The Melbourne market would you buy soon or hold off some more?

Hello all first time poster here with a few questions to ask?

If you were cashed up what suburbs would you be looking at as far as securing a bargain property in the next 3-6 months thats not out in the sticks so to speak?

Or would you hold off some more due to the predicted slump and 1-2 potential interest rate rises? From what I have read and seen the Sydney market appears to be dropping from 2-15% depending upon the suburb location. Is this likelly to happen here as well? Being new to property investing where can I find up to date charts and data specifically about individual suburbs in Melbourne.

Thanks Milt,

welcome milt,

 where to buy you ask! , thats a very broad question and will depend entirely on your person circumstances and future goals and when you want to get there...

second question about when to buy, interest rates etc... again that depends on where you buy but general speaking I dont think i would be rushing into anything right now...its likely growth will be fairly modest over the next 6-12 months (there will be exceptions no doubt) . 2 more rate rises.... i dont know... cant read into the future but I think 2 is quite unlikely, my belief is a drop in rates in 2009 but who knows..depends on alot of unknown factors

third question re Melbourne property.. Im no expert on melbourne but obviously its been very kind to people lately in terms of growth and yet, depending on your sources, it  still has a cheaper Median than Brisbane and Perth and Canberra at the moment which is historically  unusual. No doubt WA and QLD are riding of the back of Mining, economic prosperity and rapid population growth just to name a few drivers. The question is will this mean Melbourne will permantly loose its mantel as Australia second most expensive city... Bernard Salt seems to think that melbournes population growth (which has  been  also moving along quite nicely) that at current rates, it will have a larger population than Sydney in 20 odd yrs... obvioudsly population growth is not a constant and will fluctuate....
 
right now i think I still would be careful in melbourne, but again depending on your goals income etc , but for me I would stick with no brainers and not take to big as risk,  what always work for me are properties that have scarcity value (cant build anymore of them such as an old terrace house for example) with high demand for both owner occupiers and renters, in close proximity to all the neccessary infastructure, rail, bus, hospitals, university, shopping, cafe society, etc etc and preferably and area going through a change in demographics (ie an ugly ducking suburb) thats undervalued......a year ago I would have said Footscray Coburg possibly satilite bay suburbs like south frankston, geelong may do well due to the new by pass coming maybe, those kind of suburbs might be the place to start you research, perhaps they still have potential , i dont know im not from melbourne but that my distant observation.

re the drop in the sydney market.. if you take the western and south western suburbs out of the equation the drops are very slight and have only been in the last quarter. (Which is why i stick with assets that are move robust) obviousy there was a downturn in 2004 but there was a holt almost nationally, sydney just has lagged behind and been flat while other markets recovered well in 2005-2006.. as did the eastern suburbs inner city of sydey around mid 2006..till late last yr.. I for one are not concerned with the kinds of dooms day reports where hearing... If we get a recession it will be the secondary asset classes that will suffer first as they already are in some parts of the country..and as in the US and the UK...Dont forget that we are more economically aligned with CHina and India and no doubt as you know they are holding up our ecomony quite well at the moment  with an unrealenting thirst for our resources which id expect will continue well into the future....

NOw to your price resources question

 , There are heaps of resources for pricing, yeilds, capital growth on all suburbs

buy a Australian property investor or my investment property magazine for example ( i recommend subscribing as it will give you lots of ideas answer questions ,get you motivated etc)

also go to Domain website. they have a new link for investing plus if you go to the suburb profile section you can get quite alot of stats..

Most of all take all info (including mine) with a grain of salt and digest it and formulate your own ideas about what you feel is right, I dont have all the answers anymore than anyone else on this site, best of luck.

EH

a bargain property can mean a couple of things e.g. good value or just cheap.....how much are you willing to spend?

what sort of suburb specific info are you after ?   there are pay for use services and you can get basic info from sites like :

http://www.homepriceguide.com.au/snapshot/price/index.cfm?action=view&suburbORpostcode=3200&st_locale=Frankston%20North&source=apm

http://www.domain.com.au/public/apm/default.aspx?mode=research

I will leave the futures questions to others.  I have invested in Melbourne recently (and live there) and would happily do so again if I can find the right deal and also create enough financial breathing space to do the deal comfortably.   You will probably get the full range of views from .... now is a great time to invest ....through to it being suicidal.  Suggest you do your research and come to your own views rather than relying on mostly anonymous opinionated views on the internet.   My only direct advice is that if you decide to do anything ,  make sure in the current environment you can comfortably hold the property.   This is not a time to be in a strectched holding position.   But thats just another opinion I guess :-)

Many thanks for the replies and internet sites to visits for assistance with PI. We are looking at suburbs that will essentially be clasified the next inner city suburbs in say 10 years time and like most want to get as much bang for our buck as possible. The suburbs i have been looking at thus far indicate a 13% growth long according to domain.com.

It looks like i'll just be sitting around for 6 months monitoring the 2-3 suburbs I'm interested in and begin submitiing offers 10% lower than the asking prices until i find a property I like, that the owner needs to sell. A property in the west of melbourne we were looking at has all of a sudden slahed 5% of there asking price which had me asking are thing getting tougher out there???

I've been advised to find 10 properties I like and submit 10 offer less than the expected price until I find someone who desperatelly wants to sell! Has this tactic worked for any of you in the past is this our best technique on purchasing a property for less?

Essentaill the first house we buy will be our base then we will wait for the market to drop a few years later if it does in fact, before we purchase another. Fortunatelly we will have a very small mortgage "working very hard over the past 5 years" which will leave us with options later.

Do you think the highter costs of living,  or if the US invades Iran in November resulting in big petrol increases will help deflate the market at all or could it in someway make housing affordability worse in our present economic climate?

I'm sure years ago it was much simpler to make these decisions as the world was no where near as compex

Milt,

sounds like a good strategy, particluraly if your looking at future inner city areas ( I assume you mean up an coming lifestyle areas).

Make as many offers as you feel neccessary as often as neccessary, ive certainly made 5 or 6 offers in one day of looking  on the fisrt day in the feild and had 3 excepted and taken the best deal.. thats pretty normal practice when you are buying an investment if you have already done your research, understand the market  in your chosen area and can compare apples with apples. It also gives you the opportunity to play the properties off each other. before or while ne3gotiating. ie..." well i made an offer on this other place and its in my view a better deal becuase"............. "so thats all im prepared to pay for this place", besides this place needs this and lacks.............(insert issues you consider shoul reduce the value and justify your offer)  etc etc........ its always better to state your reasons for your offer, negotiating is really about the agent giving your feedback back to vendor and pressuring them for a sale.... lets face it,  all agents want a quick sale to get the commisiion and move on  to the next sale, so take advantage of this by using it for you rather than against. Find out the reason for the sale.......is a long or short settlement advantagous, for example, would the owner want to rent back the house for 2 months while they find another home to buy...... if you can find out the vendors situation then your in a more powerfull position to bargain.. there are so many ways to reduce price... have a think....

as for the 5% slashing, thats not really that much... have a look again at domain and see the discount rate for your suburbs.. it may well be 7%..... Also remember jsut becuase a house isnt selling doesnt neccessary mean its a bad choice. Sometime these houses are a good choice. THink about what happens when a house is listed.  Usually the best offers are made in the first few weeks so if a vendor misses those opportunities thinking they can get more they might end up with a lemon.. people (just like you have) start wondering whats wrong with it and if they are pressured to sell you could find yourselve with a bargain..
IN my neighbourhood last month i saw a unlivable dump of a house passed in for 580K, i walk in after the auction and said to the agent, so whats it on the market for now, 615K was her reply and i though wow really they should take the 580K, it sold for 550K 1/2 months later. and another place listed for 810K I made an offer of 750K without going inside (didnt bother following up as I changed my mind). It then when to auction and was passed in after almost 2 months already on the market . Eventually selling for high 6s.... a good deal for someone, thats  a least 120K of the original asking ( may well have been to high obviously), well more than 10%.  So if you no the market you should figure out the discount also maybe 5% is a good deal on a particular place   You can play the waiting game even if your offers get refused and still get the house later.... anythings possible.....

If you will have a small mortgage than you are lucky, the last thing you want in a uncertain market is negative equity so dont worry to much.

if petrol goes up considerably there would be more downward pressure on the market (thats not to say it would actually go backward) and the effect would most likely be broader in terms of demographic but it will however be more pronounced in the mortgage belt , It will have economical as well a direct impact to those areas becuase they are usually poorly serviced by public transport... if you can stick to a transport route/node within your search area  you would be reducing your risk is my view. particulary if it has fast access to the city, like express trains for example...

Thank you for the very extensive responses, they are now be kept in my arsenal ready for battle with realestate agents .
it leaves just leaves me with one silly question is the discount rate the percentage figure that the property was discounted overall i.e property was listed for $400,000 but sold for $360,000 hence the 10% discount figure?
What economic factors control the prices of homes in inner suburbs in particular the falling of if any, all theories accepted?

Cheers Milt,

yes thats the discounted amount as you stated,,,,,, in terms of the price reduction my theory is this.... Statistically we get iproperty nfo from a zillion sources APM, APdata, domain etc etc, etc telling us the rates of growth in suburbs and they are always different to each other and that is becuase of how they go about calculating and crunching the numbers,, what date they start and finish, how they collate ther own info etc etc.... it can only be used as a guide, besides stats are not reliable.... i.e if you see as you can on domain right now 350% growth on units in 12 months in some suburb that i cant remember ,  you can pretty much guarentee thats becuase that suburb  had a major (probably expensive) unit development sold off and there were  very few old crappy units sold that 12 months...............or some other infuential reason.....

Getting back to your question and my point, in my previous example of (apparent price falls) a mentioned a  house selling less than the highest bid at Auction after the auction and another house selling for 120K less than the original asking . This doesnt neccessarliy statisically theres a falling market...this is really about  smaller micro changes happening ...FOr example look at clearance rates in the first week of January... very low.... So what happened with the above property was a direct result of the last interst rate rises, as this was a week later when  there is a (fear induced) micro climate and people dont buy... a month later people adjust and get back out there ( but perhaps in smaller numbers) statisitaclly you might see a flat market for 3 months ( usually the minimum time period for the stats) but in reality there may have been a 2 week window of bargains and then stable prices........When a market recovers and or optimism returns the same micro climate happens. Prices jump back to more optimsitic levels, this can happen very quickly. The house someone was prepared to sell for 550K could all of a sudden be on the market for 600K in a month in a different market as buyers move back in, but the stats agian might not show this.....So in my area i beleive the market is still stable for example despite the examples i stated earlier. Besides im only talking about individual properties and there is alwys gogin to be opportunity in any market...

hope this helps.

milt,

the other point i should mention to ease your mind further regardinf those examples i used beside the interest rate rise effecting the discount was this...

the 810k property was on the market for 3 months but was listed as a must sell.........he was getting desperate and  it was a lemon by then.... it also needed substancial work.. It was an old victorian house that had the typical 1970s migrant reno if you know what i mean... it needed its architectural integrity brought back, like remove all the concrete the rough render the alumium windows and a interior overhall, then you would have a million dollar house when the market turns upward..no prob.... THe other house was a total dump and unlivable......What can happen when the market flattens is these types of propertys dont look very attractive to buyers or investors as they cant justify the uncertainly in the market against possibl future profits.. (you will find the quality assets will be more robust in a downturn for this reason as theres a broader buying base) . But look what happens in a fast rising market... Sometimes these proteries of opportunity can attract premiums as renovators can see $$$ signs and a place they can refurb to there tastes..... The point is again, dont let those stats deter you as it doesnt mean you are making the wrong choices....SOmetimes its very good to do the opposite of what everyone else is doing..

And then there are the independent banks that raise there own interest rates  like St George LOL

Milt,