Weekly Update (Melbourne)

Jake Milne

Jake Milne

Hi Guys,

I write a newsletter every Monday for my clients but figured it may be of interest to anyone in Melbourne or looking to buy here.

Sorry about the infolio branding - just ignore it the content is still pretty good:

$428.65mil worth of real estate transacted last week; an increase in volume by $10.89mil from the week prior. Results from the 432 auctions equated to $182.94mil worth of property with the clearance rate lifting to 58% from 55% for the period before. The coming warmer months should lift auction activity however Enzo Raimondo, CEO of the REIV, has anticipated the volume of property being offered could be lower than in recent years as buyers and sellers continue to make conservative decisions.


Last week, Westpac-MI's Consumer Confidence Index for August was released with a surprising result. The index still fell by 2.5% to 96.6 despite multiple sources of good economic news such as:
• Australia's strong dollar ( at USD$1.05),
• low unemployment (5.2%),
• share market gains (+2.9%),
• $1.9bil of government fiscal stimulation,
• and positive news from the EU;

This index level indicates that consumers are still more pesimistic than optimistic. In light of this information, John E, CEO, Residex, believes "...the current market is ripe and offering opportunity, provided you have done your research and be selective in the many opportunities available.".

There is more good news for investors as the average rent in Melbourne has risen by 9.72% over the last 12 months.


On Saturday infolio participated in several auctions. One of which was for an updated, Edwardian weatherboard house. Infolio was up against 5 other parties. With a set limit of $1.216mil our bidding knocked out most of the competition, however the property sold out of reach for $1.253mil; a good result for the vendor. When property evokes a buyer's emotional side the result can exceed expectations.

Same day: infolio secured a fully renovated Californian Bungalow. In this instance the vendor had previously rejected our pre-auction offer. They wanted to sell for more on the day of auction. infolio skillfully intimidated the other bidders and secured the property for less than our initial offer. A fantastic result for our buyer.

When it comes to pre-auction offers, it's important to note, if the seller rejects your initial offer in hope for a better price, the selling agent must change all of the quotes on any marketing and advertising so it is not below the amount the property is expected to sell for. Changing the advertised price to a higher amount may damage the selling agent's marketing campaign. A strong bargaining tool can be mentioning the relevant legislation so the vendor considers your pre-auction offer more seriously.
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Good point, I guess it depends on which side you're standing.

I'm sure exporters and manufacturers would be in favor of a weaker AUD$ (they prefer around USD$0.65) so I understand where you're coming from.

A strong dollar for us though has many benefits inclusive of importing and low inflation; it's a topic that'd probably deserve its own thread to be fair.
 
Shaneelastic said:
How is a high aud a good thing
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Only good for consumers buying cheap imports - like big screen TVs etc.
Also when the $AU is higher, overseas buyers of Australian property are reluctant to bring in cash for their purchases = good if you are buying (less competition) but not so good if you are a seller.
 
Propertunity said:
Also when the $AU is higher, overseas buyers of Australian property are reluctant to bring in cash for their purchases = good if you are buying (less competition) but not so good if you are a seller.
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As per your edit - Yes, we lose foreign investment - which may mean corrections in new units / off the plan purchases (which are typical investment classes for foreigners) and a general softening from this segment.

At the same time people in Australia also find it harder to enter the housing market. Rental demand increases which pushes rents up.

In turn a more tightly held investment property market means that good properties become much more competitive while sub-standard properties fall to the way-side. Thereby giving savvy investors better returns than the overall market

We're already seeing all of the above signs being played out.
 
Jake @ infolio said:
When it comes to pre-auction offers, it's important to note, if the seller rejects your initial offer in hope for a better price, the selling agent must change all of the quotes on any marketing and advertising so it is not below the amount the property is expected to sell for. Changing the advertised price to a higher amount may damage the selling agent's marketing campaign. A strong bargaining tool can be mentioning the relevant legislation so the vendor considers your pre-auction offer more seriously.
Click to expand...

I like this bit! Tell me more, what's the legislation?
 
Update as of: 27/08/12

This week's Melbourne Update:

$466.94mil worth of real estate transacted last week; which is another increase in volume, this time by $38.29mil from the week prior. Results from the 516 auctions equated to $247.22mil worth of property with the clearance rate lifting substantially to 66% from a revised 57% for the period before. As mentioned last week, as we enter spring both volume and clearance rates are expected to rise. We shall have to and see if this week's increase is the beginning of a new trend or just a spike as seen in other weeks earlier this year.
MPTV Market Wrap 26/8/2012

On Saturday infolio participated in several auctions. One of which was for a fully refurbished 1 bedroom apartment in Richmond. There was a concern with this boutique apartment block, in that, there was a large crack on the outer wall and the real estate agent's hadn't opened the large garage door during any of the pre-auction inspections or on the day either, which is uncommon. infolio insisted that the garage must be opened prior to auction if they wanted us to participate. The agent eventually opened the garage door and low and behold the crack was on the inner wall too and was so substantial daylight could be seen through the brickwork.

When infolio took the initiative with the garage inspection, the auction crowd followed and mumbling concerns could be heard throughout the potential bidders. We discussed the costs associated with fixing the movement in the building with our client and changed our maximum bid accordingly. The auction started and moved along with pace. infolio through our favour with the auctioneer influenced when the property was put 'on the market' however we were then out bid by a professional couple who secured the property for $379,000 - $49,000 above the quoted range.

Obvious cracks in buildings can be a major cause for concern. With apartment blocks the cost associated with re-pinning the building can be excessive. If you find something like this in a property you're considering it is best to seek professional advice from a building inspector who can help you understand how the problem may affect your long term returns. The alternative option is to withdraw your interest and search for something that doesn't come with potential headaches.
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Interesting read Jake, can't believe the RA tried to hide that all through the campaign. I think I have an idea which agent it is as well.

Was interested in what you did to influence the auctioneer to put the property "on the market".
 
Hi Jake,

I like these weekly updates. How many props are you on the lookout for at any particular time? and what areas (I think I remember updates from st k, richmond, brunswick).

Thanks,
 
starter said:
Interesting read Jake, can't believe the RA tried to hide that all through the campaign. I think I have an idea which agent it is as well.

Was interested in what you did to influence the auctioneer to put the property "on the market".
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Thanks Starter - appreciate the feedback.

Our relationships with agents give us the ability to influence many facets during the sales process. Agents understand that we buy a lot of property and are a hassle free transaction for them so they prefer to deal with us more than buyers they don't know.

During this auction we (Cameron Deal and I) were standing right next to the auctioneer, all it took was a quiet word and the agent then went inside for the half time instruction. While the agent was inside we then went and stood among the crowd. He returned and was shocked when we weren't standing where we were before. He looked for us saying "Where is he?" "Where is he?" and then when spotted "Yes Jake, on market."
 
matto_ said:
Hi Jake,

I like these weekly updates. How many props are you on the lookout for at any particular time? and what areas (I think I remember updates from st k, richmond, brunswick).

Thanks,
Click to expand...

Thanks Matto :) At present I have 8 clients and have viewed no less than 10,000 online listings, 18 properties in person (8 of which are off market) so far this week. Usually I will view around around 60-80 in person a month; locations vary on an individual's budget and situation.

We're active in an area that spans from 2km out of the CBD to a distance within 15km of the CBD. At present I'm active in Glen Iris, Blackburn, Reservoir, Sunshine, Hawthorn, Windsor, Malvern East, and then wider areas such as the South Eastern Corridor and Eastern Suburbs for example.
 
PS if anyone is thinking about a career in Real Estate it is highly rewarding and great fun but be prepared to work 70-80 hours a week, 6-7 days.
 
For me it's a passion; it makes me happy, confident with who I am and a gives deep satisfaction when I find clients a home they fall in love with or an investment property that delivers amazing results. This job helps me create lasting relationships with like minded people.

It's a busy lifestyle with lots of face to face interaction with a wide range of people, my days are never dull or monotonous and to be honest when I'm not working there's a part of me that wishes I was because it's so fun!

Not to mention being in the industry opens up a world of opportunities for investment and helps with building a good team too.
 
This Weeks Update:
$483.56mil worth of real estate transacted last week; which is the 3rd consecutive week where volume has increased; this time by $16.62mil from the week prior. Results from the 455 auctions equated to $223.1mil worth of property with the clearance rate holding above trend at 62%. Last week we wondered if the reported clearance of 66% (revised to 63%) was just a spike or the beginning of a slight improvement in market conditions. This weeks results would suggest that Spring, as usual, will effect the overall market in a positive manner..


On Saturday infolio participated in several auctions. One of which was for a beautifully presented Victorian Weatherboard. infolio knew we were under competition at this auction so our bidding strategy was to open aggressively. At this auction we used many different tactics. We opened strongly, jumped the bidding, feigned that we were out, slowed the bidding to smaller increments and waited until the final count before bidding. We managed to knock out two competing parties but in the end we were the underbidders as a late entrant bid beyond what we were prepared to pay.

This auction was a great example of strategy so here are 5 tips from Saturday to help you when the time comes:

1. Bid amounts that you choose rather than what the auctioneer suggests;

2. If there is competition be assertive with your bidding and raise in larger amounts;

3. Declare yourself out of the bidding to test the strength of other parties (you can always come back in later);

4. Bluff weakness by taking long pauses and making small increments only to return with strong bids later;

5. Don't be fooled into revealing yourself when the agent counts down the property before half time, unless he's stated it's on the market.
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Great updates!

I was personally looking at using Infolio myself earlier this year (through Cameron Deal) however ran into some personal issues that kept me out of the market. May look into the possibility again in future :)
 
Thanks smurfs! That's great you were considering us, and unfortunate that you weren't able to jump in.

Feel free to call if you ever want to have a chat about investing!
 
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