Property Buyers following the Herd

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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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About the author

Ian has been operating his own businesses for more than 25 years. During this time the self taught lessons of building the business, dealing with staff, suppliers, clients and economic woes have been invaluable. Ian is a fully licensed Real estate Agent, a member of the REIV and registered with the Business Licensing Authority.

Buying property is not just sticking up your hand and outbidding your rival. It is an emotional, fiscal and psychological decision that needs to be planned and well executed. Ian is usually involved in over three hundred property negotiations per year; ranging from the $250,000 first unit purchase for a young couple to multiple million dollar residential developments. Ian's business background and endless numbers of negotiations make him one of the industry's leading negotiators.

Ian is married with two adult children, living in Patterson Lakes. He is a keen fisherman when weather and business allows the time.

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