Market Comment – Monday 16th August 2010

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With Clearance rates well and truly entrenched in the mid to high 60’s for the past several weeks, I think it is safe to say we can expect these levels to continue until the spring selling season begins in October. The REIV is reporting an increase of nearly 40% in turnover this year compared to this time last year.

In a robust economy, if we don’t see a slowdown in property price increases then inflation will run rampant. We have already seen increases over the past 12 months above 20% but if you look over 5 years the rate is less than 10%. When looking at property price increases or decreases for that matter, you must look over a reasonable time frame.

To assume to buy somewhere that has not done well in the past 6 months on the assumption it must do better over the next 6 months is fraught with danger. This is what many property “spruikers” will tell you. They sometimes show you how easy it is to buy in a place where others are not purchasing or where there are a lot of people selling because they paid far too much. Think the reasons through very carefully before committing to a strategy like this.

With the market the way it is now, negotiation becomes your key to short term capital gains. Properties can sell 10% below comparables or 10% above comparables depending on how well the deal is negotiated. Once you have established what the property is worth, your ability to negotiate with the agent will become the most important part of whether you will be ahead of the capital growth curve, or behind it.

In a sellers’ market, the selling agent will try to run to auction or wait until he has multiple offers and then try to play one prospective purchaser off against the other. In a balanced market he or she does not always have the luxury of waiting for multiple offers. When a selling agent is calling you on a Thursday before auction, to see whether you want to purchase the property prior to Saturday, you know he can’t have too much competition. If you do not buy prior to auction and the property passes in then you are in a very good position, as long as you know how to press the advantage. If, however there is another competitor that the agent didn’t even know about, then you may be in a much worse position than you would have been if you had started negotiations on Thursday. This is where a seasoned negotiator will save you tens of thousands of dollars.

Some selling agents have been practicing their craft for many decades and if this is only your tenth or fifteenth property you have negotiated, then you will probably be a distinct disadvantage. However, there are some ways to balance the playing field. I regularly speak at seminars and Home Buyers Expos about negotiating one on one with Real Estate Agents. We have three upcoming events across Melbourne that are free to attend. (See our home page at www.jpp.com.au )

Property purchasers should always be looked at as long term investment and as such the performance should be looked at in the same way. If you are interested in buying property please do not hesitate to come in for a chat or alternatively come to one of our upcoming seminars.

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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