Demand High, then low

S

Sharpstone888

I am in the market for a house around 300K in western Sydney (Blacktown). This is in the fields of the FHOG frenzy!!!!

I won't be in the market till at the earliest Feb09. I checked RPData free suburb report and it shows an increase from 327K to ~380K in median prices for houses. This is crazy and is not actually current data, so it could have been higher. I was expecting a discount of ~10% off the price (300K --> 270K), it may end up being a bidding war.

All this crazy demand is making prices rise dam fast and is taking some buyers that would have bought at the end of next year to buy now. If the gov stops the FHOG and I buy in feb after the FHOG frenzy, it will go from a FHOG frenzy to a FHOG bubble and will come crashing around me.

I'm really confused? I might be priced out of the market as I can't afford anywhere over 350K.

Any thoughts on the matter.

Chris
 
If there's a buying frenzy there, then don't be a part of it!

I suggest that if you want to stay in the lower price bracket, then perhaps you should look at some of the regional satellite centres. I haven't researched them lately so don't consider any of these recommendations, but I'm thinking of places like Bendigo, Geelong, Wollongong, Toowoomba, etc.
 
If it's for an investment, the FHOG shouldn't dominate your considerations. Far better to make a sound investment and not get the FHOG, than get it on a bad investment... The difference in performance of good vs bad investments in ONE YEAR can exceed the FHOG.

If you're determined to buy in Sydney, then perhaps it would be worthwhile to buy, and thoroughly study, a Residex Report, such as this one: Budget Metro. Then you can narrow down to some of the lower cost areas with better prospects.
 
Thanks I'll check that out. The thing with the FHOG is that we will only have about a 16K deposit and the 14K FHOG will bump that up to 30K. If we don't get the FHOG we will have to pay stamp duty which will cut our already slim 16K deposit in half.

Chris
 
Median prices can be an inaccurate guide!!

I'm still amazed at the media, and mum and dad home buyer going on about "median" house prices.

"Median" prices are just a measure of the middle point of "SALES". RPdata reports this at the monthly level.

So I checked Rpdata for "medium" prices on an investment house.
The "medium" prices for the suburb are as follows.
Sep 2008 382K, Oct 2008 427K, Nov 2008 355K.

Ohh damn!!, Pity the people who bought in Oct. Then just lost 20% in a month. Not!.

Even more suprising is that the "capital growth in medium prices " actually went from 8% in Oct, to 9.3% in Nov, despite the apparent fall in the "medium" price in Nov.

Use "medium" prices are a rough guide only.

Don’t trust median house price reports
http://www.hudsonbond.com.au/userfiles/HB_41.pdf
 
I just checked domain.com.au for a suburb report of Blacktown. It says Nov08 so its up to date. It says the following:
houses;
median price: $310,000
Long term trend: 8.4% (i'd like to know exactly what this is)
Auction Clearance Rates: 41%
Days on market: 88
Discounting: 8%

Now these reports come out in the middle of each month, so i'll be eagerly awaiting next months one to see mainly the median price and the auction clearance rates. If the auction clearance rate stays low, then I might be able to jump in as that is a good indicator of market sentiment.

Though, I don't understand the difference in the two reports: both are dated as Nov08. hmm, confusing.

Chris
 
Chris, don't get swayed so much by monthly figures. The long-term prospects for the area are much more significant, and the degree to which your vendor is willing to negotiate will generally be of far greater magnitude than any monthly market shift anyway.

Focus on buying in an area with good fundamentals, where you can afford to hold the property long-term, and then negotiate hard when you find a particular property, and be willing to move on to another one if you can't get it at a price you consider reasonable.
 
PM me for my thoughts on your situation, I might have a strategy that could get you into your home that will up your servicability in a way the lender will agree to your price so you can afford it AND save you money in the mean time.
 
Sharpstone888 said:
I won't be in the market till at the earliest Feb09. I checked RPData free suburb report and it shows an increase from 327K to ~380K in median prices for houses. This is crazy and is not actually current data, so it could have been higher. I was expecting a discount of ~10% off the price (300K --> 270K), it may end up being a bidding war.

All this crazy demand is making prices rise dam fast and is taking some buyers that would have bought at the end of next year to buy now. If the gov stops the FHOG and I buy in feb after the FHOG frenzy, it will go from a FHOG frenzy to a FHOG bubble and will come crashing around me.

Chris
Click to expand...

A median report is very inaccurate, and I pay no attention to them. The media love them for some reason.

For example, in Dromana where I live, there has been a good number of sales in the cheaper end of the scale in recent months - the median has dropped.

But houses in the higher end such as ours ($700k-$1mill - this is the higher end in our area) are still selling at good prices if they are well positioned and in good nick. The median for these houses hasn't really changed too much.

Spec townhouses in the $400-500k range have taken a hit, but many are overpriced to begin with, so their asking price versus sell price is not realistic.

Your best bet is to research the specific area you want to live and the price range you can afford and look for the best value, best position, best quality etc and ignore the media reports for the most part.

They're good for making you sit up and take a bit more notice of what's going on, but that's about it.
 
Ozperp, the guy look like he is looking for a PPOR, not an investment property.

The month-to-month medium figures at the suburb level can be highly inaccurate, with a lot of volatility. You may have 40 sales in a suburb, which for a sample size can alter the medium price greatly.

Long-term trend - The average year on year performance price change expressed as a per annum percentage change. Based on the last 10 year. So it effectively your straightline average for the past 10 yrs.

The long term trend may/may not be that accurate guide to future performance either.

If you look at Blacktown in RPdata, you'll see in the 10yrs, the medium price increased abotuu 270% from 1998 to 2004, but then since 2004 it's fallen. So when you have a large boom period, and are looking over the last 10yrs, the long-term trend may be skewed higher than the true future long term trend might in fact be.

Blacktown RPdata
http://www.myrp.com.au/report_NSW_Blacktown_2148.html

Check out this site as well www.homepriceguide.com.au
http://www.homepriceguide.com.au/snapshot/price/index.cfm?action=view&suburbORpostcode=2148&st_locale=Blacktown&source=apm
 
Sharpstone888 said:
I would need to live in the property for 6 months.
Click to expand...
investor888 said:
Ozperp, the guy look like he is looking for a PPOR, not an investment property.
Click to expand...
The above leads me to think he's looking for an IP that he wants to look like a PPR just for long enough to obtain the FHOG.

And sorry, but here comes the spelling monitor: the word is MEDIAN, people! It has nothing to do with a person communicates with spirits (a medium).

And that strip in the middle of the road - that's a MEDIAN strip, too!
 
Thanks heaps guys, you all helped out alot.

So median prices are as important as the media suggests, bloody media they cant do anything right..
So the important factors really for market sentiment would be auction clearance rates, right?

And what ranges of auction clearance rates would you label for different parts of the property cycle? (such as 80> boom, etc).

ozperp, you are correct, i'm looking for an IP, but will claim the FHOG and move in for 6 months, then rent it out as an IP.

Now Blacktown has many benefits going for it; large western Sydney train hub, close to M7 and M4. Location wise I can be close to the train transport or closer to the car transport. The property reports suggest that only 10% travel by train, with a much larger percentage travelling my car. I don't know where to buy, will public transport pick up and become the preferred travel, maybe a middle ground???

Chris
 
There is no FHOG frenzy going on in Blacktown. Not unless I blinked and missed it. :D

If Blacktown is the suburb of choice, then go there. Look at properties, talk to the agents, go to the auctions. In other words, do a little research. This is the only way to gage what is actually happening.
 
I'll back up what everyone is saying... Median prices are NOT a good guide as to what is going on in a suburb. I would only use them to gauge the long term trend (over a number of years)... not over a number of months.

All I know is that the REAL bargains that existed in Blacktown a few months ago are all gone now (the low $200K houses). Now it's hard/impossible to find a house under $260K in blacktown.... back in July-Sept i couldve bought a few places for under $240K, but didnt have the funds at the time.

Personally, I would look at that information and infer that the blacktown market is moving. Investors/smart buyers have already snatched up the really good bargains, and now you are getting an increased volume of FHBers (i wouldnt call it a frenzy either) who are buying up the $260-300K houses.
In a few months time all that will be left at the bottom of the blacktown market is the $300-350K houses....

So take that information as you see it.
I would think that there is still some good buying opportunities in Blacktown, and it still has very good fundamentals and strengths. You've only missed out on the super bargains.
 
Witzl said:
All I know is that the REAL bargains that existed in Blacktown a few months ago are all gone now (the low $200K houses). Now it's hard/impossible to find a house under $260K in blacktown.... back in July-Sept i couldve bought a few places for under $240K, but didnt have the funds at the time.
Click to expand...

Sorry to break the bubble. I saw one just the other day that sold for $230k from memory. Lalor Park.
 
If you are eligable for the FHOG and must enter the market now then use it.

You may get a second better bite at the cherry when unemployment goes up next year. No one can predict the future but to me it seems rather likely.
 
Sharpstone888 said:
So the important factors really for market sentiment would be auction clearance rates, right?
Click to expand...

No.

Another twisted stat.

The r/e industry quote clearance rates, but include the sales after auction.

This means there was bugger-all interest at the auction, and the Vendor had to sell afterwards - sometimes several weeks afterwards - at a discount to get a sale. But the result still gets recorded as a successful auction. :eek:

The real stat is how many actually sold on the day - by auction.

Then, look at how many were actually auctioned as compared to say the same time last year.

Currently, the total auction numbers are down - total sales are down across the board and stock is down across the board currently, and the rate of actual "on the day" sales is down.
 
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