or if it goes. Firstly, if it stays in the same form there will be a continuing push for people to purchase property. This will continue to affect the sub $500k market the most. However, plenty of people who are selling their properties under $500k and are getting more than they had anticipated, and are now purchasing in the $500k - $1M range. These successful vendors now have a little more money than they anticipated and they are using it to purchase their second house. The flow on effect of the FHOG will be felt much stronger in this higher market, the longer the grant is in place. The other catalyst for this mid range is interest rates. Whilst I can remember paying 17.5% for my family home in the 80’s, 5% that we pay now seems almost like free money.

If the grant stays in a changed format which only assists those who are building, and I believe this the most likely, then there may be a stabilisation of property prices of established properties under $500k but I doubt there will be any drop. First home buyers have gone from around 17% to nearly 25% of the market. The majority of these would have been buying new house and land packages in outer lying suburbs. These suburbs have shown large growth over the last six months almost solely due to the FHOG. If the grant does not continue it is these suburbs that will bear the brunt of any price decrease in property market.

In short; whether the grant stays or goes there will be little significant change to the established property market within 20kms of the CBD. Conversely, there could be a substantial drop in price for any of the outer lying (new estate) suburbs. It is not only first home owners that are driving the inner city market. Only last week we saw the population growth of Melbourne is still exceeding all other capital cities in Australia. We still do not have enough dwellings to house our existing population, let alone our growing population. We still have low interest rates and will have until we begin to come out of this recession.

Is it the right time to buy? Properties in the inner 20km will not drop in price in the near future, regardless of the FHOG. If you are secure in your job, have equity or a deposit, now, like always is a good time to buy property. If you would like more information, or you are in the market to purchase at the moment, please feel free to contact us for a no obligation meeting.

Monday April 20th

Are auctions beginning to fade into insignificance? With only 442 reported auctions to the REIV this week and about 200 next week, it seems that Real estate Agents are losing faith in this method of sale. There were in excess of 900 private sales reported to the REIV last week and add this to the auctions that either sold before, sold after or passed in and were then negotiated to a sale, it seems that Melbournians are beginning to see that auctions are not the only method of sale in this town.

If this trend continues, it will hurt the advertising budgets of most real estate agents. The auction process, by definition, is a fast paced, highly visible, highly marketed system of selling real estate. It gives both the property for sale and the agency a high profile with the hope of attracting multiple offers for the property in a short period of time. By creating competition, the price should increase. Even if the price does not increase it brings the property to its conclusion quicker by putting a fixed date. This is great if it works. It is not good if it doesn’t. Many vendors will agree to pay thousands of dollars to build the competition to get a good price for their property. If it fails they are still liable for this advertising fee.

More vendors are now opting for a more cautious approach of private sale with a minimal marketing budget. As there are fewer properties on the market, it is not as necessary to pay huge marketing dollars to help your property “stand out from the crowd”. This will cause no end of angst for most Real Estate Agencies. They will need to fund their own advertising campaigns. Profile is the single biggest selling feature of a real estate agency.

As the advertising dollars dry up, there are less signs on houses, as there are less houses for sale, and as turnover drops down to much lower levels than the heady days of 2006 and 2007, watch out for the larger franchises moving to generic marketing of their brand. The smaller agencies will not be able to compete and, as we saw in the early nineties, there will be a lot of consolidation of Real estate Agencies.

To the buyer this will mean private treaty negotiation will take on a whole new meaning. This is the time when more “cowboys” may be seen in the industry. This is the time that “creative” advertising campaigns tend to be seen more often. It may be much more difficult to find out exactly what the agent actually wants for the property he is trying to sell. To attempt to do this yourself without an experienced Advocate/Negotiator, you may cost yourself a lot more and worse than that, not get your terms, or make a costly mistake of buying a property which does not meet your needs.

If you are looking to buy property at the moment, please give us a call. We will organise a no obligation meeting to discuss your needs show you how we can assist.

Monday April 13th

Vendor Advocacy

Vendor advocates are popping up all over Melbourne. The majority of Buyer Advocates in Melbourne do some sort of vendor advocacy. (Apart from a potential legal conflict of interest, the moral dilemma would be next to impossible to cope with). There are quite a few selling agents who are promoting vendor advocacy quite strongly. After the debacle 10 days ago with a vendor advocate I thought we would look further at Vendor Advocacy. The worst situation is the Vendor Advocate who is not even licensed.

Typically a vendor advocate will interview three agents within the area the vendor is selling and make a recommendation as to which agent to use. Once an agent is chosen, the vendor advocate will negotiate the commission. This is a fundamental problem. The vendor advocate is being paid a percentage of this commission. In other words the vendor is paying an advocate to try and lower his own fee. Doesn’t really make sense does it?

The vendor advocate will then monitor the entire sales process. They will work alongside that Agent during the selling campaign making sure, on the vendor’s behalf, that the marketing and advertising are right, the costs are crystal clear and under control and the Agent does everything they say they will do. What surprises me is that, after the “vendor’s advocate” has decided who the best agent in the area is – why does he need to do this. Are all Real Estate agents so unscrupulous that they need monitoring? Why doesn’t the Government do something about these agents?

If you look at all of these facts then, look at motivation of the agent you will also see another huge negative. If the agent is paying the vendor advocate up to 40% of the commission it leaves only 60% for their agency. If the Real Estate agent has three houses in a similar area, with similar attributes, at a similar price; two of which are paying 100% commission and 1 of which is paying 60% commission, which ones do you think he or she is pushing the hardest?

Finally, all offers are “vetted” by the vendor advocate. If there is to be any negotiation sometimes the vendor advocate does it, even though he hasn’t dealt with the potential purchaser before, sometimes the agent does it – then what is the vendor paying an advocate for or what’s worse, neither of them communicate clearly and the following can occur:

After inspecting a property with our client, we found that it was of interest. It was an unusual property that was well over the average value in the area. I spoke to the principal of the agency and asked how the offers were going to be handled. This is not unusual as many agents do things differently. Some will have a boardroom auction; others will say put your best offer forward others will say first person to offer ‘X’ dollars will buy the property.

When queried the principal of the agency told me a “Vendor Advocate” was in charge. I asked who was holding the authority. Her reply was that her agency held the authority but the vendor’s advocate was putting the offers to the vendor. She asked me to call him. He explained to me that if we presented an offer of $850,000 that would buy the property – no ifs or buts. I qualified this with him and asked when this would happen. He explained that at 5.00pm he was meting with the vendor. If we had a signed offer he would have it countersigned. At 4.55pm I called him and said I had a signed offer and it was being faxed through to the agent now. His response – the property is yours. I asked for signatures straight away. He replied we would have them within the hour.

At 5.45 the principal of the real estate agency calls me to explain the property has been sold to someone else. Documents are signed and the deal is done. I asked what had happened and was told there was an offer of $881k and this was accepted by the vendor. When I explained what the Vendors advocate had told me – she replied I would need to take this up with him. I explained that my clients had asked me to find out – “what buys the property” I explained I was not asked for more money, nor was I asked for our “best offer”. So whilst my client missed out so did the vendor. Due to a total lack of communication, the selling agents made it impossible to have any real competition.

When I was finally able to catch up with the vendor advocate, I asked what happened. He explained that he was unaware of the other offer. The other party had been told the property would be sold at 5.00pm and they had not made an offer of $850k. They were told that another party was involved and were given an opportunity to increase their offer above ours by the agency principal. We were not given the same consideration; in fact we were told verbally we had secured the property and we were just waiting on signatures.

Overall a total lack of communication between the agency and the vendor advocate meant their vendor did not get the best price. As a buyer, when dealing with vendor advocates you must try to communicate with both parties. Even when everything seems very obvious, even when you are told what is happening, it may not be the case. As a vendor, be very careful who you choose to be your vendor advocate. More often than not you will do much better going directly to any of the more recognised agents in the area.

Monday April 6th

For the seventh straight week, with the exception of the Labour Day week, we have seen more than 1000 sales reported to the REIV. The market is not only heating up in the $300k -$500k segment, but all the way up and beyond $1M mark. Trends do not, however, begin with one sale. There were several properties over the weekend that achieved results reminiscent of 2007 but on the whole the market seems quite stable with most properties achieving quite realistic results.

Finally even the REIV have begun to realise that the “Clearance rate” is not going to have the significance it had in 2006 and 2007. There has been an increase of 26% in reported private sales this year and a drop of 56% on the number of auctions according to the REIV. The REIV would report on most auctions but to think that anything over about 60% of private sales would be reported to the REIV would probably be wishful. From the anecdotal assumption that the split between Private Sales to Auctions in Melbourne was about 70:30%, I would suggest we are now looking at 80:20 and if we take into account sales before auction, pass in and Sold after, as well as properties that are passed in, then immediately sold and reported as sold at auction, we are most likely looking at the “clearance rate” representing less than 10% of the market sales.

RP Data have released figures showing a 1.9% increase in the median price of property across Melbourne. With the exception of Darwin, whose market is relatively small and by extension quite volatile, Melbourne had the highest capital growth of any capital city. Is it any wonder why? We still have the fastest growing population of any capital city. Our economy is in much better shape than our neighbouring states, and our infrastructure whilst not perfect is in pretty good shape.

We need more housing built. A finance company was quoted through the week as saying we have an oversupply of housing and that population growth would only require the building of 12000 dwellings nationwide next year. This would equate to an increased population of only 28,800 people. It’s great to see the Australian Bureau of Statistics isn’t needed anymore. The planning level for the 2008–09 Migration Program is set at 190 300 places. This does not include our natural population growth either.

First home buyers, investors who want to avoid the volatility of the share market and increase the certainty of capital growth, people who are selling their $400k properties and changing up to $1m+, even the top end of town is slowly starting to awaken. There are more people wanting to buy property than there are properties to buy.

THIS IS THE REASON PROPERTY PRICES WILL CONTINUE TO RISE.

Selling Agents only have a limited supply of stock and this allows them to spend more time on each of their properties. If you are in the market to purchase you had better have a good negotiator on your side. I had a woman call me on Thursday. She had purchased a property subject to a building inspection and the building inspection was particularly poor. She asked some advice as to whether she should proceed or not. One five minute phone call saved her over $5000. Another client asked me a question about a property negotiation he was involved in. One five minute conversation, what seemed like a huge and difficult problem – solved!

You are going to be making the largest financial decision of your life when buying a new property. GET SOME ADVICE!!

Call us now for a no obligation meeting to see how we can help you.

Ian James

Monday April 6th Case Study - When Auctions Go Bad

What do you do when the auctioneer brings down the hammer and you have the highest bid? You have bought the property. You can bask in the applause from the crowd. You can begin celebrating and sign the papers. There are the formalities of documentation but usually these take only a few minutes.

The auctioneers team rushes the winner inside, takes their deposit writes up the contracts and has the buyer sign them. The agents then have the vendor sign and the contract is complete. The SOLD sticker goes up and the sale of the property is over.

On a slightly overcast day in April, the JPP team arrives in Glen Waverley to assist one of our clients to purchase their dream home. We have analysed the property, we have negotiated the terms we will sign under if successful and we are prepared to bid. While we were representing the purchaser, the vendor was being represented by a “Vendor’s Advocate”

The auction begins with the usual ringing of the bell and then the auctioneer begins his show. He reads from the rules of auctions, he tells us a bit about the vendor’s statement and the contract and he also espouses how sensational the area and this particular house is. So far no different to the thousand or so other auctions I have attended.

The bidding begins and within a few minutes of myself and one other person bidding at $627,500 I asked if the property is on the market. The auctioneer gave me a usual deflection line and did not answer the question in either the positive or the negative. I did not put in a further bid and waited. The auctioneer, with no further bidding went inside to consult the vendor. When he came outside he asked the other bidder in the audience to confirm their bid at $627,500. They did and he turned to me and announced the property was on the market. If there was no further bidding the property would be sold.

I bid and so did the other interested party. We fought out the auction and finally I was successful with a bid of $670,000. In fact it was my very last bid as we had agreed with our client this was a fair and reasonable price to pay for the property. We had already done a 20 page report and this is where comparable sales put the price point for this particular property.

When we began to move into the house the agent came up to us and asked if we would mind filling in the paperwork around the corner at his office. It would be more comfortable and easier. Alarm bells were going off in my mind and that of my colleagues. This was most unusual but not unprecedented.

Antony accompanied our client to the agent’s office and filled in the contract whilst we waited for the Vendor Advocate to bring the vendor up to the office. Subsequently, the Vendor Advocate arrived alone, but with a valuation certificate. He explained to Antony that his client was unaware their property had been put on the market. He explained she actually wanted $690,000 as this is what the valuation certificate stated and he put it on the table for all of us to see. Both the sales agent and Antony were flabbergasted. This Vendor Advocate had come into the office without the vendor and intimated that to complete the purchase on the property we would need to pay $690,000. Antony immediately asked him to put the paperwork away and demanded they all go back to the vendors house to finalise the contract by getting the vendors signatures. He proceeded, with our client, and the Vendors Advocate in tow back to the property.

Whilst this was going on we had already sought and received legal advice. We had made it very clear to both agents that they had a legal and moral responsibility to organise the sale at the price that was agreed at the auction. The selling agent we had been dealing with throughout the campaign was absolutely fantastic. At no stage did he think anything else but get the deal done at the agreed price.

After three and half hours of further negotiation, threats and discussion we finally received signed contracts. Our client and her daughter, although quite shaken, were ecstatic. Without a buyer advocate assisting I believe the deal would either not have happened or the purchaser may have been persuaded to pay more than the price bid under the hammer or worse still, ended up in a lengthy court battle. By remaining focused and calm we were able to secure the property for the agreed price of $670,000, for our client.

Monday March 30th

With a clearance rate of 77% on only 390 auctions and private sale negotiations sky rocketing to 735 last week, a number only topped once last year (751 in first week of march), we can see the market is moving in a very positive direction. With the exception of the Labour Day weekend over 1000 properties per week were sold throughout March. And they are not solely in the first home buyers’ realm. There has been a 10% increase in total sales this week compared to the corresponding week last year.

When there are plenty of people interested in a particular property then going to auction can be sensational. A property on Saturday in Heidelberg, unrenovated 3 bedroom 1 bathroom home on normal land size, quoted over $500k, went under the hammer. In front of a couple of hundred people, there were at least ten people bidding. The auctioneer announced the property “on the market” at $560k. The property sold under immense competition for $702,000 to the delight of both vendor and auctioneer.

                       

If you want to visit an open for inspection at the moment, be ready for the queues. A three Bedroom townhouse in Doncaster quoting $400k+ and you had better not be in a hurry.

At auction with enough competition the desired price is usually met or exceeded. But more and more agents are retreating to traditional “sale by negotiation” methods. Don’t be fooled by advertising lines like “Sale by set date” or “Sale by Tender” or “Sale by sealed offer”. Almost always there will be a small disclaimer saying “Unless sold prior”. This is the case with an auction as well.

It is now almost universally agreed that prices on properties below around $1.5M have stabilised or are likely to increase in price. If you wish to purchase an investment property, your first home or trade up into a more expensive home after getting a sensational price selling your own existing home, then you had better be prepared for some serious “one on one” negotiations with some very experienced negotiators.

In any negotiations, whether it is buying a house, negotiating a divorce settlement or trying to free hostages, one of the key steps is to place a professional negotiator between the two decision makers. Every good real estate agent does this. When was the last time you negotiated in front of the vendor? This is one very simple but incredibly valuable lesson to be learnt when negotiating for hundreds of thousands of your dollars. Representing yourself in your own negotiation is as intelligent as representing yourself in court.

If you want to know more about negotiation or would like to purchase a property in Melbourne well please give me a call or write a comment.

Ian James

Monday March 23rd

Finally the media is starting to look past the clearance rate to the numbers of properties sold. This week’s sales of 1082 properties leaves only Labour Day week as the last time in 5 weeks turnover has dropped below 1000.

I was invited to speak at the Geelong Property Expo yesterday and one of the questions I was asked continually but in a different fashion was, ‘If the first home owners boost drops off in July, will the market drop”. There was an academic on the news last week from western Sydney who said the market would drop at least 20% and probably more. He went on to say we were looking at a US style housing failure.

He was obviously looking for some sound bite publicity. First home buyers, whilst very prevalent in the mark place have only moved from 17% to 24% yet the market has increased from an average turnover of fewer than 950 per week to 1073 per week over the last 5 weeks. These figures are the REIV reported data. Everyone who has any money and a secure job is flooded to the housing market.

What other investment can offer a 4.5% yield whilst historically through recession still looking at 10% growth over the long term. You can’t get that at the bank, and I don’t know anyone rushing out to increase their share portfolios. Bricks and mortar have always been the cornerstone of wealth creation. This year is a little different to others. Loans are cheap and returns are excellent.

A property for $500k bought now should be revenue neutral within a year or so and should still appreciate around 5- 8% this year and over the next ten I believe should be in excess of 10%. You only need $130,000 in equity (not cash) to be able to achieve this. If you buy good property in good locations for the right price you will do well.

Call us for a no obligation meeting to discuss your next investment property. If you are a first home buyer or upgrading your home we can help you save time, money and effort.

Ian James

Monday March 9th

We have seen another surge this week in sales in Melbourne. Sales were up 1.3% on sales for the same week last year and only retreated back 30% on last weeks sale numbers. This time last year Labour Day weekend showed a reduction of over 40% on the previous week. Don’t be confused by solely relying on the auction clearance rates or numbers of auctions. The market is changing and auctions are no longer the preferred method of selling, even in Melbourne!

People are putting their money in the only safe bet in town right now. And they are proving it in droves. Good land in good locations with tenantable, or the ability to easily renovate to be tenantable, properties are selling very quickly. Whilst the banks maybe making many margin calls a day on people who invested and leveraged heavily in the stock market, those who have leveraged to buy residential property near the Melbourne median price would not be getting those calls. In fact with the increase in value over the last 5 years, most people who have bought property in Melbourne are leveraging to purchase more property now.

Under a margin loan arrangement, it is the investor's portfolio of shares or managed funds itself that provides security for the loan. The risk is that market fluctuations reduce the portfolio's value to a level where it no longer provides adequate security for the loan. Once values of shares have fallen far enough so that the ratio of the loan to the portfolio value exceeds the maximum set by the lender, it will step in and make a "margin call".

The lender will ask for additional funds or assets to reduce the loan size and bring the loan-to-valuation ratio (LVR) back below the maximum. If investors are unable to make the extra loan repayment in cash, they may be forced to sell part of their investment.

Melbourne residential property prices close to the median will have dipped only a couple of percentage points in the past twelve months compared with the stock market shedding about half its value and substantially more in some cases. This year I believe property prices under $600k will grow by 5% - 10% based on supply vs. demand.

Anyone with cash can buy residential property in Melbourne and get between 4-5% return on investment, whilst getting good long term capital growth. Only some very special bank accounts are offering above this return and there is no potential capital growth beyond the yield.

Anyone with equity can borrow at around 5% for residential property; this will be almost fully covered by the rental return allowing for a secure capital growth at a leveraged rate which should not attract margin calls.

Good property is both hard to find and then very difficult to purchase. JPP Buyer Advocates can assist you in purchasing good property at the right price. It doesn’t matter whether it is to occupy or as an investment; buying good property will bring good long term results.

Give us a call or drop us an email. Our first meeting is absolutely obligation free.

Ian James

Monday March 2nd

Everyone will tell you the stock levels are low, everyone will tell you the “clearance rate” is down from last week, everyone will tell you there is gloom and doom on the horizon and we are following the United States into the depths of despair. Is it true: NO its not.

REIV figures show us that total sales this week have increased by more than 22% over last weeks figures. Although turnover figures are still down on the same time last year, there are plenty of properties to purchase and plenty of buyers out there trying to buy them. Of the seven properties we purchased in the past eight days all were under competition, or bought within the first few weeks of being on the market.

There are plenty of doomsayers talking about us following the USA into an economic state we will never recover from. This is rubbish. Australia is nothing like the US. And everyone will eventually recover from this economic downturn. In fact history shows us that now is one of the best times to secure new assets, as the growth coming out of a recession is usually quite strong, whilst the cost of borrowings is relatively cheap.

Underlying housing demand is rapidly outstripping building completions. So much so that the gap may be insurmountable for new home buyers in the future.

Whilst there are plenty of people that require somewhere to live, builders and developers are becoming scarce as financial institutions are reluctant to gamble on them with finance.

Fundamentally, overseas residential property markets are vastly different to that of Australia. Our nominal Gross Domestic Product is above and still going in a positive direction compared to both the UK and the US. Our population growth is soaring above Britain and the US. The UK is almost static and the US has begun to slow, but Australia, due mainly to migration, has increased steadily and is still going that way. The government will most likely reduce overall migration in the coming years. This will be solely a political stance based on opinion polls of voters. This will be a negative economic step in my opinion. Australia has a massive labour shortage and when we move out of the doldrums, we will require even more people. Skilled migrants don’t take the jobs of average Australians! Skilled migrants don’t detract from our economy! Australia is the best country in the world to live. And it is because of all the incredibly diverse ethnicity of ALL our migrants, over the past 200 years or so, and our native Australians who have been here much longer.

The US rental vacancy rates are exceptionally high and therefore deter investors from the market place. Ours are incredibly low and therefore attract the investors who can just about get neutrally geared property in excellent locations throughout the Melbourne suburbs.

                     

We also have a totally different system with mortgages. As you can see from the above graph, Australia’s delinquencies are far below that of the US and much of this has to do with the fact that a vast proportion of US loans have mainly fixed rate loans.

This also means that when the US federal reserve bank drops rates it does not have anywhere near the effect our Reserve bank does when they drop rates.

                     

Overall, our market is quite strong and in my opinion only going to get stronger. Especially in the lower end under about $600k- $700k. Whilst our unemployment will rise, plenty of people will be out to increase their asset holdings and much of this will be in residential property. All the above data and graphs are part of the presentation I attended at the RACV club last week. The above graphs were put together by Paul Braddick, head of Financial Systems Economics at the ANZ Bank. His presentation was excellent, with extremely well weighted arguments to put Melbourne Residential Property as one of the better investments in the foreseeable future.

If you are considering purchasing property in the next 12 months, give us a call or come in for a no obligation chat. We actually buy properties throughout Melbourne on a regular basis. We are known by most of the agents across Melbourne and we purchase properties at all different levels of the market. At JPP we don’t just write about property we actually buy it.

Ian James

Monday February 23rd

The market is as hot as this time last year. There were only 16 less sales this year than the third weekend of February last year. It is only the method that varies. There were 117 more private sales last week than the corresponding week last year, according to REIV figures.

Although everyone is talking about the 77% clearance rate, this was on only 436 Auctions and therefore is not as accurate as a clearance rate on over 1000 like last year. The value of the clearance rate is losing its significance. The value of total sales numbers is much better.

Of the four properties we have purchased over the weekend, only one was purchased at auction. What we couldn’t purchase before auction all went strongly over expectations. These ranged from a $400k+ “renovators delight” to a stylish $1m+ family home in the Eastern suburbs. And whilst I would say the $1.5M and above range is quiet, there are still quite a few quiet sales and good property will always sell well.

Properties below $1m have launched themselves into a sellers market again. Investors looking for revenue neutral property in excellent capital growth suburbs, those who are up-trading from the $500k - $1M range, those who have cash for a deposit and are renting and first home buyers are all pushing the demand for property well in excess of the supply.

Companies like Mirvac, Stockland, Australand and Lend Lease are inundated with enquiry from first home buyers, so much so they do not have the stock to sell to them. This in turn puts pressure on the established market where there are even less properties. Investors who can now get about 4.5% yield and are only paying just over that for finance are also making the demand increase.

More and more people are finding it difficult to rent. I was passing this property on Saturday. This is not for sale, this is an open for inspection to lease!!!!!!!

Rents are becoming as expensive as repaying a loan at 5% and this is also generating more interest in buying.

Anybody who is currently waiting around until the market falls will be waiting a very long time. Socio – economic influences can only have effect on the two core elements of price differential. These are supply and demand. Even if unemployment gets as high as 10%; people are still going to need somewhere to live. And we have more people coming into the country and into Melbourne than we have dwellings to house them.

Ian James

Monday February 16th

The autumn selling season is under way and it has hit “home runs” for the vendors in the first real week of result reports. Whilst there were only 246 auctions with a clearance rate of 70% there were over 600 private sales reported by the REIV. Looking at the auction numbers coming up in the next two weeks, The REIV is guesstimating 500 and 670 auctions, the similar weekends last year had 1138 and 1006. This is over 35% less auctions. This number will only be significant if the numbers of private sales don’t exceed last year’s sales for the same period (reported as 729 and 759 last year).

We know that first home buyers are driving the property market substantially at the moment. Tim Colebatch of the Age reports a surge in new loans to first home buyers: “The bureau's [Australian Bureau of Statistics] figures showed almost 40 per cent of all people taking out loans to buy a home in December were first-home buyers.” We also know that whilst rental accommodation is hard to come by, if you have a deposit you can buy a property for the same cost as renting.

As interest rates are still expected to ease a little more, buying property will be one of the safest, cheapest and easiest forms of investment. Why pay rent when you can buy a home that history shows can have double digit capital growth each year (since 1980 some of the better suburbs in Melbourne with medians below $500k have had better than 10% per annum growth in their median prices [Valuer General])

We have been talking about median prices in suburbs under about $700k rising this year. Looking at sales results over the weekend we saw multiple bidding at every auction our advocates attended over the weekend. We attended auctions in the northern suburbs, Bayside, Inner Melbourne and the outer eastern suburbs. Just as a side note there was a distinct lack of auctions throughout Melbourne’s southern suburbs but we still had good results through private treaty negotiation. Of the auctions we attended our advocates have reported consistently of multiple,” on the market” bidding.

Investors who have equity in their current properties and anyone who has about $80k or more in their superfund should start talking to their financial advisors about direct property investment. If you do not have a financial advisor, please give us a call and we can recommend a number of excellent people.

Supply and Demand are the quintessential factors in price movement. We are going to see demand increase substantially this year, and if supply does not keep up, and it certainly is not looking that way at the moment, then prices will rise!!! Using the right buyer advocate to help you through the most important purchase of your life will be the best investment you have ever made. Please call us for a no obligation meeting and we can discuss all aspects of any property purchase you are considering.

Ian James

Monday February 9th

Our condolences go out to all those who have lost family, friends and homes in the most devastating fires ever seen in this country. Personally I would like to thank the tireless volunteers who have saved countless more lives. These selfless volunteers, some of whom have lost their own homes, continued to work for the benefit of all Victorians. I hope all those who are in a position to help, whether it be volunteering time, giving clothing, blood or donating money, can dig deep to assist in this unprecedented tragedy. There will be few people across the state who do not know of friends or relatives who have been touched by this tragedy.

Regardless of the heat on Saturday and the fact we are only just into February, 99 Auctions were reported with 64 sold and 35 passed in, 23 of these on Vendors bid. Whilst this sample is not large enough to give us any indication of what will happen this quarter, next week there are 300 auctions scheduled. These figures were reported by the Real Estate Institute of Victoria.

For those who have not been reading our regular market comments, I will repeat our thoughts on where the market is heading. By the way this is now almost universally agreed by everyone putting a comment in print. The upper end of the market, above approximately $1.5M will be hit hard this year. This market will show signs of dropping in the vicinity of 25%-40% this year. This will be made up mostly of people who have a financial “need” to sell.

The middle range of $700k - $1.5M will be quite volatile. Whilst some well presented homes on good land will sell very well, the poorly located, poorly presented properties will struggle. Overall the statistic will probably show this range as steady with maybe a minor drop.

It is the sub $600k range that will perform very well this year. There is a huge rise in demand for these properties from both first home buyers and astute investors. Whilst the government grants remain in place first home buyers can pay off a loan at nearly the same as what they will pay in rent. So anyone with even close to enough deposit will be entering the market over the next six months if they can. The small investor will also be targeting this market. Good locations around Melbourne that consistently show double digit annual growth over long periods will be almost revenue neutral from time of purchase. Revenue neutral property investment usually takes about three to five years. Those who buy this year will be a long way ahead.

This market range will probably show increases in price due to substantial demand in the vicinity of 3% - 10% this year. Call us now for a no obligation meeting to discuss your needs. Anyone can buy property; an expert will assist you to buy the right property at the right price.

Ian James

 

Monday February 2nd

February is already upon us and we have just completed our busiest month for new enquiries since I have been a buyer advocate. First home buyers, first time investors, people who are upsizing their properties are all out and about looking for bargains. During this same time all my conversations with Real Estate Agents have been centred on the lack of new listings. If Demand is rapidly increasing and supply is decreasing there is only one place for the prices of property to go. UP!!

This will only affect the lower end of the market, under about $750,000. Above this there will be less new purchasers and potentially a lot more vendors as loans and margin calls come due.

Interest rates are sure to drop after the Reserve bank meeting tomorrow. It is just a matter of how much? The current thoughts are 0.75% - 1.5% (I think it will be 1% or 1.25%). With money getting cheaper, first home owner grants still in force and rental returns getting higher, more and more people will want to get into the market this year.

Looking at the statistical data, the Melbourne Median house price dropped on 0.9% in the December quarter. Whilst we have seen drops in some of the more affluent suburbs like Hawthorn East drop over 20% in the same time. Balwyn and Kew also showed drops of well over 10%. Bucking the trend were suburbs with lower median prices. Although not all affluent suburbs did badly. The top performing suburb last quarter was Templestowe with a rise in median price of 49.1% on over 30 sales, Toorak went up by 15.4% whilst Brighton dropped 4.7%.

These are statistics and they can be read in a variety of ways. Excellent property with long term outlook for fantastic growth needs data to be looked at over a much longer time frame than a quarter or even a year. Look at how a property area has performed over ten years and over twenty five years or more. This will tell you much more than short term data.

If you are considering entering into the property market this year, please do not hesitate in calling us for a no obligation appointment. We can explain in far more detail what good property purchasing is all about.

Ian James

 

Monday January 27th

We are looking forward to an early start to the autumn selling season. There are now quite a few properties scheduled for auction on February 14. This is substantially earlier than usual. We are still inundated with enquiries from first home buyers and investors wanting to enter the market place as it is a very attractive time to be cashed up and buying property.

For the second week in a row Enzo Raimondo, head of the Real Estate Institute of Victoria, is trying to educate property buyers about selling agents responsibilities. In Saturday’s Herald Sun Mr Raimondo explains that the agent’s first responsibility is to their client, THE VENDOR. He goes further to say;

“Given the responsibilities of the agent, they will do whatever they can within the bounds of the law to negotiate the highest possible price for their client”

In exactly the same way the selling agent must put their client first a Buyer Advocate, or Buyer Agent, must put their client first, THE PURCHASER. If a purchaser is using a competent, licensed and experienced Buying Agent, then they will be in a far better position, both from the data collection, assessment capabilities and also the negotiation of the property. In addition to the assessment and negotiation assistance, Buyers will be comfortable having a trusted advisor to lean on in an abnormally stressful time.

If you are in the market to purchase a property you must get professional help. To attempt to assess or negotiate a property on your own in the current market would be similar to representing yourself in a lawsuit when your opposition is a Queens Counsel.

Buyer advocates must be licensed Real Estate agents and registered with the Business Licensing Authority. Any member of the public can access an online list of Licensed Real Estate Agents maintained by the Victorian Government - https://online.justice.vic.gov.au/cav/bla-search-criteria?mode=E

If you are considering purchasing a property please call us for a no obligation meeting. We can explain many things you may or may not already be aware of.

Ian James

Monday January 19th

Whilst the papers are full of which selling system is better, Auction or Private Sale, I think Enzo Raimondo’s comment in The Age “The market is a buyers’ market and having a skilled buyer’s agent working for you will help to get you the best deal" is far more relevant.

To buy good property in today’s market, you need to find and identify the better properties and not waste time on those that do not meet your needs or fall well short of the parameters of what a good property is.

Secondly, once a suitable property is found, due diligence must be carried out very quickly. You must ascertain what the property is worth to you, what it is worth to the general public and also what the vendors’ expectations are. The reason you have to move quickly is that good property does not and will not last long on the market.

Once you have decided this property suits your needs, is good value for money and offers good long term growth prospects, you need to secure it before somebody else either buys it or starts to get interested and pushes the price up. This can mean making an offer very quickly that may have conditions, such as three day cooling off or subject to a building inspection. Or to increase your chances of closing the deal making an unconditional offer after doing all necessary due diligence.

The value of having a professional Buyers Advocate on your side at times like this will be obvious. Assessment of a property and what is likely to happen during a sales process goes well beyond information you would receive if you had the property valued. Even assuming the Valuation gave you an indication of the worth of the property it does not even begin to give any indication as to the wants of the vendor. In today’s market there are many non realistic vendors. If a selling agent initially asks for 20% above the value of the property, do you know what to do? A good Buyer Advocate will!

It does not matter whether an agent takes a property to auction, asks for expressions of interest or uses phrases like ‘Sale by Set Date.’ A good Buyers Advocate can handle all of these situations. Even in the height of the ‘sellers market’ of 2007 our company bought less property actually under the hammer than by private negotiation. Even if agents persist with auction campaigns, it will only be a very small percentage that will sell under the hammer.

The most important figure this year to watch will be total sales for the week. I have been saying this since June lat year and I believe most people are just starting to understand why. Property prices are always set by supply and demand. It does not matter whether the sale was generated by private negotiation or auction or a tender process.

If you are interested in buying property this year, please feel free to contact us for a no obligation meeting.

Ian James

Monday January 12th

Welcome to the New Year. I hope you each had an enjoyable and fulfilling break. Whilst last year ended in a flurry, usually January builds up at a very slow and gradual pace. 2009 is not going to be an ordinary year. We have had a huge influx of enquiries and have already negotiated several property transactions in the last 10 days. The REIV has reported 677 homes were bought over the Christmas break. The market is speeding up much faster than most people have expected.

We know that the finance reporters are still writing about gloom, doom and recessions. There will probably be an increase in unemployment. But there will still be plenty of people who are secure in their employment, who have equity in their homes or are saving like crazy in order to take advantage of the first home buyers’ boost the federal government has offered.

First home owners will be a large growth sector of the market place over the next 6 months. With a sunset clause of 30th June in place for the extra $7000, or $14000 if you are building, First home buyers will be increasing the demand for properties up to about $500,000.

This current market is also very good for people upgrading. The higher the purchase price, the less likely the vendors will get ‘full price’ for their properties. So if you are selling a lower priced property, for which the demand is increasing, you have a chance of getting a fair and reasonable price for your property and more chance of getting a ‘good buy’ on the higher priced property.

Investors with equity in their homes, who in the past have looked at the share markets to invest in, will start to look for alternatives. I don’t know too many people who haven’t lost money in their super last year!! There are a couple of reasons people hesitate to invest in ‘bricks and mortar’. Firstly, areas with high capital growth usually have a lower return; this leaves a shortfall to be made up by the investor. This can be as much as $10,000 per annum. Whilst this is tax deductible (known as negative gearing) it can sometimes be difficult to find the money each week. Secondly, most people despise the process of buying a property. The searching, assessing and dealing with Real Estate agents every weekend is usually too stressful and most people give up.

This will change in 2009. Firstly, rental returns in the better suburbs which have had over 10% capital growth per annum over the last ten years or more have now increased substantially. Interest rates are dropping and these are the two fundamental numbers which make up how much money an investor has to find each week. With another rate cut due early this year, a good, long term investment, in a suburb that should have excellent capital growth will be very close to revenue neutral from day one.

Secondly, Buyer Advocates will alleviate the second issue. More and more properties are now being purchased with the assistance of a licensed real estate agent acting for the purchaser. In this market, assessing or negotiating a property without the assistance of an expert will cost you substantially more than the fees of an advocate. Add to this the lower stress and the wealth of knowledge a Buyer’s Advocate brings to the transaction, not paying for an expert seems ludicrous.

Our office has reopened earlier than expected and if you are considering a property purchase this year, please do not hesitate to call for an appointment. Our first meeting is obligation free and may just save you making a mistake with one of the biggest purchases of your life. We have packages to assist all budgets and needs.

Ian James

Collapse Section

Monday December 15th

With the spring season drawing to a close we have seen the “clearance rate” climb to 57%. Private sales picked up to 635 for the week and this is the figure that we will be watching throughout 2009. I have been saying for months, the “clearance rate” is an obsolete statistic. Agents have finally worked out to put their clients before their agencies’ advertising.

In 2009 properties under $500,000 will most likely continue their positive march. The median price for the last twelve months according to the REIV increased 3.6%. I believe this figure will rise steadily throughout 2009. Investors who are secure in their jobs will be looking to capitalise on other vendors insecurities. With interest rates dropping and rents rising, neutrally gearing a property, maybe even positively gearing maybe possible in some areas early in 2009. Investors should however be aware that yield is not always the best indication of a good investment property as the capital growth may not be the best.

First Home Buyers looking to pounce on the governments first home owners boost will be pushing up the price of the sub $500k properties until at least June. Then it will depend on whether the government extend the boost or not.

All in all, properties that are in good locations that show a history of good capital growth, have an improving yield and are under $500,000 will be the hottest property for the first six months of next year. In the later half of the year, depending on the economic outlook and what consumer sentiment brings, properties between $500,000 and $1M will be the next bracket to move. Once the economy begins to recover, properties above $1M will rebound extremely well. If you are in the market for this type of property, spring 2009 may well be the last time to buy at reduced prices before a recovery in early 2010.

It has been a tumultuous year throughout the world. Next year will probably be easier to read than this one. Although some downsizing in nearly all industries is a fact that we will need to get used to, it will also be a time for opportunity. Don’t look back in 2010 and say “why didn’t I buy property last year”

Whatever property you are looking at next year, come in and have a chat to us. Our office will be open from 5th January next year.

From the team at JPP we wish to extend our best wishes for the holiday season to all our avid readers and wish you the very best fortune in the New Year.

Ian James

Monday December 8th

Total sales stayed above 1000 again this week and the clearance rate was up by 4%. Anxiety runs hot around the holidays and any properties that are still on the market after next weekend will struggle to sell this year. There are about 700 auctions booked for next weekend and only about 200 for the Saturday before Christmas.

Whether it is the First Home Buyers Boost, people becoming a little more confident, rental price increases or the world wide sentiment improving, one thing is for sure; there are more buyers in the market at the moment than I have seen all year. Our enquiry levels are up for both owner occupiers and investors alike. Buyers are coming back into the market with a lot more confidence that property prices are going to level out or turn fairly sharply up again in the near future.

With interest rates pegged to drop further and rental prices increasing, neutrally geared properties are no longer a pipe dream. What used to take several years for rents to catch up to interest payments, now good property can be purchased and in some areas and be revenue neutral in as little as a couple of years. This will only be possible if you buy before the property prices begin to rise again.

To illustrate this, a 3 bedroom family home in Frankston may cost $280,000 which would cost about $16,800 to finance. If it is well located, and neatly presented it should be possible to earn between $13,500 - $15,000. After some rates, charges for maintenance, some property management fees etc, which are tax deductible and your negative gearing tax deduction, there may be as little as $2000 per year to find. If in the next 2 years the rent went up, similar to what is happening now and interest rates are still going down which will reduce your expenditure; your income would surpass your outgoings.

First Home Buyers need to purchase before 30/6/2009 to ensure the extra boost the federal government is offering. If you are considering upgrading your property, now is an excellent time to changeover. Whilst the top of the market is more depressed than the bottom, your sale may not be fantastic but you should be able to buy very well.

Anyone thinking of purchasing a new property, be it to live in or as an investment should come in and have a chat. There is no obligation at our first meeting.

Ian James

Monday December 1st

If you read the “Gloom and Doom” printed in the media yesterday, then you may not have noticed that 1157 properties sold last week. This is the best result since April this year. Real Estate Agents are beginning to understand that Auctions are only good advertising for their agencies, not for the vendors’ property price.

There are more properties selling now than there were one month, three months and even six months ago. Everyone who wants to purchase a property in the next twelve months needs to prepare for some vigorous negotiation. Most good Real Estate agents are very smart. They will change their methods and move away from auctions and back to private treaty negotiations.

Purchasers who still want to buy good property at a good price will need to move quickly. Early through next year, the property prices will cease to be reported with poor clearance rates. The Real Estate industry will simply not give the media “gloom and doom” to write about. In fact the figures coming out from the REIV will improve steadily, regardless of what actually happens in the market place. This will be due to the fact that the clearance rate percentage will lose its appeal. More properties will be sold privately and undisclosed, making it even more difficult for the general public to understand what is happening in the market.

This is not such a bad thing from the confidence angle. Good property will serve the majority of people very well as an investment. It does not have the “dot com” or mining share price surges, but it also doesn’t have their downturns. Unlike some of the largest companies and banks in the world, I cannot recall a well situated property in Melbourne every losing 100% of its value. I cannot even recall any time where a well located property even lost 50% of its true value.

Even as the world economy takes a nose dive throughout next year, Australia, and in particular, Melbourne’s property market, is poised for strong growth over the next ten years. For those of you, who have enough headaches from work and home; think about a long term, “set and forget” property investment, upgrading the family home, or buying that first dream house.

We are happy to have a chat anytime.

Ian James

Monday November 24th

It was hit and miss this weekend. With the cold and rain putting a dampener on people’s spirit (and wallets) the clearance rates were again at a low of 53%. Across the board this week there were sales and properties passed-in in the under $500,000 home buyer range, sales in the $500,000 - $1m upsizing range and million dollar plus range. We do however note that for the third week in a row there was an increase in total sales.

Not unusually we opened the paper this morning to numerous pass ins in Brighton, Albert Park, Kew and Glen Iris among many other top end areas. What was slightly different this week was the pass ins in Elwood, Brunswick, Preston and Moonee Ponds, again among others. The latter suburbs are areas prominent with units and apartments and medians around the $500,000 - $700,000 range, which were yet to be hit too hard.

Saying this however it shows that we are still in a buyers market. Unlike this time last year when you would go to auction and stand there with your hand up until you had beaten other potential purchasers off or ran out of money, we are now seeing a lot more negotiation after the auction. Coming up to Christmas, even more properties will be negotiated at prices that will be dependent on financial circumstances of the buyer and seller rather than on what the property is necessarily worth.

If you are thinking about buying either now or post Christmas why not come in for a no obligation chat about what we think the market is doing and how we may be able to assist you.

Courtney James

Monday November 17th

The “clearance rate” was 54% across the weekend. The media would have us believe there was no movement and that things are going from bad to worse. What they neglected to explain was the increase in total sales of 21.63%. These figures are the same ones supplied to the media by the REIV.

Auctions are designed to achieve one bid over the second highest price. When the market is “firing on all cylinders” there are frequently multiple people biding which pushes the price higher than it may achieve normally. When the market is only achieving one interested party at the higher levels then Auctions do not benefit either the buyer or seller. For example; if two people are interested in a property, Buyer 1 has $420k and Buyer 2 $450k then an auction would finish one bid over $420k and if this is well below the reserve then negotiation by both sides becomes very difficult. Once the auction has been passed in the negotiations can be strained. The Buyer will think they have offered something fair and reasonable as they were the highest bidder, but of course the vendors’ expectations maybe a little higher.

An auction pass in negotiation is as difficult as it gets. There are high emotions. Everyone is nervous. There may be a lot of people around, and as a buyer you may not understand what your rights are. During the auction everyone is bidding on agreed terms. That’s right! Agreed terms; we frequently arrange for different conditions, settlement and deposit amounts. Once the auction has passed in all deals are off. Everything is negotiable!! You can offer different settlements, different deposit amount, add a building clause or anything else.

If you are looking to buy a property at the moment, negotiation is truly the most important factor in buying well. Once the property is assessed, a professional, experienced negotiator could make tens of thousands of dollars difference. If you are using a professional negotiator, it will be in your favour not the vendors!

Ian James

Monday November 10th

The “clearance rate” continues its course towards 50% and there were only 840 total sales last weekend. The government is talking more gloom and doom than the media and the “R” word is being talked about more openly than the previous whispers in the corridors of our politicians.

Interest rates around the world are dropping sharply; our own Reserve Bank dropping 0.75% off the cash rate and the Bank of England 1.5% last week. Our big banks are grabbing a small slice of the profit each time the reserve does this. Most of the banks passed on 0.58% - 0.65%. If the banks continue to profiteer on each deduction the Reserve makes, the government and the Reserve Bank will need to come up with another solution to stimulate the economy.

It can also be said that, whilst most people that were polled by the Herald Sun today, wish to see a drop in Australian immigration, more and more people are still travelling to Melbourne from other states and settling in the “Most liveable city in the world”. This is continuing to put pressure on our infrastructure, our accommodations and our property prices. With more and more people looking for houses either to rent or buy, our demand for housing is still rising. Our supply, whilst slowly increasing thanks mainly to the First Home Owners Boost, is still falling short.

All of the above factors will lead to an increase in housing prices and will make it nearly impossible for future generations to afford to buy property. In the market under $700,000 we can see that every well located property, that is presented well and marketed accurately, tends to sell very well. We attended an auction in Murrumbeena on Saturday that was a great 2 bedroom villa unit, in an excellent location. 9 different people bid on this property and it sold above where it should have. The Agents, Gary Peer and Associates, did a good job on behalf of their vendor. Another property we purchased on the weekend in Northcote was bought under the hammer just shy of $700,000. This property was extremely well located and presented and had several potential purchasers.

The first home owners grant is beginning to kick into play. Good properties around $300k - $500k are becoming scarce. If you can get into the property market, now is the time to do it. “Find” the right property, “Assess” it accurately and then have a professional “Negotiate” it for you. The best properties will not be bought without competition, nor will they be given away by the Real Estate Agents.

JPP is running another seminar with information available to First Home owners and Investors. It is being run this Thursday evening at the Glen Eira Town Hall. Places are limited so please follow the link to book your seat.

Ian James

Monday October 27th

We are back to the shrinking “clearance rate” again. The clearance rate dropped to 53% but the total sales for the week climbed 18%. Whilst most buyer agents and selling agents will tell you the market is “hitting the wall” or that the market is in free fall, this is a total fallacy. Investors are moving into the market in droves. Our enquiry levels for First Home Buyers are up by 75%. There are plenty of good properties out there to buy at very good prices. But don’t be surprised by competition at the best.

Of the properties purchased last week, more than 60% were bought under competition at auction. We purchased one property where 4 interested parties were bidding after the property was “on the market” and the amount between the final bid and the first to drop out was only $4000. The property was sold in excess of $400,000. Conversely, another auction we attended was sold under multiple competition, $150,000 over the asking price. It was very obvious this would happen after due diligence had been performed. This was no surprise to us, our clients or the other real estate agent who was also bidding.

The high end of the market is always the most volatile. The closer to the Melbourne Median Price, the less volatile the prices are. We will see median prices in the top 20 highest priced suburbs show the greatest downward movement over the next 6 months. If you actually analyse these sales you will notice that the majority of these properties will not be the best in their class or there will be some excellent properties selling below their true value for some specific reason, either quiet sale, long settlement or special requirement. It is the latter type of property that will make the most money in the long term. In the lower priced suburbs, under $700k, the key to buying well is selecting good property and then negotiating the best possible price.

Real Estate agents are creatures of habit. Melbourne is so used to auctioning property that both the agents and purchasers expect all property (that is thought to be good) will be auctioned. But good, experienced Real Estate Agents are not stupid. They will change with the times and the market. There will be a lot more private sale negotiation from now on.

It is now imperative to choose the property very well, assess the property very accurately, and now you must also negotiate with a very experienced property negotiator. If you want to secure an exceptional property at the right price come and see us at our free seminar at Glen Eira Town Hall on Thursday November 13, or give us a call to organise a “no obligation” meeting to discuss your requirements.

Ian James

Monday October 20th

This opinion of the market has taken me nearly four hours to write this morning. I have had about 6 phone calls from clients, past clients, reporters and friends asking me “what is happening in the market?”

The current market is being driven by two opposing forces. One, similar to the stock market, is falling confidence. All the papers are talking “recession” with one analyst in the paper this morning saying Australia will be in recession by Christmas. Last time someone explained economics to me, a recession is two successive quarters of negative growth. Growth in Australian GDP was 2.7% in the quarter to June 30 and this means it is technically, as well as unlikely, for Australia to be in Recession by Christmas.

The other influence on the property market is Supply and Demand. Supply is very low for good properties throughout the Melbourne Metropolitan area at the moment. Demand is getting stronger for good property. Therefore prices should go up as demand outstrips supply. We also have a dramatic a rental crisis, long term serviced apartments have exceptionally high occupancy rates, a growing population and a reduction in new housing approvals.

These two opposing influences are keeping the property market buoyant. As interest rates are dropping, and rents are rising, we can see investors who are looking for some stability of investment, heading back to the safety of bricks and mortar. We also know that if there is a choice between an over $1M investment and under $1M that offers a better return and a similar or better capital growth then it is obvious to go after the properties that show excellent long term growth, and are cheaper to purchase and offer a much lower volatility in price.

In my opinion, this can only lead to a growth in property prices. It will start in the sub $700k category and then move, slowly, into higher price brackets. Within the next 6 - 12 months, properties below $700 will begin to sell strongly. And, if we add to this the government incentive of doubling and / or tripling the First Home Owners Grant, we should see very good growth in this sector. Properties over $1.5M will always sell depending on whether the agent and vendor pitch to the correct price. Good property always sells well, average or poor properties sell at the right price and tend to fail when marketed above their correct price range.

Investors or owner occupier’s main dilemma is now getting good advice on what they will have to pay at any given time in the market. Prices will fluctuate dramatically in the next 12 months. Buyers can save tens of thousands of dollars by knowing the market and having a professional negotiator on their side. Remember, the vendor will be using a professional to negotiate – so should you.

If you have any comments or would like to have a chat, please do not hesitate to email or give us a call.

Ian James

Monday October 13th

There has been a drop of about 6% in the total sales within the metropolitan area last week. Unfortunately, the “clearance rate” bears no resemblance to what is going on in the market, except by coincidence. Between all our advocates we visited nearly 15 auctions over the weekend, only one of which sold under the hammer. All the rest were negotiated under the same conditions as any normal private sale.

If you are buying a home in Melbourne you need professional advice. Advice that is designed to assist you not the vendor. If you cannot accurately assess what a property will sell for, you could be paying 10% too much or miss out on the bargain of a lifetime.

We have bought several excellent properties at very reasonable prices lately and also some very good properties at excellent prices. Professional Real estate Agents are very good negotiators. The vendor is paying a fee to have somebody to represent them during the negotiation; any smart purchaser will do the same.

Whilst some analysts are estimating the last three to four years growth has been wiped off share portfolios, Melbourne’s property prices have risen over 10% in the last year. We have very low vacancy rates, a population increasing faster than any other capital city in Australia and housing approvals for new homes dropping.

The RBA dropped interest rates on Tuesday and have strongly signalled further rate cuts in the coming months. Rental increases are getting larger and more frequent. This means the difference between cost of borrowing and income produced from rental return is getting closer. Investors are flooding into the market.

If supply is decreasing and demand is increasing there is only one way for property prices to go. Property prices will increase dramatically over the next 24 months. Buying now is one of the best ways to safeguard your future prosperity. The statement “as safe as houses” is very apt in the current economic climate.

Come in and have a chat or attend one of our free seminars and see how we can help you buy your next property.

Ian James

Monday October 6th

With the football season over, the snapper season just beginning and the weather starting to turn on the warmer days, property sales in Melbourne should begin to heat up. The clearance rate of 68% doesn’t really mean too much whilst the auction numbers still make up less than half of the total sales. We need to watch overall sales. 996 sales from auctions and private sale means we are holding in the total sales numbers. Excluding last weekend, over the past 5 weeks there has been an average of just over 1000 properties per week sold in the Melbourne metro area.

The US government has passed the bail out plan and will begin to assist the financial institutions, firstly in the USA, but this will filter throughout the world. Is the economic crisis over – of course not. We can see our federal politicians already making excuses for our banks not passing on any interest rate cut that will occur on Wednesday. We see that economists are predicting the market will not pick up until the first home owners scheme kicks into gear in 2011. We can see everyone assuming the share market will be in trouble for quite some time.

If we then look at Australia’s overall property outlook, I would say property prices will remain very flat, if not drop 5% or so. In rural areas where mining and agriculture may drop off slightly, there will be less demand for housing. (This is a totally different topic, that I will talk about another time – but property spruikers promoting positively geared rural properties could well end up with large scale negative capital growth soon) But!! Melbourne is in the grip of a chronic shortage of property. Chronic meaning “a persistent and lasting disease or medical condition, or one that has developed slowly”. Whilst housing approvals are down, due in part to the credit crunch and there is a growing increase to the number of people arriving in Melbourne, we also have a change of numbers of people per household. With all these factors leading to a “chronic” shortage, the simplistic rules of supply and demand will most likely prevail.

Property in Melbourne will go up in the short to medium term. There will not be a “Wall Street” style drop in property prices. Investors, who for the first time in seven years saw, dramatic falls in their share portfolios are starting to look at adding direct property to spread the risk. Property does not go up and down like stocks. Owner occupiers who have remained out of the market earlier this year will begin searching again. Tenants who simply cannot get rental accommodation in their preferred locations will down grade their expectations and look to buy. Demand will exceed supply in the Melbourne Metropolitan area. This will have an upward effect on property prices that will increase over the coming years. Even if property prices don’t start to gradually climb, the shortage of stock will compound and create another market similar to that, which we saw in 2007. If you have not bought prior to this time, you will miss out on very valuable growth.

Buying property in Melbourne is a long term secure investment. You won’t double your investment overnight, nor will you be “day trading” but you can secure your financial future with a little bit of help. When was the last time property in the Melbourne Metropolitan area lost 90% of its value? Have a think about that next time you are buying shares in a company even in a bank!! (Bear Sterns was sold to JP Morgan for less than 10cents on the dollar)

Buying property on your own is scary, time consuming and becomes exasperating. Buying property should be like retail therapy on a grand scale. Get an expert on your side. Give us a call or come in and have a chat!

Ian James

Monday September 29th

With the crowning of the new premiers of the AFL for this year, we congratulate the Hawthorn Football Club. We also begin the spring real estate season in earnest. The next three weeks will indicate what the stock levels will be like for the rest of the year. I don’t think anyone is too certain what will happen in the markets of the world. Whether the Multi – Billion dollar bailout in the USA will strengthen or weaken our markets. Will there be such a credit squeeze, that we will go back to the times of 20% deposit, or will everything continue on as it did during the 2001 downturn on Wall Street.

When contemplating the price movement in the market, I will always come back to supply and demand. If the selling agents do not increase stock levels then property prices will remain resilient due to the shortage and may well increase. If the selling agents flood the market, then of course there will be a downturn in “average” prices. Good property will still continue to sell well. Melbourne is still the fastest growing capital city, and whilst housing approvals are low and seem to be stagnating, the number of people looking for homes is increasing and this is putting upward pressure on rental accommodation.

Over the next twelve months the key to buying good real estate at a good price will be quality assessment and quality negotiation. Any person contemplating any property purchase within the next twelve months, either to live in or as an investment, will do very well to seek advice in these two crucial areas of property acquisition.

We are running a seminar on property negotiation – a buyers’ perspective and also discussing some of the hotspots around Melbourne that should appreciate well in the coming years. It is on at 6.30pm Wednesday 8th October at Glen Eira Town Hall in Caulfield. Click here for more details.

Ian James

Monday September 22nd

Again the market moved up sharply this week and moved back over the 1000 sales mark. This is the fourth time since March this has occurred. And again the drop in clearance rates is virtually meaningless. Next weekend is virtually a non event for auctions due to the AFL Grand Final; it will be interesting to see the number of private sales that still proceed.

For those of you perturbed about little things like the world economy, and such other trivial matters as stock market crashes and resurrections and what it will do to the Melbourne property market, you may have missed a small article quoting RP Data. They believe rental returns will increase by 14% over the next year. If this trend is continued for five years, a good $500k investment property returning average rent, in a good location, with average depreciation could easily be revenue neutral within about 5 years. If this occurred and the average trends of the last 25 years continued, you could have a property appreciating at better than 10% pa and the tenant is paying for the whole thing.

Add to this the supply vs. demand issue which is always the dominant influence on price movement. With building approvals not keeping pace with increases to our population, the price over the long term must rise. Add the fact that investors are returning to the stability of property and the possibility of being revenue neutral in a relatively short time frame, and you have the basis for excellent long term outlook in the Melbourne Residential property market.

Owner occupiers are starting to consider their position in the market as well. As investors continue to come back to the market, this will put a lot of pressure on the first home buyers especially.

Prices will begin to climb, slowly at first; the spring selling season is upon us and the total number of sales is rising. By February or March next year, with perhaps one or two interest rate reductions and the prospects of revenue neutral properties even closer at hand, property prices in Melbourne have nowhere to go but up.

Ian James

Monday September 15th

The clearance rate jumped to 68% whilst total sales dropped by just under 2%. There were 959 total sales last week reported to the REIV. 366 properties sold via an auction campaign, either before, during or after an auction was advertised, whilst 539 properties were sold by private treaty. As we move into the busier part of the spring selling season during October and November, it will be interesting to watch whether the numbers of Auctions will increase. There is usually a greater urgency for purchasers, coming closer to the end of the year, to try and be settled before the start of the new school year. This puts a greater demand on property. Will there be an equal supply, or will prices be forced up due to the Supply vs. Demand equation? Only time will tell.

There will be some increase of property and this will mean purchasers will need to reassess their searching techniques. It is better to filter your choice of property when looking on the internet and then talking to the agent to try to cut down on the number of properties you need to view. On a Saturday and Sunday there are only so many open times and “Murphy’s law” predicts all the properties you want to view will be open at the same time or at opposite ends of the day. Each week you should be refining your parameters to reduce your need to visit every property. Here are some handy hints when searching:

• Know what you want and try not to get sidetracked.
• Write out a run sheet before you leave home. Note the address the open time and the agency name.
• Regularly attend auctions of similar properties in your target area.
• Keep notes on properties you have seen and then follow up what happens at auction.
• Before inspecting any property, call the agent and ask him what price they are quoting. (Many agents now do not indicate this in their advertisements).
• Try not to view too many properties in a row – you can easily merge their details.

If you are going to buy a property without assistance, you must try and mitigate your lack of experience. Have a plan, work out the type of property, style of property, its characteristics, its size and its value. THEN STICK TO IT.

Have a look at our “How to” series for more tips on the property buying process.

Ian James

Monday September 8th

Whilst the market clearance rate went up 4% (Yahoo!!) the overall sales figures dropped 4%. There were a total of 977 sales reported to the REIV last week with the preceding week showing 1023. I noticed in the Age this morning even the agents are now saying the true rate for sales under the hammer would be closer to 18% as the vast majority of properties still pass in but are quickly negotiated after the auction.

If you are buying a property within the next three to four months you will almost certainly have to negotiate with an experienced Real Estate Agent. We are running seminars over the next couple of months with topics such as Negotiation - A buyers perspective, we will have Melbourne "hot spots" and checklists of things to do before purchase. These seminars will be conducted at the Glen Eira Town Hall and there is no charge for this. These are informal talks and there will be a chance put specific questions to our panel of experts.

Please come along and ask questions, or send them to us and we will answer them on our "How to" page on our website.

Ian James

Monday September 1st

Welcome to spring! And of course the papers are full of failures in the market place: "59% clearance rate means that nobody is buying property". This week there was a 24% increase in the total number of properties bought against the previous week. Last week there were just over 500 private sales and a similar number of auctions. This week there were 573 auctions and 685 private sales. All these numbers are courtesy of the REIV.

Further to this, the "Spring" selling season doesn’t really kick in until October. With cold, wet weekends, and the AFL final series taking up most of September, we usually find the market builds up slowly to a rush in October.

With RBA interest rates almost guaranteed to drop this week, the banks will probably offer something within the next couple of weeks. There is a good chance a further rate cut in November would push the prices up before Christmas. The "autumn" selling season starting in late January, should be very strong. The lack of new home building approvals and the lower than average number of sales this year will leave buyers outweighing sellers. There is only one thing that can happen when demand out strips supply. Prices will go up. We do not even have to factor in the rental crisis.

With the slow demise of the numbers of properties selling under the hammer at auction and the increase in the necessity to negotiate "one on one" with vastly experienced real estate agents, there has never been a greater need than now to get professional assistance when buying a property.

Call us on (03) 9523 1054 and book a no obligation meeting to discuss how we can assist you.

Ian James

Monday August 25th

Another fairly lacklustre weekend for auctions saw the "Clearance Rate" slip to 63%. But there were still over 800 property sales in Melbourne last week. Just because auction numbers slip a little doesn't mean the market is shutting down. At the same time, the major banks are coming as close to saying they will cut rates if the Reserve Bank does. Investors and Owner occupiers are beginning to re enter the market. Purchasers are still looking for "the bargain of the century" and just as stubbornly vendors are still looking for a 20% increase on last years prices. The market must come to a balance.

And the market will balance. There are always a variety of factors which have an effect on the market. There are economic effects, such as interest rates, inflation, vacancy rates and confidence levels. There are social factors, such as migration - currently standing at 60,000 people a year entering Melbourne. And there are always political factors. I don't have enough room here to start talking politics. But the market will always go back to the fundamentals. SUPPLY VS DEMAND. Demand is increasing after a very low turnover throughout the first half of the year and the potential lowering of interest rates. If supply does not increase as well then prices will go up. Just as there will always be death and taxes, if supply is low and demand is high property prices will increase.

For any of you looking to get into the market over the next 12 - 18 months, the next three months will be crucial. Owner occupiers tend to try and purchase in October and November, in order to settle in before the new school year. Investors will have just got their tax returns after negatively gearing their last investment. This can nicely form their next deposit. There is also a normal increase in property sales and this should allow prospective purchasers some good choices.

The key to a good purchase, especially in a balancing market, is assessing the market value of the property as accurately as possible. There are three magic numbers to try to ascertain before negotiating. What's the property worth to you? What's the property worth to the average purchaser? (Market value) And finally, what is the lowest amount the vendor will accept? Have these three figures worked out as accurately as you can before you begin the all important negotiation. If you cannot work out these numbers, seek advice from a professional Buyers Agent. The vendor's agent is not allowed to assist you with these numbers. He is contractually obligated to get the most money out of you that he can. It does not make any difference to him if your financial institution values your purchase 20% below what you paid, but it will make a big difference to whether you can fund the purchase of the property. A small error in estimating the value up or down will mean the difference in overpaying by $20,000 or not buying the property.

Before you go and spend half a million dollars, consider paying someone for some advice. I don't know of anyone who would go to court without legal representation; even if it is a $5000 dispute with a neighbour. Our government chooses to try and curb some of the habits of selling agents and then say they are assisting people who are purchasing property. This will never be a successful. Selling agents cannot help the purchaser - that would be unlawful. Before you purchase your next property at least talk to us. The first meeting is free and without obligation.

Ian James

Monday August 18th

A clearance rate of 66% this weekend, whilst very well received, does not denote the almighty change in the market. The fact that thousands of people attended the Home Buyers Show certainly does. Thank you to all those who visited the JPP team over the weekend.

It was great to talk to so many people who are intending to come back into the market place sooner rather than later. The mix was fairly well spread over investors and owner occupiers. Thank you also to the hundreds of people who attended my question and answer sessions on Saturday and Sunday. Anybody wishing to hear me speak about negotiation and the Melbourne property market can go to our website and get booking details of the upcoming seminar at Milano's in Brighton on 25/8/2008

Throughout the weekend, whilst speaking to many people who are in the market to purchase, I noted a similar thought. Most have waited until they were sure the interest rates weren't going up any further. None were too sure whether they would come down due to the banks, but all were happy to take the plunge as of now. Most were comfortable with their own economic outlook and nearly all pointed to migration as the largest catalyst causing them to buy now.

With the newspapers full of problems with the public transport system, the roads are always clogged, our water supply is running out etc: it is relatively obvious our population is dramatically increasing and causing these events. This is spurring on home hunters to take the plunge.

Ian James

Monday August 11th

July has been the busiest month this year for JPP. Our enquiry levels are as high as they have been in twelve months. And its not just investors flooding into the market, the owner occupiers are back. We have purchased 15 properties on 10 days. These properties ranged from family homes in Melbourne's best suburbs to investors units in Inner Melbourne to some of the best properties in Geelong. Vendors are beginning to meet the market; owner occupiers and investors are flooding back to the market. I believe the spring season will be a very hectic time. The Reserve Bank and the bigger commercial banks will obviously play a pivotal role; but, Supply and Demand will run the market as it always does.

As the cold weather freezes the Dandenong Ranges, buyers are starting to brave the wintry conditions. Most reporters are telling us the clearance rate is down, the market prices are falling and the ocean levels are going to rise by 3 metres. The reality is agents are marketing properties well above what the market sees as fair value and accordingly the properties do not sell. As soon as the agent comes back to meet the market, the property will usually attract attention.

Those vendors, who understand that a well marketed property will usually perform better than one that has a poor marketing strategy, are selling their properties easily and usually well above asking price.

It is not the fault of the agents in asking for more than the property is worth; it is usually the vendors dreaming that their property has continued with another 20% rise since the start of the year. We all know this is just not the reality.

There has been a very handsome 14% increase on median house price between June 07 and June 08 and if we had this kind of growth year in year out like some of the better parts of Melbourne have done over the past 10 to 12 years, then I would be extremely happy.

We are continually seeing properties sold weeks after a failed auction, when the vendor finally begins to understand what their property is worth. However, those that are marketed accurately are attracting multiple bidders and stern competition which usually pushes the price up above expectation.

The RBA will drop interest rates; the major banks will certainly not raise them. At the Parliamentary inquiry into banking competition last week, ANZ's Mr Rowland likened a Reserve cut to a drop in price of one ingredient in a loaf of bread. What an absolute "crock". When funds were cheap overseas and the Australian economy began to heat up, the RBA began to raise interest rates. The banks immediately passed on every full rate rise. If it were such a miniscule ingredient, why were the full rate hikes passed on Mr Rowland?

Property prices have a natural floor, unlike stocks in a company. If the company is incredibly poorly run, it can go out of business and shares in this company are worthless. Property does not operate like this. The market demand is increasing on a daily basis. 1500 people a week are coming to Melbourne to live here. There are not enough rental properties now. When interest rates come down, the disparity between rent and loan repayments will become so close that renters will re-enter the property market.

Supply and Demand are the quintessential elements controlling property prices. Prices will eventually have nowhere else to go but UP!!!!!!!!

Ian James

Monday August 4th

To say the top end of the market is slow is a ludicrous statement. It is unlikely to get 20% over value at an auction now, but properties are flying when they are 5% over market. If you bought a piece of land for $900,000, built a $700,000 home on it and then in this market received an offer in excess of $2M, who wouldn't be happy? Obviously some people still think last years growth was normal. A property such as this was passed in with a reserve of $2.3M. On auction day they were offered $2.1M. Five weeks later the property sold for $2.1M.

There are plenty of properties like this across the entire market range. The clearance rates are showing us that you won't get absolutely unrealistic prices when you sell. But you will still get a good price. If vendors accepted realistically "good" prices then clearance rates would be back in the high 70% range.

Anybody waiting for the property market to see a drop of 10% in the next 12 months across the board is talking about another country. Owner occupiers are flooding back to the market. Our enquiry levels are higher than they have ever been. And not just with investors. The mass media has finally decided to tell everyone the Reserve Bank won't be lifting interest rates in the near future. In fact they immediately talk of massive reductions. Our politicians are already telling the banks they must pass on any RBA reductions. (Good one Mr Swan - Who is running the RBA - you?)

There are plenty of potential purchasers who have held off buying in the last six months. There are plenty of prospective vendors doing the same. That will change. It has to! At the start of the year I thought the market would start to move again in February and March 2009, I am now not so sure. I think we could see significant upward movement as early as October.

Plenty of Vendors have worked out they can get a "good" price for their property. Nobody could have expected last year's upward trends to continue indefinitely. And they haven't. The market will continue to rise, but at its normal 7%-10%, until everyone works out we have more people than accommodation and then the prices will sky rocket again.

If you have been thinking of buying a property there is an easy adage to remember: "The best time to purchase property is yesterday". Tomorrow I will give you exactly the same advice!

Ian James

Monday July 28th

The media usually catch on slowly. It's easier to sell papers whilst printing gloom and doom. THE PROPERTY MARKET IS ALIVE AND BREATHING.

After last weeks multiple bids at auction, I was engaged in 4 private sale negotiations last week. All of which had multiple potential buyers. One was purchased by another party who were willing to pay well above market value. We were successful with three others, with two at fair and reasonable prices, whilst one was very good buying.

Our enquiry levels which had increased to yearly highs through last month, mainly by investors, are now being matched with heightened enquiry from owner occupiers. The majority of people requesting help to purchase properties are looking for assistance in knowing what to pay.

Anyone can put their hand up at auction, and if yours is the last hand up you win. BUT HAVE YOU? If a good auctioneer pushes the price up to $900,000 and its not yet "on the market" and you put your hand up to "earn" the first right to negotiate; What are you going to do when you get inside? What happens if the property is only worth $850,000? What are the rules regarding negotiations after an auction?

If the agent is asking $650,000 and you bargain him down to $630,000, you will be feeling very happy until you find out the property is only worth $600,000.

Property prices are about to jump again. Rentals have increased in some areas by 15%+ this year so far. Most economists are in agreement the RBA is not about to raise interest rates any further and may even drop them closer to the end of the year. I always assumed February or March next year would be the next jump in the property market, I now think this will be sooner rather than later.

If you are thinking about buying property over the next 12 months, why don't you come in for a no obligation chat.

Ian James

Monday July 21st

For the fourth weekend in a row I have been to auctions with more than three people bidding at properties on the market. There is a strong return of both investors and owner occupiers to the market place. Some properties purchased over the weekend sold at prices that may not have been attained in December last year. If we look at the media comment from most agents they are saying the same thing.

The market is heating up again and it is due to two major factors. Firstly, good property has a habit of always going up over the long term. Even with the "drop" in the market this year most good properties will still show 12 month increases above 10%. The March 2008 Melbourne Median price still showed a rise of 14.4% for the year (REIV Statistics). Can the Stock Market show this?

Secondly, good property is scarce. Supply and demand factors are way out of sync. Many people have been putting off their house purchase for the past six months, to see what would happen. Now they are in a position where they must buy or rent and both of these are daunting tasks. If stock doesn't increase by October, to quote Paul Braddock, ANZ Banks chief economist "there will be the mother of all booms in the property market"

It is not easy to find good property, and when you do you have to be prepared to "fight" for it to a certain point. You need to set limits, but you also have to be realistic. Good property, will always be good property and whilst everyone thinks the market is in the doldrums, smart people are buying these good properties.

Always do your research, always have a plan. Use a professional Real Estate Agent that is working specifically for you. Unfortunately, your accountant, your loan broker, your valuer or your best mate will not be able to assess and negotiate as well as a seasoned professional Real Estate Agent. Buying property in this market without using a Buyer Advocate is fraught with danger. You need to know what to buy, when to buy and how much to pay. You need to be able to negotiate with a seasoned professional.

Get an Expert on your side

Ian James

Monday July 14th

The Herald Sun Money section has thrown out the "R" word. Recession means an economic slowdown, evidenced by two consecutive quarters of negative growth. We have the Reserve Bank on one hand holding interest rates where they are, whilst we have banks arbitrarily increasing them to protect their profits. We have speculators in the market place buying up oil and sending the prices through the roof, regardless of the fact the supply has remained constant, and in fact the northern hemisphere has lowered usage; probably because of the price increase. The lending for new building is down approx 20% and the Master Builders Association believes the new home market will be in the doldrums for the next 12 - 18 months at least. This is while the State Government is telling us we will need to build an additional 380,000 new dwellings to house the highest level of immigration we have seen in 20 years.

There are so many contradictions on the economic landscape that it is difficult for anyone to work out what will happen over the next few years. It is a time when most predictions begin to follow historical precedent. We know that over the past 25 years property values in Melbourne's suburbs have grown between 10% and 12% where the amenities are good, where public transport is evident and where Owner occupiers prefer to live. We need not even mention the fact that the vacancy rate for rentals is less than 1%. People have to live somewhere!!!!

There will always be sales of properties, either because the vendor is economically forced to sell (loss of job, interest rates raised too high, cost of living out weighing income) or socially forced to sell (births, deaths, marriages, divorces, employment relocation). Obviously the motivation of the vendor can play a part in what the property will finally sell for, but either way the market is usually met.

Buying whilst the market is flat and holding until it picks up again is the strategy that most long term property investors will tell you almost never fails. It does still come down to buying the right property at the right price in the right time.

Call us for a no obligation meeting to discuss your options

Ian James

Monday July 7th

Why aren't the property market median prices in free fall?

We are in the depths of winter, the middle of the school holidays and a free falling world stock market!! The world financial experts are talking about recessions, Hyundai are talking about car sales dropping, the climate is changing and the Murray River is drying up. Yet property prices have remained remarkably resilient.

We know they have dropped a little from last year, we know that bidders are not losing their heads at auctions, but we also know that whilst the clearance rate for auctions has remained fairly steady in the 60% range, and the number of private sales has increased. In fact, since early March, when the turnover was up closer to 1300-1400 sales per week, we are now seeing consistent turnover figures in the mid to high 900's. Sales were down slightly over last years figures this week because it wasn't school holidays this time last year.

Property prices are staying buoyant and will continue to do so even in the face of adversity in other financial sectors. Even if banks put rates up independently, property prices within Melbourne's more established suburbs will continue to hold their value and in the near future resume their upward trend. Vacancy rates are at their lowest numbers on record, people coming to Melbourne are at a twenty year high. Ever heard of supply & demand?

The market is poised to take off again as early as the Spring season. The ANZ bank has said "the growing housing shortage is setting Australia up for the 'mother of all' housing booms" and Commonwealth Banks' Securities chief equities economist Craig James said buyers had fled the property market because of high interest rates. "With population growing at the fastest rate in 18 years, we simply should be building more homes, not less," he said. "Interest rate hikes have spooked investors and budding owner-occupiers. Investors are putting their money in the bank and people are staying in the rental market longer. But the situation is unsustainable."

I know property is hard to get started in, but even a one bedroom apartment for $200,000 in areas well serviced by good public transport and walking distance to cafes and shops, will appreciate over time and get your property portfolio started. For those of you that are struggling to save for your first home, think about buying an investment property first, leasing it out to assist in mortgage repayments, get some capital growth and then use it as a deposit on your own home.

For those of you who have been burnt in the stock market have a think about direct property investment. Talk to your financial planner or call us today to organise a meeting to see if we can help you. Buying property is not difficult if you have the right team on your side.

Ian James

Collapse Section

Monday June 30th

Clearance rates this week differ in the two newspapers; maybe not all properties being passed in or sold are getting reported!!
The Age with 477 Auctions, Clearance rate 65%
The Herald Sun with 477 Auctions, Clearance rate 62%

Either way, no big shock. School Holidays, Petrol Prices, Tax Time could all be weighing in on these figures.

This time last year there were 614 Auctions with a clearance rate of 85%. More buyers, more choice.

The Range Stats below show the Higher end is struggling with clearance rates at 45% in the $1m - $2m bracket; whereas the $300,000 - $400,000 is still moving along at 70%, making good negotiating the key to a good buy. More reason to get an expert on your side.

Results according to price range
Price Range	Total Offered	Passed In	Sold	Clearance Rate	Private Sales
$1 to $200,000	5	2	3	60%	80
$200,001 to $300,000	57	18	39	68%	144
$300,001 to $400,000	86	25	61	70%	165
$400,001 to $500,000	70	23	47	67%	73
$500,001 to $700,000	100	39	61	61%	92
$700,001 to $1,000,000	70	30	40	57%	28
$1,000,001 to $2,000,000	35	19	16	45%	13
$2,000,000+	2	2	0	0%	1
Undisclosed	53	11	42	79%	2
Source: REIV.

Lets see what the next week brings for the start of the new financial year.

Sam James

Monday June 23rd

With clearance rates well and truly established in the low 60% range, we turn our focus on which properties are worth buying. Most people who do not have to sell at the moment - won't be. Those vendors that are putting their properties on the market are usually doing so because they are moving due to family or work commitments, or they are simply selling then buying (when exchanging properties it doesn't matter what market we are in - what you lose on one you gain on the other side).

What this generally means is supply is low but bargains can be there if the property is good. As an investor the cheapest property in the area is not necessarily the best long term investment. However, buying whilst the market is depressed means you have the greatest chance of capital growth as the market takes off again. It is your choice of property that will be the key.

With an extra million people due into Melbourne over the next 12 years, property prices should rise very well. Although most of the 380,000 new dwellings that will be required will be built in new estate areas, the majority of the capital growth will probably be much closer to the CBD. Fuel prices are also beginning to take their toll on properties 25km or more from the CBD.

Areas that are close to the CBD with excellent transport facilities, good local cafes and restaurants, easy access to hospitals, major shopping centres and places to walk the dog or play in the park are going to be highly sought after. Access to educational facilities and community infrastructure are also components of highly sought after locations. Refer to our article on property selection in our "how to" series.

The choices you make now as an owner occupier or an investor will make a difference as to your asset position in the future. Why don't you call for a no obligation meeting and come in an discuss some of the options that are available for home buyers.

Ian James

Monday June 16th

After the long weekend's lacklustre turnover, we were again shown that the market is not dead and buried. 67% clearance rate on 600 auctions is better than most of the results of the previous three months. The third week in March was the last time the clearance rate was above this.

It is becoming more obvious that assessing a property accurately is a key ingredient to buying well. Three people fought out a spirited auction in McKinnon on Sunday lifting the final price over reserve. The house was well located, offering excellent attributes of good light, accommodation and entertainment areas and was very well finished. The property was marketed at the right price throughout the campaign and therefore reached its objective: selling at a good price for the vendor.

Conversely, when we see offers 15% over market value for properties and these offers are declined, we can see that some vendors are still in a state of denial regarding the market, and others are simply waiting for the ill-informed to appear.

Buyers who are borrowing money from the banks and who are reliant on a reasonable valuation must take this into account when placing offers. Even at auction, a Valuer does not have to value the property at the final selling price. This means if you are borrowing say 80% of valuation from the bank and you pay $600,000, then you are expecting to borrow $480,000 and this is no doubt what you have done your figures on. But, if the bank values the property at $550,000 then they will only lend you $440,000. Where will you get the other $40,000 from?

It pays to get a professional to assist you when buying a home. When choosing a Buyers Advocate, ask if they sell any properties, or do they accept any commission sharing arrangements with any Real Estate Agents. All we do is assist our clients to buy property.

Ian James

Tuesday June 10th

A 61% clearance rate over the long weekend from only 190 offerings is fairly symptomatic of the current market. There were also nearly 500 private sales - this is more encouraging. We are still seeing reasonable turnover in the market place, but much of it now is dependent on good negotiation and assessment skills.

Even good agents who consistently work in the market can be fooled by fickle purchasers. A Northern suburbs flat that should have had excellent competition by multiple investors failed to receive a single bid on Saturday, even though the agent thought he had multiple interest. However, I have no doubt this property will probably sell very quickly if the vendors have a reasonable expectation.

No matter the state of the market, people will be born, pass away, move, get married or simply want a change of scenery. Although we are in a "buyers" market, our enquiry levels of the past three months show us that not only are investors flooding back to the market, owner occupiers are also creeping back in.

Petrol prices will rise, interest rates will go up and down and steady, there will be higher taxes and governments promising us lower taxes, but one thing is sure, people in Australia will always want to buy property. We are expecting one million new residents over the next 12 years and these people will need a further 380,000 dwellings to house them. In my opinion long term capital growth for property is as close to a forgone conclusion as you can get.

Ian James

Monday June 2nd

Another week of 64% clearance rates. Another week of agents saying that it is impossible to pick this market. Most media outlets have moved to call the market a “Buyers Market” and to some extent I agree with this. Most agents, however will keep telling us the market is fickle and that good properties are still commanding higher prices.

All of the above statements are true!!

The key ingredient here is the type of property that you are looking to purchase. Good properties do sell very well. These properties need to be taken off the market early in the campaign for a fair and reasonable price. Some properties, that are not presented well and may need a fair amount of work, are currently not selling very well.

A case in point. We looked at a property in Prahran that was offered at auction and encountered no bids. It was a well located period home with very good “bones” but a little tired and in need of some tender loving care. The property was offered at $850k, $815K then $799k. We purchased this property in the $750's. An apartment that we looked at in Glenhuntly on the weekend was being offered at $330 - $360k. This was a two bedroom apartment with lock up garage in a small block, easy walking distance to the station. We told our client this property was an excellent prospective investment and should sell between $400 - $410k. It sold for $407K.

If you are in the market to buy a property today, you should speak to a professional buying Agent who is on your side. We are currently in a market that would make it very easy for the ill informed to easily pay 10% more than you would need to, and for the investors out there, you could easily miss very good opportunities simply because they are not quoted accurately.

Ian James

Monday 26th May

I don't think anyone would disagree when I say; we are moving into a totally new era in Real Estate. Already we can see the two distinctly emerging trends in areas of Melbourne and Sydney. We can see that a proportion of the suburbs will show growth patterns ranging from 10%-15% per annum over a 10 – 20 year period, whilst others will show 6%-10% for a similar time frame. Property prices are advertised at numbers that have little or no relevance to the final price or worse still, to the market value. The clearance rate has levelled out in the low 60% range and all the commentators are agreed we have moved into a buyers market. Buyers now need to get better representation and assistance.

And the need for better representation starts here:

If you have to go to court, you take a solicitor. If your car breaks down you go to a mechanic. Before most people put in their tax returns they speak to an accountant or a financial planner. But when people buy a house they only speak to a selling agent. Or someone who says they buy and sell property.

I cannot think of any other industry where the government does not legislate to attempt to protect both parties as well as they can. Financially, we do our taxes which the ATO scrutinise. The tax man is the first to suggest getting good advice from an accountant. When we elect a government, we are told the best way to get good government is to have a “very good” opposition. If you get arrested, by law, you are “read your rights”. Why is it that when you are making the largest single purchase in your life, you are not told what your rights are and what is even worse, the only information you can usually get comes from the other teams representative.

If you went to court and represented yourself against a Queens Counsel the convening magistrate would counsel you regarding your lack of experience and judgement and suggest you get representation. Why does the governing body in Victorian Real Estate fail to do the same?

Consumer Affairs Victoria continues to publish names of agents that have done the wrong thing; they attempt to make changes to law and legislation to stop good selling agents doing their jobs. SELLING PROPERTY! They are doing everything they perceive they can and for this I applaud them, but, when will they understand they simply need to balance the ledger? We need a strong robust Buyer Advocacy fraternity.

Selling agents can then be free to do as they wish, within the law, in order to get the best price for their client; the vendor. Buying agents should be just that Buying Agents. Selling agents should be just that Selling Agents. If you were selling your property with an agent who was assisting and taking a fee for assisting people to buy, and they could not show them your property (It is illegal to act for more than one principal) wouldn't you use an agent that exclusively sells and therefore doesn't have the conflict.

Conversely, Buyer Advocates who do any type of Vendor Advocacy open themselves to this exact dilemma. If anyone of their buying clients is in any way interested in a property they are receiving a fee (or a commission from the selling agent), they are trapped in a moral and ethical dilemma. They cannot assist their buying client whilst taking money from the seller (that is illegal), they cannot simply say to the vendor, I won't take a fee from you, and then they are working solely for the buyer, whilst having intimate knowledge of exactly what the vendors want. Whichever way the go they are trapped into an impossible dilemma unless you don't allow the situation to occur. BUYERS BUY and SELLERS SELL.

Next time you are thinking of buying a home, ask your advisor does he only help buyers or does he sell property as well.

Ian James

Monday 19th May

With the clearance rate at 63% again this week, we can see ourselves settling in for the winter sales season. This tends to be a time where volumes become lower, and negotiations become far more intense. If supply drops off whilst demand stays level, then pressure occurs in certain segments of the market.

Investors have well and truly come into the market place as there are more distressed sales of property. Your choice regarding style and location of property will be paramount in your success as a property investor.

There is much talk of the government trying to coax institutional investors in to offering low cost, affordable housing to those people who need assistance. This is not being offered to the average Mum and Dad investor, who by the way own 80% of the rental properties. We also read everyday from the “property advisors” spruiking positive geared property is selling well.

I am not a financial advisor; I only assist people once they have made the decision to have some direct property in their investment portfolio. Personally, I agree with this, but each person should seek the advice of a reputable financial planning professional. There are two main ingredients in any investment; Yield and Capital Growth. In layman's terms yield is the rent you receive each week from the tenant and Capital Growth is the difference between what you purchased the property for and what you sold it for. (Or what the property is worth today).

For the purposes of this comment, I will be very simplistic. The average property is seen as “negatively geared” if your interest on the mortgage and other costs (rates, insurance, body corp. etc, called outgoings) is greater than the income you receive from the tenants. Because the government sees this as a net loss, it is treated like any business loss and you can reduce your taxable income because of this. When the tenants' rent outweighs the interest and outgoings it is deemed positively geared and these funds will be added to whatever other earnings you have and taxed accordingly.

Most areas where the capital growth rates tend to be at the higher levels (the more established suburbs of major cities, where there is good infrastructure) unfortunately usually have the lowest yield (%return). The opposite is also true. Where the capital growth is limited because of distance to infrastructure and not as many people wanting to live there, the rental return tends to be higher.

So which is better? Higher yield and lower capital growth or vice versa? If you can afford to negatively gear (where you will need to contribute out of your own pocket each month to make up the shortfall in interest) and you achieve good capital growth, I believe this will offer the greatest benefit if you wish to grow your property portfolio. If you have limited capital growth then the only way to get the deposit for your next property is to save, rather than use the equity (capital growth) from your current investment property.

Go to our “how to” series on our website to read more about Yield vs. Capital Growth in the coming weeks.

Ian James

Monday 12th May

Hallelujah!! The whole market has turned around now we have a clearance rate of 64%, which as one paper described it as 65%. What's a single percentage point between friends? But it is great to see that the whole property market is now safe and that the world economy is recovering! I am sure we will find the answer to how the Universe started before next weeks figures are released!!!!!

Doesn't anyone have anything useful to write? A few weeks ago a 67% clearance rate sounded the “death knell” for the property market as we know it. Yet a 64% clearance now signals the revival??

Last week it was announced that in the first quarter of this year Brisbane and Perth median house prices had surpassed Melbourne and our market was in for a downturn. Let's look at a little more data. In April, there was a 29% increase in new home loans in Melbourne. There was a decline of 4% and 5% in both Perth and Brisbane. Melbourne is still welcoming more and more people to our city and even the State Government is looking at ways to assist people to buy smaller properties.

Regardless of “one off” statistical data, Melbourne property prices have to increase over the long term as a simple function of “supply vs demand”. Whether the market will be flat for a week, a month or a quarter is unknown, but if we look at short term time frames in the property market, then we need to look over five years. The state government are mooting a new scheme to try to persuade people to buy smaller houses in the metro area. Changing the density of certain areas of the city will assist people in the short term but in the long term property prices will continue to rise, just like most other capital cities around the world.

We see today the release of new figures that our farmers are starting to come back to some financial reward. This will in turn mean that rural areas will again have a strengthening income. This in turn will make buying and renting in rural areas harder, forcing more people back to the city. Our State government is trying to assist people into these rural areas with changes to the building grants for first home buyers.

What is encouraging to potential purchasers in the market place, is the current figures for numbers of private sales. Whenever a property is up for private sale, is purchased before auction, after auction or is passed in and then negotiated, the whole deal must be looked at. Whether there be negotiations for special conditions, special terms, vacant possession or receipts of rents and profits, a good negotiator will do so much better than simply going to auction and sticking his hand in the air.

If you require any help negotiating a property transaction please feel free to contact us on 9523 1054 or read through our website at the “how to” series.

Ian James

Monday 5th May

As I am sure everyone is thinking 60% clearance rates means the end of the property market as most people understand it. With the quarterly median price across Melbourne falling 8.6% from the December Quarter to the March Quarter, it is obvious we need to sell all our property, all our shares, take our money out of banks that are going bankrupt and place all our money under the mattress or bury it in the back yard. If we read everything that is currently being written then we may be thinking of some of these things.

Let's look at some numbers that span a reasonable timeframe. The Valuer General gives us increases every year going back to 1999, with an average increase across the whole of the metropolitan region of 10.5% pa. This does not include the 2006 – 2007 figures as they are not yet available but we know they will substantially increase this average. Within these years there have been times of almost no growth such as 2004 – 6% and 2005 - 3%, and there were some excellent years of 2001 – 18% and 2002 – 16%.

In other words, trying to justify the market movement and where it is headed by looking at one quarter's movement is absurd. We know that Melbourne has now “slipped” to the fourth highest median priced capital city behind Sydney, Brisbane and Perth. Adelaide and Hobart still trail Melbourne. If we look at the current housing shortage, the fact that we have more people coming into our fair city than any other and the fact that our median prices are the fourth lowest, it is fairly obvious that the “downward” trend of the past three months cannot continue for very long.

It is true that interest rates and the world economy are in turmoil. Europe and the Americas are slowing whilst the Asia Pacific region is going from strength to strength. China's property boom may end up with a closing of the market to foreign investment. If we assume the interest rates are not going to continue to increase and the government (both federal and state) give us a favourable budget, then we must assume that further investment in the “Australian Dream” of owning your own property will continue. This will compound the distinct lack of supply in Melbourne and ultimately raise prices.

As far as individual suburbs are concerned, in any major shift in the market, the suburbs with a median furthest away from the overall Melbourne median will be the most volatile. This means that they will be the first to go down in a downturn, but will also be the first to go up in a turn around. Suburbs that show good infrastructure, good job prospects, good transport and recreational facilities will continue to outshine the others. There will be some good buys in the next few months, with some excellent negotiation opportunities, however, do not wait too long. The market will turn up again, AND WITHOUT MUCH NOTICE!!!

Ian James

Monday 28th April

Total Auctions	358
Passed In	116
Passed in after Vendor's Bid	83
Sold Before Auction	49
Sold at Auction	187
Sold after Auction	6
Clearance Rate	68%
Total Private Sales	451

The long weekend brought us another quiet weekend in the property market. With only 358 auctions on the weekend, the 68% clearance rate doesn't mean all that much. But going forward we have now finished with all the long weekends, Easter & school holidays until later in the year, and we can see some good clear periods that Real Estate Agents like so much to market property in. There will be many people feeling the banks interest increases as well as those from the Reserve Bank.

Investors are moving back in to the market place very strongly, with good solid properties on good land located in solid positions, surrounded by infrastructure such as parks, schools, public transport and cafes are selling extremely well. Investors also have other ways to fund investment properties with their super funds.

Over the coming months we will see how much the US led credit crunch will lead our property market. In my opinion it will not be that much. We are still in the worst situation for accessible rental properties that we have seen in recent memory. Unemployment is still very low and most people have made very good equity in their properties over the past 3 years. We should also mention there has been no slow down of people moving into Melbourne. We still have that little problem of one million people expected here 10 years earlier than planned.

When looking at property investment, short term is 5 years, medium term is 10 years and long term is longer than 10 years. With this many people needing accommodation in the best city in the world to live, whatever short term movements in property prices occur, they will be short lived.

Ian James

Monday 21st April

After another huge weekend of almost 1100 auctions and 644 private sales recorded by the REIV, we still had a clearance rate in the 60% range. This is showing us that although the market has well and truly turned from last year, good property that is well priced still sells, and sells easily.

We no longer see three or four people bidding for every property. When we are negotiating face to face with an agent, we do not assume there is another party waiting in the wings to pounce if we do not agree to the vendor's agent's price. In fact the agents do not tend to play the card: “I have another buyer who will pay that much - you need to give me more”. Or even the throw away line that everyone has heard as soon as they show interest: “I have another offer that will probably buy the house today – you had better give me your best offer”. These lines no longer sit very well, even with die hard agents.

On Saturday at one auction that I attended, when the property was passed in to us the lead agent immediately made a bee line for the other interested party. Now normally I would have raised quite a commotion, because it was fairly obvious he was trying to negotiate with the other party in order to put me “over a barrel”. This is a very common technique used by agents to give themselves, both an unfair and arguably, illegal, advantage. (The agent represents during the auction that they will FIRST negotiate with the highest bidder.) But, in Saturday's situation, whilst I was inside speaking to another of the agents (who was not the negotiator) our second team member watched the exchange between the lead negotiator (who should have been in with me) talking to the other interested party. It was the lead negotiator that came away with his shoulders dropped and the other party walked off and left the area. When my partner called me to tell me this, it was the most valuable piece of information to allow me to negotiate from a position of immeasurable strength. Needless to say, we bought the property on the day and our clients were extremely happy with the outcome.

Property assessment and negotiation have become as important as property selection. Last year, negotiation was all about securing the property at a fair price, now it is about both securing the property and paying a “good” price. The market will not remain balanced for long. It will turn back to a sellers market probably before the end of the year, as investors flood back to property after being mauled in the stock market. The old adage, “Make hay while the sun shines” is very apt at the present time.

Monday 14th April

The auction clearance results over the weekend were exactly what most professional Real Estate Agents expected. Clearance rates were again in the 60's and with next weekend's potential 1300 auctions the rate will probably drop again. Last year with clearances regularly in the 80% range, buying at auction was simple for people who had money to burn; “keep bidding until you are the last one with your hand up". This year that has all changed.

Last year, if you had no idea what you were doing you could simply watch the auction and compete with other potential buyers. This year things are different. If there are no other bidders, which will happen at about a third of all auctions, then you had better have a very good idea of what the property is worth. If you are too high you will overpay and if you are too low then you won't get what might be a good property. EVEN GOOD PROPERTIES CAN PASS IN AT AUCTION. Assessment is the key preparation to be able to negotiate, whilst experience is necessary to close the deal.

When the property market is as finely balanced as it is now, in other words it is not a sellers market like last year nor is it a buyers market, then whichever team has the best negotiator will usually fair the best after the auction has been passed in. The auctioneer, whom you may have met or had a chat to before the auction, is quite often the agency principal, or at the very least an extremely experienced Real Estate Agent. It is his or her job to negotiate the highest price for his client the vendor. These agents are usually involved in at least a couple of negotiations every week and so they were probably involved in over one hundred property negotiations last year. How many were you involved in?

When people sell a property the vast majority will pay up to 3% of the purchase price to hire a professional negotiator to act for them. Why do you think they do this? Marketing a property is not that difficult nor is it very expensive now we have the internet. The majority of the fee paid to a selling agent is for their expertise in appraising and negotiating a property. If you are considering buying a property and you did not negotiate at least a couple of hundred properties last year, you should think about speaking with a buyers advocate.

A buyers advocate will not only save you money immediately by negotiating the property better than you, but also and more importantly assisting you in choosing the best property, taking into account both your needs and also the potential for long term capital growth. These savings will far outweigh their fees in the same way the selling agents do.

Ian James

Monday 7th April

Again last weekend we saw interest in auctions waning. Clearance rates including all properties sold before and after auctions only reached the mid 60% range, although the better properties sold well and with multiple bidding. We are now back to the times where selling agents must prove competition. Most agents will agree there is usually one buyer for every property with only the very best having multiple buyers.

If we look at the breakdown of clearance rates on the weekend we can see the highest rates were in the lower end of the market. This can mean either the vendors at this level are keener to sell, or alternatively the investors are moving into this end of the market. I think it is a mixture of both. There should be some good properties at good prices for the investor that does his homework this year.

Something else to think about as an investor: Mortgage brokers are now more valuable than ever. Last year most of the bank rates were similar. The deals they offered may be slightly different but the rates were similar. As the Reserve Bank moved, so did the majors and soon after the minor banks followed. This is not the case at the moment. All the banks seem to be “jockeying for position” independently of each other and many of their rates differ depending on individual circumstances. It would be a good idea to have a mortgage broker give you a quote as they can quickly look over all the banks' options at the same time.

If you would like a referral to a mortgage broker, please do not hesitate to call. We receive no commissions based on our recommendations. We only recommend those brokers that have done good work for our clients or our staff in the past.

Ian James

Monday 31st March

The market has now well and truly corrected!! The balance has been restored to the market place, being that we now see approximately one buyer for one person selling. Last year, there were usually three buyers for every property being sold and this is why auctions did so well. Until the market settles, probably sometime later this year, then good negotiations will be the key to not only getting a good price, but also being able to secure the property in a timely fashion.

Do you know what to do if the Real Estate agent calls you on the Thursday night before auction and says, “We have an offer that is enough to purchase the property you are considering. It will be sold tonight, would you like to still purchase it.” This will happen more and more often this year. We have already had agents ringing us to ask if we would do a deal prior to auction. A 63% clearance rate includes all properties sold before auction, sold after auction and passed in and sold on the day. This can make the real rate of “sold under the hammer” closer to one in five or 20%. Negotiation will play a far greater role this year in the property purchases than it did last year.

Do you know what to do when the auctioneer passes the property in on your bid? Do you understand that the auction is now over and that the deal will be concluded via private treaty? The auctioneer is no longer simply an orator accepting bids from people who will outbid each other to win the property. He has now changed his persona to a supremely experienced negotiator who is not working for you. You have now let him know that you want the property enough to be the highest bidder and he will now attempt to do the best possible deal he can. No matter how good a negotiator you are in the business you are in, I would suggest the auctioneer would be equivalent to a “Queens Counsel” and you are there representing yourself. He has probably negotiated a couple of hundred properties last year. How many did you negotiate last year?

Vendors do not sell a property based solely on price. It is the overall deal that counts. What is the settlement period, what is the deposit amount, is there a finance clause, is the contract subject to a building inspection, are there outstanding matters of agreement that need to be resolved or is it a simple contract note that everyone understands.

Vendors will also have accurate information regarding the market. Information only Real Estate Agents, Valuers or anyone in the property industry has access to. Just having some Valuer General Data from a $50 report that is usually 3-4 months old (Valuer General Data is updated at settlement not purchase) is not going to give you similar information to that, which the real estate agent has given the vendor. If you know what this information is, and you analyse it correctly, then you will be able to have a very good educated guess at the bottom figure the vendor is likely to agree to. Information is the quintessential element in be able to negotiate from strength.

If you are considering buying property in the next six months, or you have tried to purchase unsuccessfully, why don't you give our office a call. We offer a no obligation first meeting to anyone who is interested in buying property. I guarantee it will be the most enlightening hour you will spend in your entire property search.

Ian James

Tuesday 18th March

As predicted the reported clearance rate fell below 70% for the second week in a row and don't hold your breath for any relevant data next week as it is Easter. Has the property market taken a nose dive, is it following the Dow Jones index. NO!

There were over 1400 scheduled auctions for last weekend. A new record for Melbourne. We know that supply and demand are the quintessential ingredients driving prices and where there is an abnormal supply there needs to be an abnormal demand to maintain the “Status Quo”. We had a normal demand for Saturday. Many good properties sold well and many not so good, didn't sell at all. This is normal behaviour for the Melbourne property market. It was simply intensified because so many properties were on the market on one day. This is simply a matter of timing for Easter and Labour day making it the only main selling day for March.

Is the market the same as it was four weeks ago? NO! There are enough media outlets breathing forth gloom and doom. The Reserve Bank may lift interest rates again but they may not. What would happen if they dropped the rates? Everyone from the Prime Minister to David Koch on Sunrise has said the Reserve Bank has gone too far. I am not a world renowned economist. I don't know if they have or they haven't. But I do know if they level out the interest rate or, actually drop the rate, then the property market will take off, rapidly mimicking the growth of last year.

Buyers have a small window of opportunity whilst vendors have become a little “uncomfortable”. There may be some good properties to be had over the next few months and how long that continues for will depend on external pressures on our economy and how the media reports it.

Ian James

Tuesday 11th March

A 67% clearance rate on any normal weekend may justify some thoughts as to where the market is going. But there were only 145 properties passed in. This is less than half of the number passed in the previous week. Only 145 people failed to sell their properties on the weekend. Next weekend there are over 1400 auctions scheduled. Show me a clearance rate below 70% then and there will be plenty of worried vendors. With Easter the following weekend, we expect plenty of vendors and Agents will be ready to negotiate a lot more readily than has previously been the case.

Statistics are fantastic. You can make them say whatever you want. As far as increases in Melbourne Median price we have three sets of figures we can look at. The increase in Median house price for the December Quarter 2007 compared to that of 2006 was 23.4% whilst the movement from the previous quarter was a staggering 12.8% (so movement for a year based on this number would be 51.2%: 12.8% x 4) whilst the yearly median house prices 2006 to 2007 was only 12.6%. In other words, what would you like to hear: house prices moved 12.6%, 23.4% or the equivalent of 51.2%?

Choosing which properties to buy is not a matter a statistically analysing the market and then making your purchase. You do not buy “the average” property. You do not buy “the median” property. There is no doubt we need to look at data, but the key is knowing which data is useful. It is knowing what groups of data contradict, or enhance your analysis. Knowing how to break down the information into useable chunks is important.

Whilst an area we have bought many properties in has shown a yearly movement of only 16%, the area within Seaford where we have bought several properties has shown prices growing from around $300k to around $380k over 12 months and then further movement up to the low $400's within the last 4 months. We also know that Eastlink will open shortly and therefore a further rise throughout the area is probable.

History suggest that properties over very long periods of time usually appreciate between 7% and 10% pa. That means they double in value every 7-10 years. To be an average, this means there will be some areas above this mark and some below. Properties that consistently appreciate 10% - 15%pa are what we target as good capital growth prospects.

There will be a lot more properties coming onto the market in the coming months and the good properties will still sell very well and even quicker than they did last year.

Ian James

Monday 3rd March

Clearance rates are not the only market indicator, although the general public could not be blamed for thinking so. Stock supply, interest rates, property presentation and how the sales campaign is handled also plays a big part the sales process.

Properties that are well located, well presented and under quoted will always “exceed” public expectations. They will not, however, usually exceed the “professionals” expectations. We read in the papers of properties that were quoted at $750,000 - $820,000 and they achieve results of $950,000 or higher. What the public does not see or understand is the fact there are three or four comparable sales showing us that mid $900's has already been paid for this type of property and that the professional agent already knows it will go well into this range. BUT IT LOOKS GOOD TO SEE THE AGENCY NAME IN THE PAPER GETTING “RECORD” RESULTS. It is not to say that what the agency is doing is wrong. It is the aim of the Real Estate agent to get the highest possible price for the property whilst doing everything legally and morally correct.

When buying property you are entering into a legally binding agreement. This agreement is negotiated by the two parties, agreed to, and then formalised into a Contract of Sale. Both the vendor and the purchaser try to do the best deal they can. But! The process is so one sided as to be almost illegal. The vendor is paying to have a professional negotiator represent them. By law he must be licensed and by definition, understand all the intricacies of a property transaction. A good Real Estate agent will be involved in 50 – 100 negotiations per year. The average buyer will have either no experience or maybe “Dad” who has bought a house before and knows a “thing or two.”

If two parties went to court and one was represented by Queen's Counsel and the other was representing themselves, with obviously no formal training, the Judge or mediator presiding would strenuously recommend they seek competent counsel. Our government has set up “Legal Aid” to alleviate this issue. But what do they do with Real Estate: Nothing!! Trying to set rules for the vendors' representative to in any way assist the purchaser leaves the Real Estate Agent in an impossible situation. If the government is serious about levelling the playing field they need to assist purchasers not attempt to hamstring Vendors agents.

Buyer Advocates are not new. They are used throughout the world in the USA, UK and Europe. They are beginning to become prevalent throughout Asia and the Middle East. Buyer Advocates must be licensed in exactly the same way as Real Estate Agents. They act for the Purchaser in the same way a Real Estate Agent represents the vendor.

Buying a property correctly is about assembling a team of advisors to assist you. Advice is required in areas such as: finance, legal, value, negotiations and then some advice about choosing the property that is right for you. A competent buyers agent can do or organise all of these people.

Ian James

Monday 25th February

People buy and sell properties everyday. Whether it be a buyers market or a sellers market. Vendors still want to sell their properties and yesterday morning will have woken to the headlines in the Herald Sun “Home Buyers Bolt” and The Age “Is the boom over?” Are property prices going to start a free fall? Is the median price going to drop between 20% and 30% this year? OF COURSE NOT!

Vendors will realise they can not ask “over the top” prices for their properties. Purchasers should now become more discerning. Some purchasers bought property last year and didn't care what they paid. Doesn't every property go up by 30% every year? OF COURSE NOT!

This year smart investors and owner occupiers alike will move in to buy good property at fair and reasonable prices. Good Properties are houses that are well located, in the median to upper quartile of the suburb, are well built and maintain most of the attributes that a larger segment of the market find appealing.

After choosing the “right” property then you need to assess it correctly. Listening to the Real Estate Agent and using only his information for this task can be fatal. The way an agent quotes or gives you certain examples of previously sold properties which are bias toward making you think the property is worth more than you should pay is not illegal or immoral. It is not even “under-handed.” THAT'S HIS JOB. If you were paying somebody to sell your home would you want them to assist the purchaser, who is not paying them, or would you prefer they attempted to do the job they were hired to do: SELL THE PROPERTY AT THE HIGHEST POSSIBLE PRICE. Any purchaser wanting to assess a property correctly should get professional advice from somebody with their interests in mind.

Once you have located and assessed a property, and it suits your needs, you then need to negotiate with a professional negotiator who is working for the vendor. If you have assessed the property correctly, then you can deal from strength. If the market is a little shaky and the vendor a little nervous then putting in a legally binding offer before auction at a price that is both fair and reasonable should get the vendors representative talking to you in an amicable fashion. Putting in an offer that is ludicrously low will almost never buy the property before auction. Human psychology shows us that people need to “lose” before they will lower their expectations. In other words, failure at auction will help lower the price but it increases your risk of purchasing the property.

It looks like we will have a short window of opportunity to push some vendors who may be a little nervous of impending interest rate hikes and now the prospect that everyone will desert the property market into some better deals for the purchasers. Until the collective media writes a banner headline “boom time for Melbourne Property” or the like, negotiations for property will move back to an even keel not really favouring either party.

Ian James

Monday 18th February

We have just seen the results of the first weekend's auctions that carry some importance. Next weekend has over 1100 scheduled auctions. We can take the results from last weekend and analyse them effectively as there were over 600 properties on the market. We know from the results published in the Herald Sun that less than half the properties offered for Auction on the weekend were eventually sold. Even though clearance rates talk about 72% this includes all properties sold before, sold after and passed-in then negotiated on the day. The amount sold under the hammer would probably be closer to 25% - 30%.

Prices over the weekend were exactly as expected. Those properties with excellent location, amenities, good accommodation, a little bit or a lot of “WOW” and priced and quoted correctly sold very well. For example a 3 bedroom unit in Lorranne Street Bentleigh was quoted $570k - $630K and was well built, presented well and is in a fantastic location. We had estimated $720 - $730K to our client and it sold $735K. It was “on the market” at $650k. This was slightly above expectation and although there were three other bidders we counselled our client to pass and move on to the next one.
Alternatively a 4 bedroom renovated family home in Chapel Road Moorabbin on 820sqm was quoted $600k - $660k sold for $646K. Comparable sales last year are around this price and if it were this time last year that would have meant a significant jump in price.

Agents are asking us to do deals in some instances and others are rejecting our offers. Next weekends results will either signal another year of unprecedented growth or a tempering of the market. We will see a lot of stock on the market in the new estate areas but they will again most likely be facing single digit capital growth. This means they are struggling to match CPI. There will also be more total stock come onto the market as people try to cash in on growth over the last few years. GOOD PROPERTY WILL STILL SELL EXTREMELY WELL BUT AVERAGE PROPERTY WILL NOT. Property selection, assessment and negotiation will become far more crucial than ever before.

Melbourne has about 1000 people per week moving into the most liveable city in the world. There is a finite amount of property on the market and if we look at every major city on the planet, all good property goes up, average property has average growth and poor choices can cost you a lot of money. Professional assistance should be sought by all prospective property purchasers this year.

Ian James

Monday 11th February

Another week has slipped by this year leaving us no closer to seeing any trends. Whilst the “clearance rate” is up there near 80% there is not enough volume to give us any indication of where the market is going.

There were some anomalous results of family homes selling below expectation whilst reports from some outer suburban agents are saying that people are queuing to get into opens and offers are very forthcoming on properties. The amount of good property coming onto the market continues and agents are very quick to “chat” about offers and deals, the market is still a long way off giving any clear signals as to what will happen for the rest of this season. Just because one property sells below expectation, this does not mean we are seeing a trend.

This is the first year I can remember the agents agreeing so quickly to enter early deals. With several deals already away this month and another seven offers on the table, it would be easy to assume that agents are a little worried and they are looking to grab any deals available. This is not the case. All of the properties we have gone after are being relentlessly negotiated. It is a case of finding good properties, assessing them quickly and accurately and then moving decisively.

In a rising market the key ingredient in buying well is paying the “right” price for the “right” property at the “right” time. Those potential purchasers that procrastinate through February and March will probably find themselves needing an extra 10% to purchase what they could have bought earlier in the season. It happened last year and could happen again this year.

Ian James

Monday 4th February

Sub Prime issues, stock markets falling all over the world, interest rates going down in the US and potentially up in Australia. We have a ten year drought seemingly coming to an end with FLOODS which may well reinvigorate our massive primary industry. The Chinese and Indian economies are becoming the dominant force throughout the world and they are major trading partners of ours. Chris Richardson from Access Economics has been reported to have said Iron Ore price increases for the year will inject more spending into the national economy than our stock market losses of last month. So what is going to happen to the Melbourne property market?? Anybody that tells you they know, is joking.

The Sydney market is flat, Queensland is under water, Perth has slowed and Adelaide is a very small market. Melbourne's population is said to be growing at 1000 people per week. This is higher than any other capital city in Australia. Demand for housing is high and supply is short. It means that property prices in Melbourne will most likely continue to rise at a very healthy rate. Maybe not the 20 – 30% of last year, but I would consider in the high teens to be probable if you buy well.

Whilst the fastest growth corridors are still the outer west and outer north, for the first time in decades municipalities such as Hobsons Bay, Glen Eira and Monash showed population increases.

Buying well is not only about negotiating the lowest price. It means making a good choice of property, assessing it correctly and then negotiating it in a timely fashion. Keep in mind that if the property is actually good, there will be competitors trying to buy it out from under you.

We will have a better understanding of how properties will perform this year once we see the February auction results. Until then, the signals from the local agents have been mixed and no clear pattern has emerged yet.

Ian James

Monday 21st January

Another week of gloom and doom on world stock markets! More media “experts” saying there will be a rate rise in February. Our new Prime Minister is promising an $18 billion dollar surplus in his first budget and more economic responsibility. But we are still at a 4.5% unemployment rate: what does all this mean for the housing market this year? Anybody telling you they know what is going to happen in the market this year will preface the comment with “this could happen”.

Plenty of Mums and Dads have a great deal more equity in their homes now than they had last year. Also, the expected tax cuts and the fact that most people that want a job can find one at the moment, means there will still be investors in the property market. More so if the stock market doesn't rebound. I think the property market this year will remain fairly similar to last year. The 20-30% gains maybe be tempered back to 10-15%, but the demand will again be strong and if supply doesn't increase, auction clearance rates will again be high and this means increased levels of negotiations will be necessary and accurate assessment of the properties worth will be paramount.

With the Australia Day weekend upon us and kids back to school next week, things will again be quiet on the new property listings but as of next week we should see a huge rise in the numbers of properties. Enjoy your last weekend break before the autumn selling season is upon us.

Ian James

Monday 14th January

Even though the market is yet to fire up there are reasonable supply numbers beginning to appear. It looks like there will be no massive shortage of property even though demand will still be outweighing supply in February and March. Even if interest rates move again as early as February, I still think property values will continue to perform well this year. As we see the first sets of clearance results from the big weekends of end of February and early march, we will be able to get a better idea on how the growth rate for property values will progress through the year.

Australia Day weekend will see the start of the autumn season with the properties going to auction late February beginning their advertising periods. It will be interesting to see how this years market will develop.

Ian James

Monday 7th January

After a tumultuous year in 2007, 2008 should be the year to build your property portfolio. We have seen massive gains in many suburbs across Melbourne last year and, although some of these suburbs will keep performing spectacularly, it is the neighbouring suburbs to the best performers of last year that will probably be the real movers this year.

Interest rates will probably rise again early this year and this will put pressure on the market under $450k but for the rest of the market this rise has been factored in and will probably result in no significant slow down. Stock levels should rise slightly from last year and this may mean there is a lot more negotiation than last year but above the $700k mark I think that purchasers will again outweigh Vendors, leading us to another year of strong auction results.

Areas such as Reservoir, St Albans, Sunshine, Fawkner, Thomastown, Croydon, Edithvale, Altona are just a few of the suburbs that may have good value properties this year, that should make good investments, for both the “value-add” investor or the long term “set and forget” purchaser.

Choice of good property, either purely for investment or to live in, is vital in increasing your wealth. It is not that difficult to manage the basics. Proximity to transport, schools, parks, cafes, major arterial roads are just some of the parameters we look for. Once the location is justified, then we look at the block. How big is it? What shape is it? Is it on a severe slope or covered with rocks. Most of these are obvious to anyone who looks.

The house itself is actually the last thing we look at, as it is the item we can change the most to suit us. Obviously it must suit our basic needs, but it may not be all we want, so look at its possibilities. Can this conservative 3 bedroom family home be turned into a two level 4 bedroom dream home? Could this 2 bedroom cottage be demolished, or updated to a brand new $400k house?

I hope everyone had a great break and has had a chance to recharge the batteries, as I think we are in for another very hectic year.

Ian James

Collapse Section

Monday 17th December

With the year drawing to a close there were quite a few frenzied negotiations over the weekend. Nobody wants to be left with “stale” property this week. If there are any properties you have had your eye on that have passed in or been sitting on the market a few weeks longer than normal, then now is the time to go after it.

It is a rare occurrence that an eleventh hour deal is not struck by quite a few agencies around Melbourne, coming into the Christmas hiatus.

I would like to take this opportunity to thank all our clients, the fantastic staff here at JPP and also all our new regular readers and new visitors to our web site who have all assisted in making the move to our new premises in Caulfield an outstanding success. From all the staff at JPP, I would like to wish everyone a safe and happy holiday season and whilst I am looking forward to a short break, I am looking forward to next year and the trials and tribulations that it shall bring.

Good luck to all

Ian James

Monday 10th December

Although the auction clearance rate dropped below 80% for the second week in a row, the properties that did sell, sold very well. All the auctions we attended went at, or above our expectations. This is quite normal with only one scheduled auction weekend remaining this year.

Prospective purchasers that are unable to secure properties in the next week will have to wait until mid to late January before the next season kicks in. There will be a flurry of before and after negotiating this week and early next week before the market closes for the festive season.

Ian James

Tuesday 4th December

Two weeks to go and the clearance rate fell below 80% for only the second time this season. In the last two weeks of the selling year there is always impatience, both in buyers and sellers alike. We will see people going overboard at auctions in order to secure something before Christmas and not have to wait another 4-6 weeks for the Autumn season to begin.

We will also see many deals done buy anxious sellers not wanting to be left with stale properties across the break. This is always a challenge for Real Estate Agents: they must counsel their vendors when to take a serious look at offers put before them. The easy response from an agent is always "you should go to auction". They can quote the 80% clearance rate and say 4 out of 5 will sell. Unfortunately the 80% clearance rate includes properties sold before, sold after or passed-in then negotiated to sale, and it also includes sales that didn't attain good prices, just ordinary prices but the vendor needed to sell.

We currently have three separate clients who are looking seriously at two properties each, and have given us the brief: "make sure we get one or the other before Christmas". We can put forward fair and reasonable offers on one, and if this is knocked back then we rescind the offer and go after the other one.

We know there are more purchasers than sellers at the moment, but that will thin out as we continue into the festive season. The properties will still be on the market, but plenty of exasperated buyers will call it quits, get into the festive season and forget about property until next year. Impatience in buyers may rise, but numbers can sometimes drop off.

Ian James

Monday 19 November

With another week closing on Christmas and the election looming I think we have seen the biggest weeks for the year now past. The aim now is to watch out for the bargains. There will be "forthcoming auctions", and quiet sales from agents testing the waters or trying to make some last minute deals before Christmas. From what most of the agents are saying the autumn season will probably start a little early so property may start coming onto the market from the second or third week in January instead of the normal February start.

Clearances were again above the 80% mark with a much greater level of pre auction negotiations. This usually increases towards Christmas as vendors and agents, alike get nervous about properties passing in close to the end of the year. This means, in the coming weeks don't be shy with pre auction offers. There is nothing wrong with paying a good price for good property. If you put forward a fair and reasonable offer the agents will normally entertain this. Holding back to save a dollar means nothing if you are always unsuccessful.

Ian James

Monday 12 November

After another big weekend of auctions the reported clearance rate actually dipped below the 80% mark for the first time in quite a while. I don't think there is any single reason for this issue and I also do not think this is going to herald a change to the auction results around Melbourne.

The key factors that can have an effect on the clearance rates are market sentiment and supply. Whilst we had about 1600 properties sold throughout the week, only 536 of them sold at auction on the day. Many of these would also have passed in and been negotiated within the hour and listed as sold. So supply is up.

We have an election looming in a couple of weeks which always has a few people nervous. Most people I have spoken to have the idea that there will be a change of Government.

Interest rates went up last week and the market below the Melbourne median Price will be most affected.

Christmas is Just around the corner, and if the Real Estate Agents want a full three week campaign then this week is the last week for new auction listings for the year.

These are just a few of the reasons that affect the clearance rate. And they do so differently. Those people who have already resigned themselves to a change of Government are not worried about the election, the swinging voters probably are. Interest rates affect those who are borrowing a larger percentage of the purchase price. So those that have 20% or more equity aren't usually as perturbed. Christmas simply means there will be a slow down for 4 weeks. I think we will see a lot of “forthcoming auctions” over Christmas. This is a way for the agents to advertise their February properties early.

I think we will see another huge weekend before a drop for the election then two more big weekends in December before the break.

Ian James

Monday 5 November

Most people expect interest rates to rise by 0.25 percentage points from 6.50% to 6.75% when the Reserve Bank meets on Tuesday 6 November.

While this expected rise will effect many home buyers in the $200,000-400,000 bracket, the rise is unlikely to effect home buyers over $400,000 as most have factored into their budget the likelihood of an interest rate rise.

Interest rate changes are a part of life and as such, it's very important to understand and prepare for these changes. The market is still very strong, and even with an expected interest rate rise, we do not expect to see any change to the market.

Antony Bucello

Monday 29 October

Spring fever has hit the Victorian market. With clearance rates still in the 80% range and record numbers of properties available, buyers are getting a little nervous about missing out on property before Christmas. The market has been incredibly strong all year, with three, four or five people vying for every good property that has been on offer.

With the increased availability of stock throughout the Spring selling season, although properties are still selling well, the highly charged emotionally driven auctions with multiple people bidding in a frenzy are slowing down. Instead of four or five people bidding there are two or three and sometimes down to one. This does not affect the “clearance rate” percentage as anything that sells on the same day of the auction is usually put down as sold and therefore counted in this clearance rate figure that is so abundantly quoted in the press.

In the last three weeks I have had to negotiate three “pass ins” When competition at an auction does not force the biding to reach the reserve, the property is “passed in” to the highest bidder and that person has the first right of refusal at the vendors reserve. This is probably the most difficult time to negotiate for both vendor and purchaser alike.

The vendors are usually both angry at their agent for not getting a better offer, and also very scared that they will not be able to fulfil their next step in life. For the purchaser they are both frustrated that they are the highest bidder and therefore the purchaser “must” sell the property to them and also daunted by the fact they are now negotiating one on one with usually the most experienced agent in the company (the auctioneer). Many of these negotiations do not reach fruition.

If there are two professional negotiators, such as when we are acting for a vendor, then the negotiations usually go very smoothly. Both negotiators know what the property is really worth and what it should sell for and the quicker we get close to this figure the more likely a deal will be struck. Of the three properties that were passed into us we purchased two of them and walked away from the third as the vendors were asking for an unrealistic price.

When we call to have a chat to agents about an offer now we don't get the standard response “the vendor has instructed us to go to auction” which is usually a load of rubbish. Vendors do not determine negotiation strategy, Agents do; Agents are now much more likely to “have a chat” regarding how we wish to negotiate.

This is not to say the market is faltering; far from it. Prices are still elevating at a reasonable pace. The Melbourne market has been steadily growing at a sustainable pace for many years now, and even though there has been close to 12% increase in Median over the last 12 months, the upper quartile change has been closer to 17% and the 95th percentile is the only true runaway area having a 27% increase. (All figures published by REIV)

There will be a much greater level of negotiations on properties for the rest of the season and it will depend on stock levels as to whether this continues through to next year. Purchasers should note there will be only another month of new properties publicly advertised before the Christmas hiatus.

Ian James

Collapse Section