Market Comment – Monday February 22nd 2010

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It doesn’t take a rocket scientist to work out everyone believes the property market is the place to invest. With an 85% clearance rate on 771 reported auctions and over 1200 properties sold last week, we can see there has been a slightly upward trend on last years results.

We have spoken about how long this will last and also about the “bubble” theory. This myth that 10% – 11% p.a. is not sustainable is just ridiculous. The better suburbs in Melbourne have been averaging this since 1980 according to the Valuer General data.

Even if we think about that fundamental “average” that everyone uses. The fact that “on average” properties will double in value every 7 – 10 years. This equates to between 7 & 10%. If this is true, then let’s assume 8.5% is the average for all property around the world. This means some countries will be higher and some lower. I am confident in saying Australia will probably be above average and therefore closer to 10%. If 10% is the average for Melbourne then there will be some areas above this point and some below. The top third of suburbs usually sits around the 11% – 12% mark.

If we assume this theory has merit, then all we have to do is choose properties that will perform in the top third of properties in Melbourne. This is again where we go back to historical data. We look and see what suburbs have performed well. We look at any changes to infrastructure and we look to the fundamentals that are relevant to all properties; such as proximity to cafes and shops, proximity to parks and gardens and train stations, access to road networks and major shopping centres etc.

People ask me every day:”When is the best time to buy property?” My response is always the same: “Yesterday”. I will say this today; I will say this tomorrow, next week and next year. Property prices rarely drop dramatically, they tend just to stagnate occasionally between bursts of excellent capital growth.

For the investors, there are tremendous advantages of safely leveraging your money, reasonable rental yields and attractive tax deductions as well. Direct property investment is not at all difficult if you get good advice. Be extremely weary of anyone offering free advice. Any advocates that say they charge the vendor whilst helping you would be at the very least a massive conflict of interest and at worst illegal.

Hire an advocate whose only purpose is to assist purchasers buying property. Call us anytime to set up your no obligation first meeting. You will learn more about buying property in Melbourne from people that buy property in Melbourne every week.

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.