Melbourne's Hot Property Market

[Player]

Mind reader

Hi Player

Are you suggesting that now is a good time to get revals done on any Melbourne property, realise some equity and having this equity sitting in an offset a/c so that if an opportunity presents, you could be ready to "pounce"?

Are you concerned that if you leave it too long the valuations might not be as favourable as they are currently?

thanks

Bingo

Have you been reading my mind ........what could be better than being your own bank to enable one to "pounce" and buy the next one cash unconditional (for some discount and concession) whilst others dillay dally on finance clauses and finance the new asset at one's leisure....retrieve the cash promptly deposit into offest/LOC and be a happy banker once again.

Not sure about the valuation industry, however if your area has seen decent growth and it's been a while since last reval, it would IMHO be prudent to arrange a fresh valuation and suck out as much as you can to park in the offset. Whether to wait or not depends on your locale and the sales that are registering.....may need to allow for settlement as it appears they are the sales that count to the bank panel valuers.

To my mind this is a very conservative way of keeping ahead of the banks perhaps saying "NO!" to your next one. If you've got the cash sitting there.......you are free of their clutches. This of course assumes you get around their challenges of "no cash out unless intention is clear" policies.

 

[Neophyte]

One from the weekend. South Melbourne. Two bedroom not that big, I suppose its a townhouse. Quoting 860-920. Sold for $1.25M.

http://www.realestate.com.au/proper...-106362784?tm=1269832673&c=89151861&m=1&t=res

Or a 1 bdr townhouse for $580K.

http://www.realestate.com.au/proper...-106316172?tm=1269832884&c=11454181&m=1&t=sol


This one just round the corner is way bigger and nicer, quoting $1.48M. Similar one in this block went for about $1.1M in the last year.

http://www.realestate.com.au/proper...-106346558?tm=1269832811&c=99996913&m=1&t=res

 

[buzzlightyear]

One from the weekend. South Melbourne. Two bedroom not that big, I suppose its a townhouse. Quoting 860-920. Sold for $1.25M.

http://www.realestate.com.au/proper...-106362784?tm=1269832673&c=89151861&m=1&t=res

Or a 1 bdr townhouse for $580K.

http://www.realestate.com.au/proper...-106316172?tm=1269832884&c=11454181&m=1&t=sol


This one just round the corner is way bigger and nicer, quoting $1.48M. Similar one in this block went for about $1.1M in the last year.

http://www.realestate.com.au/proper...-106346558?tm=1269832811&c=99996913&m=1&t=res

Not to divert the thread, but with regards to the first property and given all the noise happening about underquoting contemplate this. I have made a few reasonable assumptions being top of the price range is within 10% of the vendor's reserve, which takes you to $1.012. And the property sold for 25% above that

With the market running as it is, how does a REA know how much extra keen buyers are going to pay?

 

[RocketMan]

there was an article in the age about the laws re underquoting....but like buzz said it's hard for an agent to exactly predict how irrational people will be on the day. Real estate valuations are an art, not a science!

 

[Player]

.............With the market running as it is, how does a REA know how much extra keen buyers are going to pay?

Largely they don't.

Leaving resi aside for a moment, I have posted elsewhere in another thread and too busy too hunt for it now, about a retail commercial property in Centre Road Bentleigh that sold earlier this month for double; twice; 100 % above the reserve price.....and it was vacant. It was on the market at 1.9 M (reserve at auction) and sold for 3.8 M

My figures on conservative rent would see this yield.............wait for it, are you sitting down.....a potential 1.5 % to 1.7 % .........emotions are not only reseved for folks over-paying for a PPOR.

The herd has spoken and the rea's can do nothing now except watch the carnage and be as amused as those of are sitting on the side lines and being entertained by the ensuing circus.

Their commissions are looking healthy in any case as the bulk of these properties are selling themselves to the lemmings trying to outdo each other and jump off the edge.

 

[Kenster]

yield... 1.5 % to 1.7 % ...lemmings trying to outdo each other and jump off the edge.

But,... ahem... they save heaps on tax... (cough, cough)

 

[RocketMan]

rofl. like we said in that other thread, it's Laundry Time!

 

[buzzlightyear]

Their commissions are looking healthy in any case as the bulk of these properties are selling themselves to the lemmings trying to outdo each other and jump off the edge.

Surely, its time for them to upgrade the Merc!

 

[Player]

Must have the look and the motor size

Surely, its time for them to upgrade the Merc!

The AMG's and M's are breeding like rabbits (Easter Bunnies ) out this way

A case of mine's bigger than yours (motors) is very necessary as they aim to better each other's "zero to the next tram stop" time

 

[paul2299]

there was an article in the age about the laws re underquoting....but like buzz said it's hard for an agent to exactly predict how irrational people will be on the day. Real estate valuations are an art, not a science!

The thing is though they are are "under" consistently, and by a margin that has grown of late. Personally I haven't seen much lately that I would consider irrational, just a market that is up 20% from 6 months ago. I don't think anyone expects that to be "exact" but they should be roughly right in quoting. I do think underquoting is a very deliberate thing.

 

[Intrinsic_Value]

That is exactly the point, they don't want to start somewhere. They want the best property in the best location yesterday. And yes you can get property in Croydon, but if you think that's too far, my first property was Lilydale (even further out again), and a friend of mine was travelling Silvan to the CBD daily! It's those who sacrifice who are in the market now, who are laughing at property going up, while the others complaining that it's too expensive are sitting there watching it get further and further out of reach.

I useded to agree with this point, but am less so now.
When even apartments such as the one highlighted in north melbourne start selling for $540k then there is definately an affordability problem.

People look at the status quo for identifying inherent risk. But inherent risk is organic, it changes over time.

A huge potential risk factor that i dont think many people have accounted for is government interference to increase supply.
For example they could:
(a) eliminate negative gearing on 'older property' but keep it on new property (for say a period of 10 years). On top of this with the tax saved, they could increase depreciation benefits on new property by 50%.
(b) over ride all local town planning rules, open things up to better natural competition.
(c) reduce development costs on new property.

If supply can be increased then property will gravitate back down to its true intrinsic_value (overall as expressed by the mean, there will still be 'winners' such as holders of larger blocks of land).

 

[RocketMan]

The simple truth is that land is expensive (and will continue to go up) because costs are so high. My friend is subdividing land in Mitcham and to cut up a 2200sqm block into 4 lots has taken 1-2 years + 50k subdivision costs + interest! The council had to get their own special plumber to connect the sewage, thus only ONE person available to service the whole area! So the 'intrinisic' value of any piece of land has to take into account all the stupid delays and irresponsible handling of subdivision/planning/building by the local councils and neighbours. Only if these unnecessary delays are removed will developers be able to lower prices yet keep a reasonable margin on their developments.

 

[Deltaberry]

I useded to agree with this point, but am less so now.
When even apartments such as the one highlighted in north melbourne start selling for $540k then there is definately an affordability problem.

People look at the status quo for identifying inherent risk. But inherent risk is organic, it changes over time.

A huge potential risk factor that i dont think many people have accounted for is government interference to increase supply.
For example they could:
(a) eliminate negative gearing on 'older property' but keep it on new property (for say a period of 10 years). On top of this with the tax saved, they could increase depreciation benefits on new property by 50%.
(b) over ride all local town planning rules, open things up to better natural competition.
(c) reduce development costs on new property.

If supply can be increased then property will gravitate back down to its true intrinsic_value (overall as expressed by the mean, there will still be 'winners' such as holders of larger blocks of land).

Or they could also give everyone a free house. Would love to see intrinsic value then.

 

[Neophyte]

Not to divert the thread, but with regards to the first property and given all the noise happening about underquoting contemplate this. I have made a few reasonable assumptions being top of the price range is within 10% of the vendor's reserve, which takes you to $1.012. And the property sold for 25% above that

With the market running as it is, how does a REA know how much extra keen buyers are going to pay?

Buzz I think your right that it looks to have been underquoted. Then again the high 800s, maybe low 900s is probably what I would have thought was reasonable so the quote was ok, its just it went way high at auction.

The issue with "under-quoting" is more of a problem for private sale. That is they quote a range, but actually aren't interested in offers that fall within the range.

For auctions often the reserve is passed at the top of the quote range. 85% clearance rate means that someone bids past reserve in all but 15% of cases suggesting that reserves are being set appropriately.

The reason why under-quoting is a problem in my mind isn't because it means people get outbid at auctions. The problem is that people fork out a couple hundred bucks for a building inspection thinking a place might be within their price range and finding out it isn't. You can't bid at the auction subject to a building inspect.

 

[K4K4M]

No no, you've misunderstood me, when I said "that's not what we're talking about here" I wasn't referring to this thread, I meant, in this case.

Thanks

I have found a similar thread for what I was asking.

http://www.somersoft.com/forums/showthread.php?p=652209

 

[jingo]

I useded to agree with this point, but am less so now.
When even apartments such as the one highlighted in north melbourne start selling for $540k then there is definately an affordability problem.).

Actually, it was $583,500 - which makes it even more absurd!!

Spoke to an agent from the area today that I know fairly well about the sale of the flat in Haines St. Even he said ' this is crazy!'

Will be interesting to watch the market now and see what happens. As player suggests, time to top up LOC's and wait patiently.....

Regards Jason.

 

[Trogdor]

Actually, it was $583,500 - which makes it even more absurd!!

Spoke to an agent from the area today that I know fairly well about the sale of the flat in Haines St. Even he said ' this is crazy!'

Will be interesting to watch the market now and see what happens. As player suggests, time to top up LOC's and wait patiently.....

Regards Jason.

This is a bubble. Plain and simple.

And counterproductive to Melb productivity. I wonder how many people will save $500k - $1m on a PPOR and instead move to a regional city, invest the balance, and earn an extra 35 - 70k income passively from rent / dividends (taking a commensurately lower stress, lower paid job).

 

[Africandaisy]

Agree on the heat. It is beyond red hot now. It's white and about to vapourise.

....It is entertaining however to watch from the sidelines

But its not much fun though for those of us trying to buy a PPOR.

I wanted to buy this 2 bed townhouse in Kensington, which went to auction on Saturday http://www.realestate.com.au/proper...ngton-106358632?tm=1269861355&c=7517076&t=sol

The property next door (identical) sold on 12 December for $465,000 but I didnt have my finance sorted out then. This one went on Saturday for $545,000. That's an $80,000 price rise in 3 months. My recent public service payrise of $19.15 per week doesnt exactly keep pace with that sort of inflation.

 

[DavidMc]

Jingo that's a crazy result!!!

And to think I only missed out on a wonderful top floor beauty in Haines st by 5k (sold for 405k, my offer was 400k) just back in Oct 2009.

Makes me pretty happy in my place I bought for 535k

Pity they won't revalue within 6 months.

 

[bigbucks]

Seems like the cashed up asian investors are a force in the property market to compete with its like just huge reserves of cash to play with and not afraid to bet with it in this fueled up property market.its no wonder the prices are sky rocketing.
where to from here?