Market Comment – Monday October 20th 2008

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This opinion of the market has taken me nearly four hours to write this morning. I have had about 6 phone calls from clients, past clients, reporters and friends asking me “what is happening in the market?”

The current market is being driven by two opposing forces. One, similar to the stock market, is falling confidence. All the papers are talking “recession” with one analyst in the paper this morning saying Australia will be in recession by Christmas. Last time someone explained economics to me, a recession is two successive quarters of negative growth. Growth in Australian GDP was 2.7% in the quarter to June 30 and this means it is technically, as well as unlikely, for Australia to be in Recession by Christmas.

The other influence on the property market is Supply and Demand. Supply is very low for good properties throughout the Melbourne Metropolitan area at the moment. Demand is getting stronger for good property. Therefore prices should go up as demand outstrips supply. We also have a dramatic a rental crisis, long term serviced apartments have exceptionally high occupancy rates, a growing population and a reduction in new housing approvals.

These two opposing influences are keeping the property market buoyant. As interest rates are dropping, and rents are rising, we can see investors who are looking for some stability of investment, heading back to the safety of bricks and mortar. We also know that if there is a choice between an over $1M investment and under $1M that offers a better return and a similar or better capital growth then it is obvious to go after the properties that show excellent long term growth, and are cheaper to purchase and offer a much lower volatility in price.

In my opinion, this can only lead to a growth in property prices. It will start in the sub $700k category and then move, slowly, into higher price brackets. Within the next 6 – 12 months, properties below $700 will begin to sell strongly. And, if we add to this the government incentive of doubling and / or tripling the First Home Owners Grant, we should see very good growth in this sector. Properties over $1.5M will always sell depending on whether the agent and vendor pitch to the correct price. Good property always sells well, average or poor properties sell at the right price and tend to fail when marketed above their correct price range.

Investors or owner occupier’s main dilemma is now getting good advice on what they will have to pay at any given time in the market. Prices will fluctuate dramatically in the next 12 months. Buyers can save tens of thousands of dollars by knowing the market and having a professional negotiator on their side. Remember, the vendor will be using a professional to negotiate – so should you.

If you have any comments or would like to have a chat, please do not hesitate to email or give us a call.

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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