Clearance rates are not the only indicator of the Market

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It was great to read the excellent article from Chris Vedelago in Sunday’s Age. We have written many times since 2007 about clearance rates and what they actually mean. VERY LITTLE. If you have a voluntary system where agents are averse to letting the public know when they are not selling properties under the hammer, you can never expect to get an accurate picture of what is happening in the market place.

The majority of the properties we purchase at JPP are advertised for public auction. That is because about 75% of what we purchase is within about 25kms of the CBD. On an annual basis, JPP would purchase around 20% – 30% of the properties we buy, actually under the hammer during an auction. Of the seven properties we were going after last weekend, three were purchased Thursday & Friday, one passed in and was negotiated at auction on Saturday and two were purchased under the hammer. We were outbid on the other one. We purchased 2 from 7 under the hammer yet all were advertised as sold at auction in the papers.

The Herald Sun’s Saturday headline “Bubble Bursts”. To look at a very small segment in the quietest quarter of the year and say the bubble has burst is a beat up. There was 8.7% growth between the same quarter in 2010 and now. So over 12 months, and this is still a small time frame, we can see the market is still very resilient. Are we expecting to see growth at 20% this year, of course not! But the top third of suburbs in Melbourne will still perform at about 8% or so.

Investors are coming back into the market but will not spend money on rubbish. Smart investors are always buying when the market is flat. A property that is poorly presented, overpriced, or has a badly managed campaign may not only struggle to get a reasonable price, but may not sell at all. Most investors are looking for long term capital gain. This means they look for properties that have the best attributes that cannot be changed, such as location, good orientation and easy access to rail transport and public amenities. Investors will still pay fair money for these properties.

Population growth again was in the papers last week. And although the population growth is slowing, it is still substantially outperforming numbers of properties being built. Whilst the Supply continues to outweigh Demand, property prices will continue to rise. It is not a guess, nor is it a real estate agent talking, it is simple economics.

Is it easy to know exactly what the market will do? Of course not, if anyone knew the future, Powerball would be very boring!!

If you are considering a purchase of a property please feel free to give us a call or drop into one of our information nights

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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