All Topics / General Property / Melbourne Boom ?

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  • Profile photo of Real2Real2
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    Seeking comments on how people are interpreting the Melbourne market at the moment.  I've been following the auction results, (and reporting), closely this year.  Auction clearance rates have been consistently at around 80% lately, and here is some of the headlines as reported: 

    Age  26/03/07      "Buyer demand takes sellers and agents by suprise"

    Sunday Age 01/04/07  "Reserves left in dust of bidders rush"

    Age 15/04/07       "Bidding frenzy has buyers setting new benchmarks"

    Sunday Herald Sun  " Yesterday's auctions:  Impressive results"

    Sunday Age 22/04/07        "Bidding stays hot through rain and chill"

    Age  23/04/07   "Property market stronger than in 2002 boom: agents"

    Herald Sun 23/04/07  "No stopping surge"

    Do you see the situation as:

    1/    A temporary revival, inner city specific,  only to be deflated by future interest rate rises.

    2/    The beginning of a new Melbourne property boom, where inner city goes first, and then the ripple effect to outer suburbs later.
            I have read many reports over the last few years, which were predicting a boom in 2009 / 2010.  Has the boom been brought
            forward by a couple of years, due to:

           a)   Record low vacany rates, due to insufficient supply,

           b)   Increased population growth,

           c)   Plethora of new mortgage products that have been addressing affordability,  i'e  30  / 40 / 50 year mortgages  ,  Equity 
                 Finance Mortgages  /  Limited Family Equity Guarantees /  1 day ABN loans  etc

    3/    Or, is the reporting over the top ?

    Cheers

     

    Profile photo of blogsblogs
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    Well there DEFINATELY is a boom in the inner city regions-it i snow par for the course for properies to go for $100k over advertised, which makes me wonder how on earth the realestate agents arnt being fined under the new laws.

    Profile photo of L.A AussieL.A Aussie
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    There is no doubt that the correction in Melb has been shorter and shallower than many thought it would be. It turns out that Melb is outperforming most of the other Cap Cities right now.

    Keep in mind though, that the Age and the Herald Sun are city/suburban papers and will concentrate on the "postcode" suburbs mostly – always have. it's more glamourous to talk about Camberwell and Brighton than Dingley or Airport West.

    If you want the real stats, look in the Investment Magazines and places like Residex. You know; the places that only investors and not 90% of the public look.

    Let's first look at AUCTIONS from the AGENTS' point of view:

    Be careful about the auction results listed in papers. These stats are supplied by agents to the reporters.
    A true stat is when the property sells at auction on the day of the auction.

    Anything else is not an auction sale. It is a private treaty sale. Look at how many sold before auction, after auction and how many were passed in on the day to get the real stat.

    Why do agents misrepresent the figures like this?

    MONEY – They always get a result with an auction – good or bad for the seller; quite often bad. The agents get their commission when the property SELLS. Many times in private treaty campaigns the agent doesn't sell the property before their sale period contract runs out.

    Of course, there are always a few properties that go above the listed price. The listed price is the one advertised by the agent to attract buyers. They want a grand show; lots of people, lots of bidding. A lower advertised price attracts more people because there are more people with less money than there are with lots.

    Agents don't particularly care if the advertised price is too low either; if there isn't much interest at the advertised price, they "condition" the Vendor to drop the price over a few weeks leading up to the auction because "that is what the market is telling us".
    They still get the sale, but the paper will report a good result, while the Vendor has lost thousands.

    Look at it this way; if you can spend $500k, and the next nearest bidder only bids $450k, are you going to put up your hand and say $455k or $500k to get the property?

    Now let's look at AUCTIONS from the NEWSPAPERS' point of view:

    Newspapers make MILLIONS of dollars every year from real estate advertising' and agents make many hundreds of thousands out of their Vendors from the ads that they place in papers.

    If the market is bad, there is not much money to be made by either party. So why hype up the figures and the state of the market?

    They need people to be confident, to feel good about buying and/or selling. No one wants to be the dummy who sold in the slump, or the buyer who bought in the boom and found out the prices dropped. The agents need sellers to provide the ads, the papers need the ads.

    The newspapers can't afford to have a prolonged period of no sellers to give them those lovely advertising dollars. There will always be buyers; people have to live somewhere, but buyers don't place ads.

    If the market is bad sellers disappear along with their chequebooks.

    Profile photo of blogsblogs
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    I agree with your sentiments L.A but in this instance I would have to say I agree with the newspapers-I have been regularily attending auctions for the last six months at whilst at first thought it was 'surprising' to see places sell for $50-$100k over advertised price it is now the norm. I turn up to auctions automatically adding on AT LEAST 30%, most of the properties I have looked at have been in the $300+ range and they have all gone for anything form $350-$450k. There is definately heat in the market though I dont think anyone could have seen it coming. I am truley amazed at what people are paying, its just plain crazy….

    Profile photo of L.A AussieL.A Aussie
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    Blogs, where are you looking?

    You are probably looking in the areas that are possibly experiencing a resurgence; this is not where you want to be investing anyway. If the boom is fully blown as you say – you're too late and the houses are now over-valued for the area.

    What are the rent returns on these houses in question? is there any leg-room to add value and increase rents?

    If the rent returns are crap, if the boom is underway, if the value you can add is next to nothing compared to an already renovated property in the area, then this is a bad sign. You've got a property that won't go up much more in value for several years with a terrible rent return on top.

    My gut feeling is what I said before – under quoting by agents, over-hyping by papers (and agents) to stimulate some real interest and of course the property sells for around what the vendor sets the reserve at anyway unless the agent has conditioned them down. The result looks good on the surface.

    Mind you; I hope you are right; ours will be worth more.

    Profile photo of Real2Real2
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    Thanks for your comments LA Aussie.  Just thought that you would like to know that in today's Age, it was stated that agents underestimated the auctions prices by an average of 20.6 per cent, and the weekend before that by 20.3 per cent.

    Profile photo of L.A AussieL.A Aussie
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    Of course. I don't doubt it all.
    Do you think this is an accident? Do you think that agents are all this incompetent and don't know their market?
    They know the market very well.
    This is proof that they under-quote to get buyers interested (and more importantly; to get details at the open for inspections from future sales contacts).
    It would be interesting to know how many auction sales that reached the reserve in the last month sold for much more than it.
    My guess is not many.

    Profile photo of foundationfoundation
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    MPL, I pick "none of the above" and "seasonal" followed closely by "REIV's press releases regurgitated by incompetent 'journalists'".

    The main cause of apparently high auction prices is a practice of deliberate underquoting by REAs.

    In other news from the REIV – median metropolitan house prices fell $11,000 in the 3 months to March to $380,000 and are now below the original peak from 2003. Not lovely. Also – house prices falling in Victorian regional towns and cities, including a $61,000 (21%) decline in the median sales price for the greater Shepparton area in the 12 months to March. Shep dropped 12 percent for the quarter alone.

    Profile photo of RikkyRikky
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    Foundation You are the most interesting person on this forum by a mile as far as im concerned. I do agree that the average price has fallen I belive this is due to the ever increasing sales of units and appartments flats. I could be wrong.

    I sold my house late last year settled around september and started looking to buy a house in an area I want to live, essendon strathmore around there somewere, things were a little slow from what I could see. But in the last couple of months oh my god, I saw a house advertised for 439k and want to buy it for that price about 60k over what one 2 doors up sold for in november anyway the agent hasent got the 32s yet so I cant fill in a contract. Just so happens a house about 5 doors up went to auction on the weekend so I thought might as well have ago .The house was advertised for 390k + im thinking mabe 430k 440k , I bidded to 480k sold for 508.5k   90k above reserve . Anyway as soon as I got home I called the other agent about the house that was addvertised for 439k to see if he had the 32s yet . He answered no not yet still waiting and by the way the owners want to change the price to 474k. I tell you what I felt so sick I could not sleep that night I reakon just by waiting a few months I will have to pay about 130k more. 130k more imagine haveing to work and save that 130k . I earn about 90k a year I reakon out of that I save 10k a year if im lucky  thats an extra 13years of savings in a few months. And I know its easy to say there are plenty of cheaper areas but I grew up around these areas all my family and friends are there its what I love its important for me to stay around here.   ( all the propertys Im looking at are in poor condition and I only want them for the land am going to pull down and build a new home all theses houses are on the same size block just to let you know i am compareing apples with apples ) The place is going mad and it does not look like it is going to stop
       

    Profile photo of Real2Real2
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    Auction Headlines Update

    Sunday Age 29/04/07   – "Fiery bidding as market surges forward"

    Sunday Sun 29/4/07    – "Yesterday's auctions: happy days"

    Sunday Age 06/05/07  – "Sales add more fuel to the quoting fire"

    Herald Sun 07/05/07  –  "Autumn rush looms"

    Age 07/05/07               –   "Buyer frenzy points to winter activity running hot"

     

    Profile photo of Real2Real2
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    I suggest that everybody reads the May newsletter, as Simon makes some very intelligent comments about this very topic.

    Profile photo of markxr6tmarkxr6t
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    Dunno anything about Melbourne auctions, but I do know that Melbourne property is due for some growth

    After much research and learning lots from watching the mechanics of a boom, I've just purchased my first property outside Perth and guess where I bought? Melbourne (down the Mornington Peninsula in Rosebud).

    Having seen cashed up people's obsession with coastal living here in the West, I think Frankston, Mt Martha, Dromana, Rye and Rosebud etc.. show outstanding value. Heck – even Portsea is cheaper than a "new homebuyers" near coastal suburb 50ks from Perth.

    The agent I bought through told me a group of investors from Perth flew over last week and bought 10 properties on the Peninsula, so I'm obviously not the only one seeing this value.

    Mark

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