Weekly Melbourne Property Market News - Archive

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

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.

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

The Property Market - 2008

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

Articles from 2007

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

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