JPP Buyer Advocates – Melbourne Real Estate Buyers Agents & Buyers Advocates

Owner Occupiers are re-entering the Market

March 19, 2012 Posted by Ian James

After another big weekend of auctions the REIV clearance rate has dipped just under 60%. But this doesn’t really tell the tale of what is happening in the market place. Four out of five of the auctions we attended on Saturday passed in with only one NOT being purchased after negotiation.

The very high enquiry levels are switching from investors to owner occupiers. In the past four weeks there have been two owner occupier enquiries to every one investor enquiry. There are many people who already own a home and would have been selling and moving up the property ladder to a more expensive home over the past two years that did not. They have been procrastinating. But a time must come where those who need to upsize, or downsize cannot wait any longer. I believe we are reaching that point now. Most procrastinators have been sitting on their hands for nearly two years.

If this trend continues, it will mean an increase of the family homes in the $400 – $700 and potentially the $1M – $1.5M ranges being put on the market. They will be good homes in good locations, and will mean that there will be better choice of family homes which we have certainly had a lack of for the past eighteen months. However, it will also mean there will be an increase in buyers for the next level up as well.

Whilst it will be good to see the increase in choice of property, it will also be good to see more top end properties of each of the suburbs now being put on the market. However, it will become much more difficult to purchase due to the increased competition of cashed up buyers.

I believe this year we will see the return of the traders. Those who have a home and have paid off a good percentage of the mortgage, who are now in a position to sell and repurchase. The market indicators will be very slow to encapsulate this trend as the median price will not change very much. Many of these vendors will be realistic with their values on their own homes but will probably be very aggressive on buying well.

I believe this year we may see a rise in turnover back to averages around 75,000 homes in the metro area being sold but we will not see a huge increase in price that normally accompanies this sort of spike.

2012 will be the year when owner occupiers will lead the charge for purchasing property. If you are one such person, then think setting very specific limits when you buy and sell. If you would like some assistance before taking the plunge, please feel free to call and have a chat with one of our advocates.

Ian James
Director JPP Buyer Advocates

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Tags: clearance rates, herd mentality, supply and demand
Categories: Market Forces

There is more to buying property than sticking your hand in the air!

September 6, 2011 Posted by Ian James

Last week we analysed a very nice, well located property in Bayside suburb. It was in a fantastic location, extremely well presented, undercover parking, very light and airy and looked for all intents and purposes to be an extremely good investment. Value for money in the area, put this property in the mid to high $500’s.

After inspection and property report this apartment is standing up to scrutiny very well. BUT WAIT – the vendor’s statement is now examined. Title, council checks, Vicroads, building permits and outgoings – all OK.

Further investigation shows that the owner’s corporation fees are nearly $3500 p.a. This was not put into the summary of the vendor’s statement. It is also extraordinarily high for a standard Bayside apartment of this value.

Further reading explains that they have failed one of its essential services tests. This may result in a cost to fix of over $12,000. Further to this it seems that the well-presented façade, one of the very good points about this property, has not been paid for and that it is being paid off over the next five years.

When we read further through the minutes of the last annual general meeting we find another $7000+ of repairs needed to be done.

None of this has been set up with levies on the owner, which would need to be paid by the vendor at settlement. This has all been lumped in the “maintenance” fund, which effectively shifts the burden onto the new purchaser.

In reality a purchaser of this property should try and purchase at a similar price to that of an unrenovated property as the new owner will be paying of the renovations and repairs for many years to come. At a very good price this property is still worth purchasing, but certainly not at a price comparable to fully renovated, similar sized and located properties.

I attended the auction and unfortunately I was not surprised to see at least 4 people bid and I think a few others that didn’t get a chance to bid. The property sold a little under what it should have sold for if the paperwork was in good order and the owners corporation fees were normal for the area.

CAVEAT EMPTOR – Buyer beware. Neither the vendors, nor their agent, are under any obligation to bring any of this to a prospective buyer’s attention. If you are considering purchasing a property you should seek professional advice from a licensed buyer advocate.

Ian James
Director

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Tags: auctions, buyer beware, herd mentality, market results
Categories: Property Negotiation

Where to get advice on Buying Property

July 5, 2011 Posted by Ian James

I read an article on Saturday in The Age talking about property advice. The reporter had spoken with the Financial Ombudsman, Alison Maynard. She spoke about commissions and fee for service and all manner of things but mainly related to shares and securities.

She also spoke about conflicted advice in the financial sector and how an unregulated property market is not a good thing. Nothing could be further from actuality if you understand the law.

Any person or company offering assistance in the purchase, sale or leasing of property where they are being paid a fee must be a licensed Real Estate Agent. Whoever is paying the Real Estate Agent is deemed to be the principal and the agent can only have one principal in any transaction.

THIS IS ENSHIRINED IN LEGISLATION!!

There is no ambiguity, there is no room for error, and there is absolutely no conflict of interest unless someone breaks the law. If you want advice on property simply employ an experienced, licensed, competent Real Estate Agent and make sure you are the one paying for their property advice.

The majority of people I speak to who have had woefully inadequate advice have usually received it from
1. A selling agent who is being paid by the vendor.
2. Their mortgage broker, accountant or financial planner recommended a certain development.
3. Spruikers offering free advice

Let’s break this down. The selling agent is contractually obligated to assist the vendor. His main focus is to get as much money from the purchaser as he can. This is what he is being paid for. Any advice you receive from the selling agent that actually assists you to get a better deal would mean the vendors agent has broken his contractual obligation.

The financial planner or accountants are very important in your overall investment strategy. They are there to organise loans, tax minimisation, cash flow projections and all things financial, but unless they are competent, licensed Real Estate Agents, they cannot assist you with the purchase of a property unless they do not wish to be paid. And any recommendation about the value of a property is not deemed professional information and therefore not liable to any comeback from you! HOWEVER, many of these individuals earn extraordinary sums of money from property developers. When Docklands was being developed in the early 2000’s almost any financial advisor recommending that a client purchase a “sure thing” in Docklands could earn around $10,000 or more simply for directing a potential investor there. This still happens today with off the plan sales all over Australia.

The third group are the very difficult group to manage. Some of these people will be Licensed Real Estate Agents, and very good ones. They will advertise themselves as property investment gurus. They will enshrine themselves in groups with names like Property Investment Professionals. They will explain what a good investment property is and will have fantastic spread sheets to back them up. These people will make it very clear they are there to assist you to find the perfect property. ASK THEM FOR A WRITTEN AUTHORITY TO ACT ON YOUR BEHALF AND EVEN IF THEY DO NOT WANT TO BE PAID – DEMAND TO PAY THEM SOMETHING. $1 IS ENOUGH. If you are not paying these people someone is, and there is only one other party in any property transaction – The seller (developer/vendor)
AND IF YOUR ADVISOR IS BEING PAID BY THE VENDOR ACCORDING TO LAW MEANS THEY MUST ACT IN THE BEST INTEREST OF THE VENDOR.

If your property advisor does not give you an authority to act and you are not paying for their advice, they are most likely working for the seller. I am yet to meet anyone who goes to work and doesn’t want to be paid by someone. AND THERE ARE ONLY TWO PARTIES IN A PROPERTY TRANSACTION – YOU – THE BUYER, AND THE SELLER.

Caveat Emptor or “buyer beware” is not just a saying about the physical property. If you are thinking of purchasing any property you should get professional Real Estate Advice from someone who is legally obligated to assist you. I am a Licensed Real Estate Agent in Victoria, I only assist people who are purchasing or leasing property. We do not sell any property. I charge a fee for my service and use an authority that has been approved for use by Consumer Affairs Victoria. It means I am obligated to assist the person who is paying me. There are many other reputable Buyer Advocates, or Buyer Agents in Victoria. You can see whether they are licensed real estate agents by going to this government website Justice.vic.gov.au

You can search by agent or company and you can see how long they have been in business and whether the Business Licensing Authority has put any restrictions on their license.

Ian James
Director JPP Buyer Advocates

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Tags: herd mentality, marketing, negotiations, off the plan, spruikers
Categories: Buyer Advocates

Where are we in the property cycle?

June 21, 2011 Posted by Ian James

We all know that property runs in cycles and that there is usually a long drawn out upward movement, followed by a flattening of the market, then a slight downward correction before another flattening out. Then the cycle begins again. This can take anything up to 7 years to complete.

We have seen this cycle run through twice since 2007. So what is changing? I think there are two major reasons. One is the world economy and the other is Australian population growth.

The world economy has never seen the likes of the GFC before. It hit hard and hit nearly every major economy in the Americas and Europe. There was a worldwide finance shortage and most western economies that had built their financial institutions on a house of straw (sub-prime mortgages) came tumbling down.

Australian banks had not done this! Our economy is linked to Asia, mainly China, which was and still is firing on all cylinders. Our economy has continued to grow whilst nearly every other Western nation has faltered.

Population growth in Australia has remained buoyant and strong and if the politicians allow more immigration then our population will increase even quicker. And it needs to! We have a severe labour shortage which will only get worse. And this is the “Catch 22” The more our population increases, the more we have a housing shortage! We then need to bring in qualified tradesman from overseas and this creates the cycle of needing more accommodation for them.

What this means in the housing market is compressed cycles. I believe this will be a continuing trend in the future. We will see large spikes, quick small corrections then a short six month flat period before climbing again. People’s confidence will wane whilst listening to the global economic news, then the reality will hit home that we have a growing population and a housing shortage and investors will look to capitalise on cheaper properties.

As many mortgage brokers have said recently, there are a growing number of pre approvals in place for investors waiting to get into the market. I believe we will see this in Spring this year or at the latest early next year. It will manifest in a short sharp increase in price then a flattening out as more property comes onto the market.

Overall, it means buying property is not timing the market, it is simply a matter of time in the market.

Ian James
Director JPP Buyer Advocates

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Tags: herd mentality, market cycle, population growth, property bubble
Categories: Market Forces

Property Buyers following the Herd

May 17, 2011 Posted by Ian James

The herd mentality is steering some buyers from the market place. Loan approvals for dwellings are down to 1998 levels. And this is when we had 20% fewer people in Australia. However Australian Property Monitors research shows that the Australian property market has only come off 0.6% and Melbourne has been steady in the first quarter. Whilst this is at odds with the REIV’s 6% drop in median, the different collection methods can make a difference. The REIV use voluntary Estate Agent reporting and there are some agents that may not report everything.

If the Reserve Bank raises interest rates in the next month or two First Home Buyers hanging out for the 20% reduction in stamp duty may not be as willing to purchase. If the media keeps reporting people like Professor Keene and his thoughts about massive drops in property values (like his famous bet that prices in Australia would drop 40% in 2008 – which he lost in dramatic fashion). If “mum & dad” investors stop buying investment properties then buyers will be few and far between.

Stock levels in Melbourne have doubled according to SQM research. If we look at this equation; stock levels have doubled and buyer numbers are down and dropping??? Prices are going to stagnate. They will not fall dramatically as there are so few forced sellers. There is no evidence that sellers are being forced to discount, however they are certainly not rising. This is likely to mean that it is a good time to buy.

It can also be a reasonably good time to trade up. Lower priced properties closer to the median price tend to hold their value and have less volatility in price movement. The higher the priced property, the more chance of greater discounts on price.

With the plethora of stock and lack of buyers, the tricky bit about buying good property at the moment is wading through the overpriced, poorly located, poorly renovated stock in order to end up with a truly good long term investment.

Ian James
Director JPP Buyer Advocates

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Tags: herd mentality, interest rates, RBA, RBA rates, reserve bank
Categories: Market Forces

Owner Occupiers are re-entering the Market

There is more to buying property than sticking your hand in the air!

Where to get advice on Buying Property

Where are we in the property cycle?

Property Buyers following the Herd

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