What is Going On!!!!

[Harris]

I think it depends on the area Harris. Are you currently actively looking at resi IP's? I know you are fairly Frankston heavy, and everytime i've searched that area, or even the inner suburbs apartment markets, there have been pages of results. However the areas i'm currently looking (granted my criteria is quite specific) i'm lucky if there's 1-2 new listing per week. This, added to huge amounts of potential buyers I think is one of the reasons for growth.

Outer suburbs are not auction suburbs anyway. Hardly 1 in 10 properties makes its way to auction. Inner & Middle suburbs have auctions and the numbers suggest that supply is on the high side but the demand is at a very high level. I have been monitoring inner melb since the start of this year and bought something in June. Another factor is the average duration of the property on the market which is also at its lowest point currently (as in disappearing quickly - within 26 days or less after being listed).

Harris

 

[THEHEATH]

On the contrary, I think the market can sustain such an explosive growth. Sure, we may not get 20% quarterly growth perpetually like some suburbs in this 3rd quarter, but even flat growth and consolidation from here on will already be enough to price out many FHB's and also investors alike. The prices paid for property today acts as a floor for the next round of sales and I can't see prices going down unless we have the same % of defaulters (highly unlikely given our banks stringent lending criteria/redtape and many people having 40-50% equity in their property purchases already) like the U.S or based on information asymmetry, future vendors underestimate their own property's worth. You can bet your bottom dollar that 9.9/10 houses that are sold today will never be sold for the same or a lesser price again!

Banks have stringent lending criteria????

Could have fooled me.

 

[vladt]

Rick,

Which areas do you favour?

 

[Deltaberry]

Do you know if the buyers were chinese ?

Hah what's the relevance? Talk about homophobia

 

[ianvestor]

Do you know if the buyers were chinese ?

Hah what's the relevance? Talk about homophobia

Do you mean xenophobia? Or are you actually implying that all Chinese are gay?

 

[MichaelW]

I will have to "give up my dream" of buying in Carnegie/Murrumbeena area and move further away where properties can still be purchased at a reasonable dollar. Afterall, paying 600k for a 2 bedroom unit with an average rental income of $360/week is far away from a CF neutral investment. IMHO there is very little to be gained (long term and short term)in buying such an investment.

I'm in a similar situation, continually being priced out of what I perceive to be reasonable value even in the outer suburbs.

A couple of things i'm seeing at the moment are a severe lack of reasonable supply and a lot of interested buyers who have a fear of missing out. This is causing the under bidders who are missing out to pay a lot more the next time to secure a similar property. Who thinks this is sustainable?

Bubble, bubble, toil and trouble...

Come buy in Sydney. Still plenty of upside a bit further North. You Mexicans have gone all property bubble on us!

Not that I'm biased or anything...

Cheers,
Michael

 

[BV]

Bubble, bubble, toil and trouble

Michael
It does sound like a bubble situation and from memory there was a significant pullback in Melbourne pricing a few years ago so this could repeat itself?

 

[BayView]

First of all, Greetings to Every1, I am new here, long time reader and now finally - poster.

Looking to get into my first IP. Don't want to get too far out of my comfort zone. So looking to get a 2 or 3 bdrm unit in Carnegie, Ormond, East Malvern and the like... Been doing research and diligently attending auctions over the past 2 month. Now, 6 month ago the average price of a 2bed villa unit in Carnegie area was around 460k, based on my personal research. Now in the last four weeks the market here has simply exploded. Only last week, 2 bedder in renovated condition went for 576k. Yesterday, I went to see a 30 year old 2 bed villa unit in East Malvern. This was being auctioned off at around 500k.

http://www.domain.com.au/Public/PropertyDetails.aspx?adid=2008031230&prevChannel=Emails&prevPage=Email+a+Friend+Open+(postclick)&prevServer=Emails&s_cid=EmailAFriend:VIC

I couldn't believe my eyes/ears when this property sold for 705k yesterday. I am talking 8 squares of living in an unrenovated condition. This is just plain crazy. Anywhere I turn, people are paying 100-150k more than my percieved reasonable price should be.

What do I do? Do I jump in or wait till things settle?! Surely the market can't sustain such an explosive growth? It feel like a wrong time to buy in?! On the other hand, if I miss on the opportunity now, what would happen in 6 month? Another 20% rise?

Any suggestions/advise would be greately appreciated.

Cheers
Vlad

Waiting for "things to settle" in the areas you mention is a waste of time. It will only keep going in the long term - that's why it is expensive all the time there.

Why? Because they are pretty good areas (not my taste) and everyone wants to live there.

All you can do is buy where you can afford at that time. If it's too expensive in these areas, look at the closest next best suburb that is in your budget and buy there.

Don't be afraid to look in the ugly duckling areas. There are millions of people who want to live in the postcode suburbs, but can't so they live nearby - these are the overflow suburbs that can show spectacular growth. A good example was Sandringham near Brighton. Used to be so so, but has come up very nicely in the last 15 years.

I'd love to buy a dilapidated mansion on an acreage in Brighton as an IP to reno and sell for a nice profit, because there's always some CEO who wants to live in a "postcode" suburb and can afford big dollars for a "no more to spend" and will pay it.

But I'm not at that level yet. No point even looking there until then.

 

[vladt]

Thanks very much Marc for your reply.
I couldn't agree more with you. There simply no more well priced properties in Carnegie, Brighton East and the likes. There hardly a point in buying a property on 2-3% yield. My plan is to buy and hold for a long term. CGT is not as important as a Positive or Neutral CF.

I've been doing fair bit of research over the last few weeks and decided to concentrate my search on Highett, Cheltenham, Mentone and Parkdale. Looking at either a 2bed unit or a house on a good size block of land.
What do you think of these areas? Any others you might care to suggest?

Thanks
Vlad

 

[JulieW]

I was looking into these areas with a budget of 400k and found good 2 bedders out of the running pretty much. In mMentone single villas are circa 300k+ and next door in Parkdale I found 2 bedders around the 400k also. I suspect that the 'empty nesters' like the area and are prepared to pay a premium for these type of dwellings.

There might be more stock and options around now, but 2 months ago searching from South Rd Moorabbin down Warrigal Rd to the sea was very dispiriting. (one memorable 2 bedder auction where agent announced reserve hit at 365 going to 438 for instance, another 320 expected going to 450.

Flats seem to be getting premium prices there as well and indeed Carnegie seems to have maxed out now - $350k for good one bedder flats and villas. I took advice on this forum and the property gurus and moved down the bayside to make my budget work. Time will tell

 

[vladt]

Thanks for your comments JulieW
The prices in beachside of mentone and parkdale have moved even further up in the last two month.
May I ask, which area did you end up buying in and what did you get?

I am also looking for a 2 or 3 bedder unit or older style house on a reasonably large allotment of land.

Thanks
Vlad