Melbourne median hits record $480,000

The key in this sort of market is to find gems, not get carried away by emotional bidding etc. While I don't see downside risk at this stage, if downside does materialise (since the economy is still very cloudy ahead), it's the people who get sucked into the sort of auctions you talk about that will have the most problems. It's the same as the stock market boom before - the key is not to get carried away and keep bidding the prices up just because there's someone else out there bidding.

There're a few good places I've seen that barely attracted 10 people on auction day and subsequently passed in. I've known 2 people recently to buy below reserve price at good spots in inner city Melbourne after passing in. And yes I do mean inner city literally, such as Carlton and Richmond.

Indeed there are exceptions to every rule, although not posturing that what I said above is now a hard and fast rule!

However if we are talking about pokey, 2br Victorian terraces with all original features gone with less than 5mt frontage, then people can have it. Same too for the numerous student accommodation that has sprung up around Carlton over the past 5 years.
 
Gordon

You picked one example (what about the other 2?) and yes it is quite correctly priced. Probably most of Carlton is. So we are on the same page. (I should have explained its underpriced compared to the other suburbs)

BTW In Northcote 565 will get you the worst sf vic probably next to a housing commission or a main road or a carpark too.........

Buzz - you are not pokey prejudiced are you? How would you like it if I called ypour house a soleless, enviro terrible MacMansion...

(im just bating........)
 
Buzz - you are not pokey prejudiced are you? How would you like it if I called ypour house a soleless, enviro terrible MacMansion...

(im just bating........)

One's man trash is another man's treasure. I am not making a judgement on those who like that style of property, just the property! :)
 
I like what I am reading on this thread.

I am getting back posession of a 2 bed Victorian SF terrace IP in Fitzroy North, on Brunswick St, just above Alexandria Pde, 2.8kms from the city on a tram line, 1 km walk to Melb uni.

I am going to take a couple of weeks off and renovate it and hopefully put it to Auction just before Christmas.

I think I will get more for it that I thought I would .. the timing couldn't be better... hope the market holds.

cheers

RightValue
 
I like what I am reading on this thread.

I am getting back posession of a 2 bed Victorian SF terrace IP in Fitzroy North, on Brunswick St, just above Alexandria Pde, 2.8kms from the city on a tram line, 1 km walk to Melb uni.

I am going to take a couple of weeks off and renovate it and hopefully put it to Auction just before Christmas.

I think I will get more for it that I thought I would .. the timing couldn't be better... hope the market holds.

cheers

RightValue

RV, what do you mean by renovate? I think you will get a better return by putting on the market unrenovated.
 
Style's one thing. If you're not living there it doesn't matter. It's an investment so only the numbers matter. You have to do your own numbers to see if it works. You could be wrong but at least you made a calculated investment. If buying a rock yields good returns and generates positive cashflows I'd buy a rock.

My friend always says if someone's willing to pay the price, then it's obviously worth it because everyone does their numbers. If someone here is willing to pay the price, hasn't that just validated it's value?
 
RV, what do you mean by renovate? I think you will get a better return by putting on the market unrenovated.

Intersting you should say that.

I am going to get an agents opinion as to wether or not it is worth it.

However I sholud point out that I do all the work myself (bar plumbing and electrics); I build my own kitchens, do plasterboard work etc.

To toally renovate this 82sqm house should cost me less than $25k .. I am sure it will add at least $50k in value ..

But in the past people have been prepared to pay more for unrenovated than renovated ... it could be the case again.

I may even put it to Auction un renovated and if it doesn't get suitable bids, then renovate it after my Christmas holiday, before my Feb Holiday.

But I am a great believer that the true bids only come out after the property is "on the market".

cheers

RightValue
 
My friend always says if someone's willing to pay the price, then it's obviously worth it because everyone does their numbers. If someone here is willing to pay the price, hasn't that just validated it's value?

Two people that really love the place duke it out at auction; they take the place $200k above where bidders 3 and 4 dropped out.

The underbidder buys another property. The winning bidder can't get the finance.. the property goes to Auction again .. what is the probability that it will go for the same price again?

I was at an Auction in Camberwell Vic in late 2007 .. The property was a 2 bed 1970 original unit (1 0f 4) which was nearly passed in at $390k .. Then it majically reached the reserve of $400k - a price the vendor was prepared to sell and what I thought it was worth ... it sold 15 minutes later for $600k.

I doubt it would get that price today.

We use "a willing but not anxious buyer, a willing but not motivated vendor" as part of our definition of fair market value.

To use your friends definition.. if someone flies down to Melbourne from Sydney and thinks that a place is cheap in comparison to their home town and pays $100k more than the price 4 similar properties sold for in the area 3 weeks ago (because they found an honest agent they could trust); it is market value ..

Or worse people that buy investment properties interstate based solely on the figures.... from investment advisers .. pity they don't fly down and pay $50k less for second hand one year old comparable properties.

Hey it's market value to your friend to pay more for a new 145sqm house off the plan than the asking price of a a 160sqm 1 year old house .. but not to a valuer or to the lender.

I am sure your friend is not a lender but is a borrower....

cheers

RightValue
 
Well as I said it's all prefaced on people doing their numbers or, in financial theory, that there's minimal information assymetry.

So what happened to the Camberwell place? The person couldn't buy it and it was put back onto the market?

Anyway, obviously he's a borrower. Aren't you? Unless you're the RBA or CBA
 
Sorry, but that one IS across the road from Housing Commission AND isn't just on a main road - it's probably smack bang on the busiest road north of the city. I've driven past that and the other Victorians along there truckloads (an apt term) of times and repeatedly wondered who the hell would want to live there, be they an owner occupier or tenant.

And if the tunnel from the Eastern to Citylink goes through, it could be right under that funny dunny out the back which may cause some consternation...

Underpriced at $565,000? I think not.

Hard to say too.. housing commission - in South Melbourne.. going to towards clarendon st - prices there still going up.

But then again - it really depends on the overall income level of people living there.

Doncaster is going to have a housing commssion flats up soon
 
Two people that really love the place duke it out at auction; they take the place $200k above where bidders 3 and 4 dropped out.

The underbidder buys another property. The winning bidder can't get the finance.. the property goes to Auction again .. what is the probability that it will go for the same price again?

I was at an Auction in Camberwell Vic in late 2007 .. The property was a 2 bed 1970 original unit (1 0f 4) which was nearly passed in at $390k .. Then it majically reached the reserve of $400k - a price the vendor was prepared to sell and what I thought it was worth ... it sold 15 minutes later for $600k.

I doubt it would get that price today.

We use "a willing but not anxious buyer, a willing but not motivated vendor" as part of our definition of fair market value.

To use your friends definition.. if someone flies down to Melbourne from Sydney and thinks that a place is cheap in comparison to their home town and pays $100k more than the price 4 similar properties sold for in the area 3 weeks ago (because they found an honest agent they could trust); it is market value ..

Or worse people that buy investment properties interstate based solely on the figures.... from investment advisers .. pity they don't fly down and pay $50k less for second hand one year old comparable properties.

Hey it's market value to your friend to pay more for a new 145sqm house off the plan than the asking price of a a 160sqm 1 year old house .. but not to a valuer or to the lender.

I am sure your friend is not a lender but is a borrower....

cheers

RightValue

Mate, it looks like you don't understand or appreciate the term 'highest and best use'. The great thing about property is the fact that (in many cases) you can do a lot of things to it (i.e. renovate, extend, subdivide, convert use etc.). Hence, what is value to you, may not be value to someone else. For example, if I am able to build a Manhattan skyscraper on my plot of land and believe I can profit from it, then of course I will outbid and completely outdo the average dude who intends to build 2 units right? Everyone's perspective of value adding is different and likewise, everyone's perspective of how much they can resell or profit from their venture is different as well. I believe everyone does their sums...and it doesn't have to be some complex excel model spreadsheet, or getting a cohort of investment advisers etc...it can even be just a mental, 'I buy for this, I sell for this in X years time and my profit is this'. Did you really think people back in the 1980's like those Vietnamese immigrants did their calculations on computers???? and understood a thing about basic principles like inflation and yield? Sure, it is garbage in, garbage out, but that is irrelevant altogether because we are talking about market value, and market value is unique for each and every individual, which is the point I am trying to make.

Btw, how do you know it is foolish for that Sydney person to buy at $100k more? As I said, perhaps he intends to build a Manhattan skyscaper on it. Maybe he knows something about the location (i.e like Taylor Swift moving into the street and he just wants a perve) that we all don't. Also, how do you know that he would not have bidded over $100K on the sale price of another similiar located property 3 weeks ago? True, perhaps he is paying over the market (and personally I think he would be foolish to do so), but the underlying point is still there...what is market value to him, may not be to you!

And yeah, as what Deltaberry was saying, are you a talking banknote?
 
DeeHwa,

Ok I bow to your greater understanding of maket value.

Ans thanks for pointing out the concept of highest and best use ... yeah I must admit I had forgotton about that and should have realised that zoning is immaterial and single dwelling covenants don't matter a toss in dertermining the value of a piece of land.

I was just trying to give the view from the lenders and valuers perspective.

No I am not a talking banknote, I am just a valuer trying to help with a bit of perspective.

I think I can remember now why I left this forum for a couple of years, my help was not needed with experts like you ... now I've gotta go and retrain for a new career as banks won't need valuers as whatever people pay is sufficent evidence of market value, no matter if no one else is prepared to pay that price.

ciao,

RightValue
 
*snip* but the underlying point is still there...what is market value to him, may not be to you!

As long as you are buying with someone else's money, it matters not a jot what you thinks it's worth...if you're borrowing it only matters what the lender figures the next buyer might think it's worth if they have to take it off you.

Oh, and if you *really* have the extremely low opinion of valuers and their expertise that you have expressed in your response to RightValue, my experience is that you are more likely to be in the "getting things taken off you" category than the average.
 
As long as you are buying with someone else's money, it matters not a jot what you thinks it's worth...if you're borrowing it only matters what the lender figures the next buyer might think it's worth if they have to take it off you.

Oh, and if you *really* have the extremely low opinion of valuers and their expertise that you have expressed in your response to RightValue, my experience is that you are more likely to be in the "getting things taken off you" category than the average.

Ah...so we are going to talk about valuers and valuation firms. Well, I used to work for Australia's largest independent strategic property consulting firm (sorry for the mouthful) and no, it was not CBRE, JLL, Colliers, Knight Frank, Savills etc...because these are not independent and they are global. True, I was not a valuer and do not intend to be, but I worked as a QS and have since moved onto another firm.

The point is, as you probably know, QS at property consulting firms work closely with valuers. All I used to do was financier's reports and I would be looking at valuation reports day in day out so firstly, I know heaps about what a valuation report encompasses. Second point, is that most of my ex-colleagues at the firm as well as many people I know from CBRE, Knight Frank etc...right down to the local smaller firms like WBP Property, Westlink etc...tell me that what they do is pretty mundane and full of sh*t. Reason? Well, it is because all they do all day is use comparable sales, chuck things into templates, do street driveby's and chase the QS for construction cost and replacement cost estimates (if it is for a new development).

Valuers are also poorly paid (I know this for sure!) and the reason is a combination of a few things. Firstly, the only real service they provide is valuation reports, there are no additional ancillary, management consulting services and thus the fee generation is limited (don't mention stupid things like rental appraisals and feasibility studies...they count for jack all). Secondly, the banks don't care sh*t all about the valuer profession and it is a myth they are respected. Banks use valuers only as mere insurance pawns (I must admit, that they use a QS for this same purpose as well). The market value figure a valuer spits out is all the banks care about, not the jargon about close to amenities, art deco, SWOT analysis, what X property sold for last month. Banks are incredibly wise institutions who aim to outsource as much risk as possible, hence why there is the valuation profession, and to a degree the QS profession in Australia (although we offer way more services like TDS, post-control, BQ's etc.). In some instances, banks would probably lend on anything the valuer says (which is probably the only cool thing to brag about) but we will just see who they blame when they can't sell it for that price!

It is irrelevant whether I have a low opinion of valuers. But when even valuers admit what they do is pretty bs, and they continually complain about their mundane work and the relatively low pay...it seriously begs the question.

Look, it is a matter of personal choice which profession you go into, but I am just trying to put some perspective.
 
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