The clearance rate has dipped under 60% again. Does anyone who managed to secure their dream home over the weekend care? Does anyone who managed to purchase an excellent investment property worry about how many others didn’t purchase their preferred home? NO!!
There are still 800 properties being reported to the REIV every week as sold. There are still properties that were passed in at auction being sold later in the week. There are simply not enough good homes on the market to go anywhere near meeting demand. But there are still vendors asking way too much for very ordinary properties.
We will still have to read about data agencies telling us that median prices are dropping. We will still have to listen to spruikers telling us to purchase properties that have amazing cash flow in the first year are the only investment properties to go after. And we will still have to listen to so many who are telling us that buying ay property would be a mistake. It is simply not true. Some financial planners will tell you that there management schemes, or this type of share portfolio is better than another but investment, is simply about mitigated risk. It is the same with buying any property. The lower the risk the less likely it is that you will lose money.
As there are fewer good properties out in the market place, owner occupiers that set their hearts on good property are finding they have either much greater competition than in recent years or they are negotiating one on one with some of the best Real Estate Negotiators in the country. With the lowering of volume of property selling in Melbourne, we are finding more and more when the negotiations start, the principals of the agencies are getting involved. There are two reasons for this. One, the selling agencies no longer have the same staff numbers that they had in 2010, and two, the dealer principals need to make sure the deal gets done. THEY NEED THE BUSINESS!!
This means that if you are buying property at the moment, whether it is your dream home to live in or another investment property, you better be prepared for a very robust, very professional negotiation. You need to know that you are a very good negotiator or alternatively get some professional help. If you have bought and sold hundreds of properties in the last couple of years then you will most likely be a reasonable adversary of the selling agents. But if you have bought that many properties you would already know that a negotiator between you and the selling agent will save you much more than any fee you are likely to pay.
For those of you who are not sure about negotiation and would like to try it yourself, I would like you to think of the negotiations you have seen at the movies or on TV. Remember when the bank robber gets caught inside the bank with some hostages. The police negotiator outside starts talking to the bank robber. The hostage taker usually asks for something like pizza and a helicopter. The response from the trained negotiator is always the same. I can organise the pizza but I will have to ask my superiors about a helicopter. How about you give me a few hostages to “grease the wheels” and show some faith. He has offered nothing but is already negotiating. “Never allow the salesman direct access to the decision maker” This is the first rule of negotiation. It is one that is followed by every real estate agent in the country. How often do you get to talk directly with the vendor during the negotiation?
In the newer estates around Melbourne we will see a flurry of activity that will be short lived. The Baillieu government is ceasing the First home buyers state grant as of 30th June this year. Whilst the federal grant of $7000 will remain for all first home buyers purchasing a property under $750,000, the bonus of $13,000 (19,500 for regional) will cease. This means that unless first home owners purchase their new properties within the next few weeks, they will miss out on a substantial hand out. This will mean that builders will again have to drop pries to coax more business. This will inevitably mean that established homes in these new estate areas will also fall in value.
There will most likely be some tough times ahead for builders. Yes! Tougher than now!
Ian James
Director
JPP Buyer Advocates
