Great comment.
Michael, I've seen your graph with the two curves that shows the 'actual state' and 'herd perceived state'. It's the one that shows that that by the time the herd realise it's a good time to buy the 'real investors' have already moved the market ahead.
Do you think this concept holds true in the reverse? i.e. the 'actual state' might be that the property marker bottomed out last weekend however the 'herd' won't think it's bottomed for another 3-6 months.
Has the market bottomed?
I have no idea - but the answer is probably not.
Are we buying "the market" - NO!
In this market there are some very motivated and at times desperate vendors and this creates some top buying opportunities for long term investors.
For example I saw an example of one very keen vendor who sold his 3 apartments in the same block of units in a top inner bayside Melbourne suburb in the last few weeks. They were all renovated and tenanted and worth much the same, but they were put up for auction on the same day.
There were buyers in the crowd at the auction, but clearly not as many as there would have been earlier this year or last year.
The first property sold at $425,000 with a few keen bidders pushing up the price. The second very similar apartment was passed in at auction and sold just after for $405,000.
The last apartment was also passed in – there were no buyers left and no one bid for this property. It was sold a few weeks later to a canny investor for $385,000
What lessons can we take from this?
Well..last year these apartments would have easily sold for well over $450,000. That means all the new purchasers have probably done well in the medium to long term, but the purchaser of the third property has done very, very well.
Knowing that particular location well, as I have a number of properties in the vicinity, I believe that in today’s market
all the properties if marketed correctly would have sold for around $425,000. There just weren’t 3 buyers there on the day and apparently the vendor was very motivated.
And as they were tenanted, if cut out all the first home buyers who are active in that market.
Buyers number 2 and 3 have done particulalry well. Even if the market falls another 10% buyer number 3 is still ahead.
That’s the type of property to buy today.
One that you would be happy to hold in your portfolio in the long term and one that was bought sufficiently below market price, so that even if the market fell a bit further, you would have bought well.
