Market Comment – Monday July 7th 2008

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Why aren’t the property market median prices in free fall?

We are in the depths of winter, the middle of the school holidays and a free falling world stock market!! The world financial experts are talking about recessions, Hyundai are talking about car sales dropping, the climate is changing and the Murray River is drying up. Yet property prices have remained remarkably resilient.

We know they have dropped a little from last year, we know that bidders are not losing their heads at auctions, but we also know that whilst the clearance rate for auctions has remained fairly steady in the 60% range, and the number of private sales has increased. In fact, since early March, when the turnover was up closer to 1300-1400 sales per week, we are now seeing consistent turnover figures in the mid to high 900’s. Sales were down slightly over last years figures this week because it wasn’t school holidays this time last year.

Property prices are staying buoyant and will continue to do so even in the face of adversity in other financial sectors. Even if banks put rates up independently, property prices within Melbourne’s more established suburbs will continue to hold their value and in the near future resume their upward trend. Vacancy rates are at their lowest numbers on record, people coming to Melbourne are at a twenty year high. Ever heard of supply & demand?

The market is poised to take off again as early as the Spring season. The ANZ bank has said “the growing housing shortage is setting Australia up for the ‘mother of all’ housing booms” and Commonwealth Banks’ Securities chief equities economist Craig James said buyers had fled the property market because of high interest rates. “With population growing at the fastest rate in 18 years, we simply should be building more homes, not less,” he said. “Interest rate hikes have spooked investors and budding owner-occupiers. Investors are putting their money in the bank and people are staying in the rental market longer. But the situation is unsustainable.”

I know property is hard to get started in, but even a one bedroom apartment for $200,000 in areas well serviced by good public transport and walking distance to cafes and shops, will appreciate over time and get your property portfolio started. For those of you that are struggling to save for your first home, think about buying an investment property first, leasing it out to assist in mortgage repayments, get some capital growth and then use it as a deposit on your own home.

For those of you who have been burnt in the stock market have a think about direct property investment. Talk to your financial planner or call us today to organise a meeting to see if we can help you. Buying property is not difficult if you have the right team on your side.

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.