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The latest happenings in the Melbourne property market. For our Essays and The Secret Agent Report, see our Research page.


Category Archives For: Market and Humans

The meaning of ‘Calor Licitantis’

Calor Licitantis is a Roman phrase which means ‘Bidder’s Heat’. Just like many home buyers of today, the Romans had trouble
when getting emotionally attached to the auction process.

Unlike today however, sometimes Romans were refunded when they went to far. As it was presumed back in those days that people couldn’t quite help themselves when an auction was taking place.

It’s actually proven that in many instances the event of ‘bidders heat’ can be more enjoyable than the original item being pursued in the first place. If that’s the case then it’s  a very concerning issue for home buyers.

Have you suffered from Calor Licitantis?


Contrarian Investing

According to wikipedia a ‘contrarian’ is one who attempts to profit by investing in a manner that differs from the conventional wisdom, even when the consensus opinion appears to be wrong.

We see signs of this in the property market all the time. It wasn’t too long ago that many people refused to invest or purchase period homes. Buying in the inner city was also un popular yet some of the greatest fortunes in Melbourne have been built by acquiring inner city property when no one else would.


On Your Terms – Our new book

On Your Terms is our new book we are promoting at the moment. It’s for sale on this site at the moment for a $10 download.

It’s a simple and straight to the point book about successfully buying property in today’s market. The main focus here is that the ‘natural market’ can make plenty of mistakes and it’s important for prospective property buyers to understand this.

By thinking the opposite to what everyone else thinks, we can often put ourselves into the best possible position. This is an early chapter discussing the herd mentality. The market often moves in a herd approach. Confidence breeds confidence while doubt breeds doubt.


The Optimistic Thought Experiment

Peter Thiel is a legendary venture capitalist and runs a big hedge fun.

Peter is also a billionaire with big investments in PayPal and Facebook. He also is a heavy thinker about the economy in whole and a very smart person.

I’ve tracked down an article called The Optimistic Thought Experiment which if you have 15 minutes – is a deeply thought moving article about the economy.

The subject of the article is Globalisation and the history of bubbles. Peter makes the case that the world has seen an acceleration in the depth of booms and busts and expects this cycle to get even more volatile moving forward.

Much of this article is not positive and talks in great depths about psychology of markets. Peter perhaps might be too smart for his own good yet he makes plenty of statements which I’ve been thinking about for a while now.


Where is the market heading?

Looking at a number of different data points and trends, it’s a tough one to predict exactly where the market is heading.

Often I’m asked whether prices will drop, increase or flatline.

I think if someone tells you exactly what’s going to happen – you’d want to be very sceptical of that information.

So here’s a collection below of some mixed key trends and data that I’m thinking about at the present and how that might affect our property prices.
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These are just some quick thoughts I’ve put together and I’m sure that I could add some further points here and there. Some concerns but the positives are overall very strong and probably show the stronger argument.


Understanding overvaluation and other irrational matters

Dan Ariely has written a brilliant book called The Upside of Irrationality.

Dan is one of the leading expects on researching irrational behaviour.

In his book, Dan discusses the problems associated with overvaluation especially when we invest effort into helping with the creation of something.

Some experiments are set up where random students in a university are asked to create origami and estimate it’s value as it’s put to auction. Many ‘self creators’ value their work at 5 x times the amount when compared to the market.

We see this in property too. Most noticeably when an owner has put their hard labour, time and creative skills into perfecting a renovation on their own home. In many cases they ‘overvalue’ the property when compared to the market.

They might become baffled and even blame the agent for not representing the property correctly. Fact is that many people in this situation don’t see the flaws, they only feel what they’ve put into the project and feel that it’s worth more that the market.

As a buyer this is helpful information to keep in mind especially in any negotiation.


The Value of Nothing

I’ve recently read the Value of Nothing. I picked up a copy when I was visiting Cambridge university in Boston earlier this year.

It’s not a book with massive hype, however a fascinating read.

Its core message is that as a society we are terrible at realising the true value of something. We also have our priorities out of whack:  such as some might baulk at seeing the cost of water rise but happily fork out $5000 for a Louis Vuitton handbag, etc .

One of the clearest messages from the book is that ‘The Market’ has many flaws. We noticed this heavily in 2008.

I think we see this on a local level in Real Estate. Certain types of Real Estate that obtain ‘market based results’ are in my opinion ‘overpriced’.

They aren’t over priced if you look at the most recent sales evidence. They are over priced in my opinion because of what’s not easily picked up. They are overpriced for the mere fact that many better options exist at the same price point.

This can be quality of construction issue or it can be the fact that I feel that the estimated capital growth projections might be weak.

Many have a habit of only comparing the features such as amount of bedrooms, style of housing – such as is this a single front etc in guessing price points.

From the outside, many places appear the same. The market may value them the same. However, in reality they may be totally different.

Back to the book. If you interested in how free markets operate, I’d recommend reading it.


Rental market conditions not as expected

At the end of last year, we thought that the rental market would be quiet strong.

We are now hitting the time of year when the market slows down a little from the highs of the end and start of each year.

I don’ think the market it as strong as we thought it may have been.

Interest rates haven’t moved like we thought they would have which is no doubt a contributing factor (pushing people to buy instead of rent) and the international student market is not as busy as it was prior to the Global financial crisis.

You might just need a little more time finding the right tenant. It’s worth factoring that time in.


Property News

Been thinking a lot about how property media will change over the next 6 -12 months.

With more people seeking the digital side of property news, we still don’t really have many good outlets for this.

More to to come from this side of things, and more to come from Secret Agent…


Staggering

Some results just baffle you. This is one of those. Don’t get me wrong, great apartment and position.

It just doesn’t stack up at the moment. Now this might change over the coming few months as the bar is raised again.  But sometimes looking at past history of sales doesn’t even get you close to the end selling price. This is one of those…