Market Comment – Monday 18th October 2010

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Who says we are into spring. Mother Nature certainly reminded us who is in charge on Saturday. The freezing temperatures, blustery winds and intermittent rain, sleet and hail made for interesting auctions on Saturday. A 68% clearance rate again this week shows us a balanced market outcome for both vendors and purchasers.

There were several interesting auctions this weekend:

The auction at 1/35 Stewart Street Ormond; a lovely 10 year old, 3 bedroom (third bedroom could arguably be classed as a study), 2 bathroom, single storey villa unit. The agents were quoting the property at $700,000-$770,000. Over 100 people braved the cold. The bidding opened on a genuine bid of $750,000, the property was announced on the market at $830,000, there were 6 bidders in total fighting it out and the property sold for $997,000, three of these bidders were over $990,000. Twelve months ago, the back unit of this development sold for $740,000.

At the lower end of the price bracket 6/26 Lillimur St, Ormond was a beautifully renovated apartment with a large courtyard which stood it out from the crowd. The agent had been quoting ‘mid 400K’, however a bank valuation our purchaser had authorised prior to the sale had come in at 475K which was in line with comparable sales in the suburb. The auction was very poorly attended – only ten people in all, however again this was likely due to the unusually cold temperatures. The agent opened the bidding on a vendor bid of 420K. 3 bidders were active at this auction. After two discussions with the vendor, the agent announced the property on market with our bid of 460K. No further bidding resulted and we purchased it on reserve – some 15K below bank valuation.

The REIV released the September quarter medians over the weekend. Metropolitan house price movement was 0.9% and units were 0.3% for the September quarter. For all those who are seeing this as the bursting of the bubble, please look at numbers across a reasonable period. In the past 5 years the median has had an average movement of 9.7% p.a. This should sit around 10% and therefore I can see a slight rise towards the end of the year.

Stock levels also played into the equation. If we take Black Rock for example, there has been less stock on the market with only 30 sales recorded this quarter – 14 of which sold over 1Mil – compared to 38 last quarter – 20 of which sold over 1Mil. Hence the reason I caution against putting too much emphasis on median price data without taking a deeper perspective.

The above $1.5m range is the softest market segment and the new estates will begin to falter next. However the $400 – $1.0M range will be the powerhouse over the next five years. This will be driven by investors and people buying their second homes. This demographic is the least affected by changing interest rates. Whilst overall averages may drop or be skewed somewhat, the better properties in good locations will appreciate very well in the coming years.

If you are considering purchasing a property in the next 6 months please give us a call for a free, no obligation chat.

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.