Download Jun 2011 – Property reports and the state of the market

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www.reidconsultants.com.au
30th June 2011
Property Reports and the State of the Market
Investors,
There has been much commentary in the last 6 months of the sky is falling in, property prices
crashing, we are heading to a US style bubble burst etc.
The headlines are what they are, the reality behind the median numbers that commentators make up
headlines on are often different. When you start delving into the actual numbers, there are segments
of the market that prices have dropped significantly while there are other areas that are still increasing,
albeit at a much slower pace than in 2009/10 peaks.
The market segment that moves the most, both up and down is the higher priced properties, $1m plus
range. These are usually owner-occupier and the strength of the general economy and in particular
the financial markets drive this price movement. Big bonuses, strong employment will be reflected in
rising prices for this market segment.
It is understanding why markets move as they do and as an investor, market sentiment is important. If
buyers are staying away or holding off due to future government incentives or cannot sell their own
house to upgrade, then the opportunity to negotiate favourable terms is with you as an investor. Two
years ago real estate agents quoted prices that you could generally add 20% and expect the property
to sell at that price, now it is closer to a mid point of the quoted range. Real estate agents are returning
investor calls and even ringing to follow up.
If you are in a position to buy, negotiate hard. I recently heard a story that one house was passed in at
auction, sat for a time on the market, then sold by private sale for $720k. The buyer after 2 days came
back and said, we think we have paid too much and are pulling out. Victoria has a 3 day cooling off
period on private sales. The end result was a negotiated price of $695k.
While I do not advocate that practice, it shows there are vendors who need to sell and will accept
lower prices to move a property.
As part of my service to clients, I provide:
 Specific property reports in the form of a Residex Comparative market Analysis Report,
 Suburb reports giving broad demographical data and trends within that suburb on both house
and unit prices and rents,
 Broad LGA reports across Victoria, metro and country showing 10 year averages
 Quarterly Market commentary across Victoria
I have attached a couple of these some you can get an idea of what type of research is available to
help you as an investor.
Market Commentary Victoria April 2011
The Quarterly commentary suggests that Victoria has a potential slight over-supply of housing, mainly
Melbourne centric and the better opportunities exist in country Victoria.
The Affordability of housing has been a hot topic and Residex suggests that the average to support a
mortgage is close to 69% of after tax household income where it is closer to 31% to rent a house (unit
numbers are 53% and 29% respectively).
One of the tables that illustrate the different markets by price is:
Melbourne by Number of Properties
Houses: Under the Median Value
Houses: Above the Median Value
Units: Under the Median Value
Units: Above the Median Value
Group % Which
Gained Value
86.08%
75.82%
90.43%
84.09%
% Which Lost
Value
13.92%
24.18%
9.57%
15.91%
*Change since
Last Quarter
-1.02%
-4.18%
1.94%
-3.51%
Investors need to be aware of what segments of the market are moving and for what reasons. These
numbers do not signify doom and gloom, they signify market conditions that have been influenced by
a greater level of supply in 2011 than for the years 2009 and 2010, lower demand due to a
combination of FHOG incentives that pulled a lot of first home owners forward into the market in 2009
and 2010 (and consequently lower than normal activity in 2011), higher interest rates that the lows of
2009 and tighter credit policies for most of 2008 to just recently again affecting access to credit and
borrowing ability.
As with most cycles, these will ease and I expect the property market to grow again.
Local Government Area Statistics
The LGA report shows some interesting trends over 10 years where both houses and units have
moved in close parallels. It is obvious that prices move at different rates, strong increases 2001 to
2004, much slower 2005 to 2007, jumping in 2008 and again in 2010 with both 2009 and 2011 being
very flat to absorb the prior year increases.
Average 10 year Total returns range from 12.7% to 15.8% pa.
Suburb Report
I have attached a Suburb report for Maribyrnong, not as an area I would necessarily recommend
clients to purchase in but as a general report to see what you should expect from growth and rent
yields in that area.
If you would like to see a specific Suburb or specific Property reports or the Victorian Country LGA
report, please let me know and I will forward these to you
Our Service to You
We provide a specialised service for investors wanting to create long term wealth for themselves and
their families. We are finance strategists, credit advisers and mortgage brokers, helping you achieve
your goals. Give us a call when you think its time to consider your options.
As well as providing a service to investors, we will assist you in purchasing as an owner-occupier, or
upgrading to a new property, or simply looking at better pricing or structuring options for your current
loans and banking or assisting seniors looking at possible reverse mortgage options.
Our business is built on referrals provided by clients, so please don’t keep us a secret, feel free to
forward this e-mail to family and friends interested in their own financial future. Give us a call and book
an appointment to see if it makes sense for you.
If you have any questions about any of these topics, give me a call.
Helping People through Finance