Is Mebourne Booming????

David,
Today's super-sized mortgage is tomorrow's prized investment. The more you have to "fight" for them , the more the capital gain.

LL

That's exactly what was going through my mind as I was bidding. Even in a dull market people will be fighting for this one.
 
HI,

I know S/E also gone up but is that good idea to wait next 2 -3 yrs or buy my first IP now?

What would be the impact of further Interest rate rises?
 
HI,

I know S/E also gone up but is that good idea to wait next 2 -3 yrs or buy my first IP now?

What would be the impact of further Interest rate rises?

I still have a "gut feeling" the outer fringe might be ok buying if there is a big land component... Maybe kilsyth, boronia, upwey, etc?

Mind you I don't own anything out that way....

Cheers,

The Y-man
 
FYI

http://www.theage.com.au/news/in-depth/under-attack/2007/05/24/1179601572013.html


and......................

Ben Schneiders and Chantal Rumble
May 25, 2007

LAWS designed to stamp out misquoted auction prices may be overhauled after the State Government last night revealed it had ordered a review.

The move comes after The Age revealed that underquoting is rampant across the city.

Over the past six weekends, data from 835 properties for which prices were publicly available has shown that Melbourne homes have sold at auction for an average 21.2 per cent more than their advertised prices.

The massive difference comes despite state laws brought in three years ago to protect buyers from underquoting. No agent has been prosecuted under those laws, which require estimates to be based on what "a willing but not anxious buyer" would pay, and forbid agents from advertising properties for less than their own estimates.

Consumer Affairs Minister Daniel Andrews said yesterday that he had called on the Estate Agents Council to review the underquoting laws.

Mr Andrews, who has previously refused repeated requests for an interview on the issue, said he had asked the council — an independent statutory body — for options on "compliance and other enforcement measures".

"These are important issues, that's why we made the changes back in 2004, but I'm keen to make sure the law is operating well and that Victorian consumers can have confidence the law is operating well," he said.

Mr Andrews said he had an open mind on any recommendations from the council.

But a spokesman for the Real Estate Institute of Victoria said it did not support any change to the laws.

REIV chief Enzo Raimondo has denied there is problem with underquoting.

Critics say underquoting of house prices misleads many potential buyers, in some cases encouraging them to spend hundreds of dollars on inspections on homes that eventually prove to be well beyond their reach.

Legal experts say the existing underquoting law is ineffective. When developing the law, the Estate Agents Council recommended sweeping changes, including a crackdown on agents who consistently underquoted by more than 15 per cent — but that recommendation was dropped from the final legislation.

Dr Sam Hepburn, a senior lecturer in property law at Deakin University, said this stripped the laws of their effect.

Critics of Consumer Affairs Victoria say the agency has failed to enforce the law but Mr Andrews came to its defence. He said the watchdog checked 45 inner-Melbourne auctions last weekend and two agents were under investigation.

Meanwhile, the REIV yesterday released new advertising guidelines to ease the confusion caused by current pricing methods and to ensure advertised prices reflect market conditions.

Under the guidelines, REIV members — who account for 80 per cent of the city's real estate agencies — will no longer be able to advertise a property for a "price plus", for example $400,000+, or in general terms such as "mid to high $400,000s".

Instead, agencies will be allowed to advertise only a single figure, such as $400,000, an estimated selling range of not more than 15 per cent, or no price at all.

Greg Hocking, managing director of the Hocking Stuart agency, welcomed the guidelines. "It's the industry body coming out and saying 'Enough is enough'," he said. "What we are finding is the industry is facing a backlash from the public in relation to this price quoting issue. It isn't good for the industry and it's about time a solid response was made," he said.

"It isn't going to be a cure-all by any stretch, but it's a major first step in acknowledging the issue."

However, Mr Hocking said the new guidelines might not tackle the fundamental issue of fair quotes. "If it's a range that still doesn't reflect what a seller may sell for, then it's not going to change anything. The core issue is that if a price is quoted, it should be in the agent's best professional opinion reflecting where the interest is building in the property or where it's expected to build."

Barry Plant, from one of Melbourne's largest real estate networks, Barry Plant Real Estate, said the guidelines would have little impact, but welcomed the inclusion of a 15 per cent price range because it gave agents adequate leeway.

ciao

Nor
 
LAAussie, do you think Melbourne is still in a slump and talk of increasing prices in Melbourne is just talk?

I'm not saying Melb is still in a "slump" (probably still flat); just that the media and the real estate industry have a vested interest and therefore we need to be very subjective when listening to their reports. They will always talk it up for their own benefit. Similar to how the snow report works on the radio - when it's crap, they say it's fair skiing, when it's fair, they say it's good etc.

In my opinion the market is still flat except for some areas, but the media and r/e industry never let facts get in the way of a lot of spin.

There are also some areas that will do well no matter what the climate is; we need to know which ones.

Having said that, I still think that a lot of the recent interest in Melb is due to a combination of the media spin, the still easy to obtain finance, the fringe loans which are now available, which if they weren't would count out the fringe qualifiers - Lo Docs, No Docs, A.R.M's etc. Once the finance market tightens up (and it will - just like has happened over here), a few more rate rises may happen also, the A.R.M loans switch back to the normal rates etc, then we'll really see how it is going.

People have short memories; the boom ended only 3 years ago, and we've had 6 rate rises since then. It ended because housing became unaffordable. What's changed since then? Wages haven't gone up much, and interest rates did.

Only market sentiment and heavier advertising for easy finance has changed.
Serviceability hasn't improved much since then which would suggest that not much should be happening. Look out for a lot of soon to be over-extended Purchasers out there!
 
What's changed since then? Wages haven't gone up much, and interest rates did.

Only market sentiment and heavier advertising for easy finance has changed.
Serviceability hasn't improved much since then which would suggest that not much should be happening. Look out for a lot of soon to be over-extended Purchasers out there!

Rents have risen though, quite significantly in inner-city areas.

GSJ
 
People have short memories; the boom ended only 3 years ago, and we've had 6 rate rises since then. It ended because housing became unaffordable. What's changed since then? Wages haven't gone up much, and interest rates did.

Only market sentiment and heavier advertising for easy finance has changed.
Serviceability hasn't improved much since then which would suggest that not much should be happening. Look out for a lot of soon to be over-extended Purchasers out there!

Yes, the boom in Melbourne certainly ended 3 years ago. Since then wages haven't increased much (if at all), and interest rates have risen, albeit marginally. Don't forget though we have had a massive rise in the Share market, bought on in part (or significantly so) by the Resources boom. That would be the significant factor that has changed since 2003. This factor has been influencial in keeping the higher end of the market churning along very nicely -with many people being paid huge bonuses, etc.

At the moment there are many buyers coming over from WA to the Melbourne market and also other interstate markets. (Brisbane, Adelaide, etc). This is also pushing prices higher. (Take a look at Frankston for example - so many houses are under contract within a day - a week at the longest of being advertised on the internet). I was speaking with my Frankston PM the other day and she mentioned the extremely large numbers of investors coming over from WA to purchase properties in the area.

Not to mention the shortage of rental properties in the inner city (GSJ has touched on this) which is leading to an increase in rent - thereby making residential somewhat more appealing to investors. There is also a shortage of properties for sale in the inner areas. (I have spoken with a number of agents who have vouched for this). This in turn pushes prices higher by vitue of supply and demand issues.

In view of all of this, I am not sure how 'overextended' people really area. It's possible they have made significant gains in the share market over the past four years and are now putting this money into property with minimal loans. I don't know.

Just my observations above, and they may be completely incorrect!

Regards Jason.
 
G'day Jingo,
and interest rates have risen, albeit marginally
Umm, I reckon the increase has been a little more than "marginal".

Forget the "base rate" - let's talk of the average mortgage (actually NOT as bad as using the Base Rate...) These have risen from 6.5% to 8% - give or take a bit.

What percentage increase is that? And have rents kept up with this increase?



(For those "calculatorally challenged" :D the Interest rates have risen 23% over the last 2 years or so). Slightly more than marginal I would think..

Regards,
 
G'day Jingo,

Umm, I reckon the increase has been a little more than "marginal".

Forget the "base rate" - let's talk of the average mortgage (actually NOT as bad as using the Base Rate...) These have risen from 6.5% to 8% - give or take a bit.

What percentage increase is that? And have rents kept up with this increase?



(For those "calculatorally challenged" :D the Interest rates have risen 23% over the last 2 years or so). Slightly more than marginal I would think..

Regards,

Hi Les,

Yes, it would seem rates have risen more than marginally over the past two years if the average mortgage rate is taken into consideration.

My rents in inner Melbourne have risen between 15 and 20% this year. I can give an example of one of my IP's.

TownHouse in Nth Melbourne.

Purchased in 2001 for $227,000 + stamping @ 5% = 238,350 Using your interest rates above the impact of the rental increase and interest rate rise would be:

Loan Cost of Holding Property in 2005, (2 years ago) @6.5% =$15492
Less rent @ 300 p/w =$15600

Cash flow to put towards holding costs =$108

Loan Cost of Holding Property in 2007 @ 8% =$19068
Less rent @ $360 p/w = $18720

Negative cashflow to put towards holding costs=$348


Ouch, That was an interesting exercise. The only consolation in my situation is that my interest rate on this property is closer to the 6.5% as it is fixed. Tax has not been considered either - these are just raw figures. But Les, that is certainly food for thought!!

So my situation as it now stands with this IP is:

Loan cost of holding IP in 2007 @6.95% = $16565
Less Rent @ 360 week = $18720

Cash flow to put towards holding costs =$2155

Regards Jason.
 
You could be right Jason.
I just wonder how many people are actually in the stock market. For example; I don't know many people in my circle of contacts that own shares (other than through super).
I know that Frankston is steaming along - we have an I.P there and are loving the news!
That is a cheaper area which will attract a lot of attention from the interstate investors for sure; the ones that are enjoying some lovely cap growth in the recent boom no doubt.
I was talking about the mainstream mum and dad buyers as the majority of buyers in Melb.
 
You could be right Jason.
I just wonder how many people are actually in the stock market. For example; I don't know many people in my circle of contacts that own shares (other than through super).
I know that Frankston is steaming along - we have an I.P there and are loving the news!
That is a cheaper area which will attract a lot of attention from the interstate investors for sure; the ones that are enjoying some lovely cap growth in the recent boom no doubt.
I was talking about the mainstream mum and dad buyers as the majority of buyers in Melb.

Hi L.AAusie,

Yes, I did approach your initial post from an investment perspective. You are right - not everyone is into shares in a big way and mum and dad buyers couldn't afford to keep pushing prices up.

Frankston is interesting at the moment isn't! Will be interesting to see if there are further movements in prices once the East Link project is completed. Many say there will be. I guess only time will tell!

All the best,

Regards Jason.
 
There is no question Melbourne suburbs are on the rise. I have a cheapie in Watsonia that I was going to sell at what was the market value of $260k but for one reason or another changed my mind, 4 months later the current market value is $285k, so I have relet for another 12 months.

I have been looking around inner beach suburbs and was told by one agent that two identical flats, side by side were sold 2 months apart with an increase of $6k.

North Melbourne prices appear to be rising monthly. At this point I believe the rents are not keeping up with the rising prices.

Chris
 
North Melbourne prices appear to be rising monthly. At this point I believe the rents are not keeping up with the rising prices.

Chris

Hi Chris,

Have you got any specific details on Nth Melbourne as its a suburb I am particularly interested in. I have 2 Ip's there and want to buy one more.

Regards Jason.
 
melbourne is booming.
apartment in doncaster
1 bedroom and an open study
wanted 285000, got 297500 last week.
bought in 2001 for 188000k.

my first ever investment property that I have sold.
 
Jason

I have been watching North Melbourne for a little while, as soon as a new property arrives on the internet that I am interested in, I watch it, phone the agent and find it is already sold or under negotiation at a price higher than I am prepared to pay.

Altona and Williamstown are the two areas I have been watching closely for quite a while but I am unprepared to pay the high prices, I have been to Open for Inspections and find that Agents are getting 20 to 30 through each weekend. I listen to the conversations of the people viewing and there does appear to be a lot of new investors.

Chris
 
Jason

I have been watching North Melbourne for a little while, as soon as a new property arrives on the internet that I am interested in, I watch it, phone the agent and find it is already sold or under negotiation at a price higher than I am prepared to pay.

Altona and Williamstown are the two areas I have been watching closely for quite a while but I am unprepared to pay the high prices, I have been to Open for Inspections and find that Agents are getting 20 to 30 through each weekend. I listen to the conversations of the people viewing and there does appear to be a lot of new investors.

Chris


Hi Chris,

Yes, I would agree. North Melbourne is becoming very hard to buy into for a reasonable price. Lots of people are inspecting these properties, and paying a high price for them.

Your comments about Altona and Williamstown are interesting - especially the numbers of people through the properties. While not as high as the inner city, 20-30 people per property is still decent in these areas!

Regards Jason.
 
People have short memories; the boom ended only 3 years ago, and we've had 6 rate rises since then. It ended because housing became unaffordable. What's changed since then? Wages haven't gone up much, and interest rates did.

Only market sentiment and heavier advertising for easy finance has changed.
Serviceability hasn't improved much since then which would suggest that not much should be happening. Look out for a lot of soon to be over-extended Purchasers out there!

I dont know about Melbourne but in Sydney prices have dropped 15% in the Inner City. On a median price of $600k that a good $90k. And when you consider the reno factor (improvements to property not considered in an apples to apples measure) it is probably more like 20% in real terms.

Are we recovering that 15% to 20%.

BTW I thought Melbourne boom ended in 2002 not 04? I could be wrong. Sydney was July 2003, so almost 4 years.

Peter
 
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