Clearance rates are stagnating at 60% on very low turnover. The State Government budget this year has Kim Wells pulling his hair out trying to manage the State’s finances. We have data analysts contradicting each other and we have real estate agents telling us how well they are doing. Throw in the uncertainty of variable interest rates (whether the RBA does anything or not is no longer the issue – the issue is whether the four banks will pass on anything to the public.) and you have the average punter wondering why the Australian economy is labelled as one of the best in the world. BY WHO?
As Chris Vedelago correctly pointed out in his column in The Age yesterday, all four major property data companies are at odds with each other. REIV are saying median went up, RP Data are saying it went down last month. APM have said property prices rose over the last three months and Residex have said it has fallen over the same time. Unfortunately they are all talking about the median house price and none of these “analysts” will admit that the median is not a useful statistic when there is major change to the volume. And worse still, when there is a large shift in the make-up of the purchasers this will impact even greater on the median price as you remove one large segment.
Owner occupiers are coming back into the market place. You do not find this out by sitting behind a desk and analysing auction results. You need to be talking to the people that are walking through the open for inspections. You need to talk to people who are bidding at auctions. Even loan data doesn’t let you analyse what people are doing until after the deal is done.
We are seeing properties that shouldn’t sell well, getting extraordinary numbers. Take the 5 bedroom, 1 bathroom period home in a Camberwell that is in a street with light industrial properties at one end. In today’s Age the property is said to have been sold for $1.965M above a reserve of $1.83M with three bidders in the action. To purchase a beautiful period home that you are going to live in for many years is the dream of many owner occupiers. They do not mind getting into a battle to win the house they want to live in. Investors do not do this.
Owner occupiers however will all congregate to a few properties that they deem are the best and leave the rest untouched. Investors will take the second best property if they can’t get the best – BUT AT A PRICE. This year you can expect to see some very high prices paid for what owner occupiers deem are good family homes and you can expect to see some lean prices paid for homes that cannot create competition.
Again this will throw the median price statistic out the window. Change in median price data should be looked at over a minimum term of 5 years and it is much more accurate over 10 years. The data should not be from a shorter period than a full years sales. Looking at monthly median changes to property prices is not going to give anyone an accurate picture of what is happening in the market place today.
The market will remain very erratic over the next 7 months at least. But there will be some very big ticket prices paid for homes that agents can create competition with and there will be some bargains to be had from those agents that cannot. I get asked is now a good time to buy and I also get asked is now a good time to sell. There is never a perfect time to do either. The right time to buy is when the house you want is on the market at a price you can afford. And the best time to sell is when someone offers you a price that you are comfortable to move on from your current property.
You can navigate the current Melbourne property market. The best thing to do is discover all the current properties, and all the recent sales (you will need some professional help with this from a buyer’s advocate). Once you have done this, think about how long you will be living in the home, or as an investor, how long you think you will hang on to the property and what rental return you think it is capable of attaining. Look at the property and see if you can add value, is the property likely to have competition on the day of sale. Is the property in a good location that is likely to have inherent capital growth. These are the questions that you should be asking yourself and your advisors.
If you want assistance purchasing a home think about using a buyer’s advocate. A buyer’s advocate is a licensed real estate agent that does not sell property or share commissions with selling agents. According to the Real Estate Institute of New South Wales under there “best practice guidelines” a Buyer’s Agent (advocate) must be completely independent from vendors and selling agents and only accept fees or commissions from buyers. In other words they do not sell or conduct the practice of vendor advocacy.
JPP Buyer Advocates are one of the only buyer advocates in Melbourne that do not share commissions with selling agents or take referral fees from selling agents. The only money JPP has ever taken from a selling agent was when we assisted them to purchase a property for themselves.
Ian James
Director
JPP Buyer Advocates
Ian James
