Market Comment – Monday March 1st 2010

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We have survived our first “Super Saturday” for the year. Over $1 Billion dollars worth of property was reported to the REIV. And of course this is only a percentage of the actual volume that changed hands over the past week. If we look at past annual results from the Valuer General and the annual figures put out by reporting agencies like the REIV, we can assume the reported numbers make up maybe two thirds of the sales in Metropolitan Melbourne.

Whilst the clearance rate was at 86% this week, as always it is the total of auctions and private sales that really tell the story. Just short of 1500 reported sales for the week. This is a little short of the levels achieved in 2007 and 2008 but way up on 2009 for the same period. The biggest issue is that demand has dramatically risen. Whilst first home owners may be struggling to keep pace with the market, investors have come out of the woodwork.

When looking at capital growth averages, investors can put plenty of reasonably well leveraged funds into direct property investment and not have to do anything but buy well. Capital growth is so consistent, unlike the stock market, that many people are also looking at property with their own self managed superannuation funds.

Buyers should not panic that the “train has left the station”. It hasn’t. In my opinion property is just starting on quite a long climb in value. Even if our state government got serious about building more homes today, it would still take quite a few years before any noticeable change between supply and demand would occur. When the government does become serious the most likely outcome for building more dwellings will be to dramatically increase density patterns within the current Melbourne metropolitan boundary. This will mean a sharp increase in land prices in Melbourne as well.

When media outlets are talking about the “lack of stock”, this is a relative term. In actual fact the stock levels available for purchase have not dropped that much. The difficulty for most potential buyers is that the competition has increased dramatically. For the average buyer this is a dreadfully difficult situation. It creates distress and panic amongst buyers with little experience.

For the experienced purchaser having a little or a lot of inexperienced competition does really matter that much. If you can follow the market, if you are accurate with your estimates of value and you are exceptional with your negotiation experience, then being in front of two competitors or twenty two doesn’t real change much.

If you are having difficulty purchasing a property in the current market, come in and have a chat. It is obligation free and maybe the biggest stress reliever you find.

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.