Market Comment – Monday 14th June 2010

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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

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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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