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Category Archives For: Property Buying Tips

How holiday weekends influence property prices

eastereggJust the handfuls of auctions took place on the weekend which begs the question, are auctions that take place on public holiday weekends a good opportunity for a buyer who is looking to avoid competition or is this good news for a property seller.

It’s a very bold move by a vendor to place their home on the market with an auction scheduled on a major public holiday weekend like Easter, this was proven on the Saturday just been with only 55 auctions taking place across the state and many of these where in coastal areas.

The clearance rate was 82% which has also been far higher than in recent weeks, the little property that did get auctioned in the inner city of Melbourne had very little trouble of selling.

In a normal weekend of property auctions many homes are offered for sale that might compete with each other, for example a number of single fronted homes in Prahan may be offered on the same day via public auction at similar times, this then means a would be buyer has to choose which auction they will attend if satisfied with numerous single fronted homes in the location.

When a property is auctioned on a public holiday weekend, this means it has prime focus from the buying marketplace and without competition from similar housing stock.

From my experience, if the property is right for the buyer, they will delay taking off early for their holiday in pursuit of the house or have someone at the property on their behalf ready to place a bid at auction. People’s mood also has an impact; holiday periods generally mean people are happier, when people are happier there is also a tendency for people to spend more!

On the other hand, if the property is not priced right or misses the mark as to what the market place is searching for then this could backfire but this would also backfire on most weekends throughout the year.

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When it comes to Real Estate everyone has an opinion: like which way the market is going to go, where to buy, what not to buy and what type of property to buy.  It's great that so many people take an interest in Real Estate however this also leads to many confused property buyers who don't know what to do.

Many said 20 years ago not to buy an old period home in the inner city, 5 years ago people where saying to stay away from city apartments and 2 years ago many advised against investing in the office property market as vacancy rates where high. Fact is if people did the opposite to all of these, they would more than likely have some substantial assets to their name.

Opportunity comes when there is uncertainty in the market place, do your research and work out the trends for what's likely to happen in the future years ahead. Take on people's advice, conduct the right research but don't be afraid to follow your own property aspirations…….

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Not all property is equal

I was speaking with a couple on the weekend down at the local coffee shop, they have purchased a fair amount of real estate in their time and they were telling me about an experience that didn’t quite work for them with their property investment.

They purchased a vacant block of land in Fitzroy back in 2004 with the intention of getting some plans and permits arranged for the construction of a new home to live in and build.

The block was about 120sqm which is about the size of a normal single fronted terrace in the inner city.

After working through the planning stage and getting the permits organized which took some time they realized the cost of construction would be too high and they didn’t want to overcapitalize on the property. They had made the original purchase to live in however at the same time they wanted to be comfortable that if they did sell the property they would achieve at least the money it would have cost to construct plus the land costs as well as all the extra’s that come with a purchase.

The construction was going to be roughly around the $400,000 – $450,000 mark which meant they needed in excess of $950,000 and more to break even.

They sold the block of land without going through with the construction for the same price they paid for it in 2004 which was $400,000 with the addition of approved plans and permits which was not included in their original purchase.

This represented a loss of $90,000 when holding costs, architecture drawings, application fees etc were all totalled up.

So not all types of property go up even in inner city areas as good as Fitzroy.

A couple of things made the resale of the land tough:

1. In inner city areas most vacant land is snapped up by developers looking to build and then on sale for a profit. The problem here was it hard to be profitable on only constructing one dwelling and the site size did not make it possible to have any more than that one. Developers tend to work off a profit margin of 15% and normally like to construct a minimum of 2 dwelling on a site with a preference of 3 or more.

2. Home buyers generally want something to move straight into, not many people have the time or patience in going through the whole construction phase of a property and with the costs of building materials and labour soaring in recent years they did not want to over capitalize to on the construction.

This means to on sell the land the vendors really need someone who has the time and just wants to build the ‘perfect home’ for them to live were the prospect of over capitalizing on the property is not as much as a concern.

Unfortunately these buyers are generally not as common and in the case of the vacant land in Fitzroy this was the case.

With such a small selection of buyers to pick from or to compete for the property this helped create a loss when selling.

I have seen people in the last 5 years triple their investment by buying the right property such as a single fronted terrace in the city or a quality townhouse and I have seen people buy property at similar price ranges and be at a loss after 5 years.

When making a property investment remember to take all things into consideration, often what you buy today which is highly sought after will be the same when you decide to sell but not in all cases.

So yes, not all property is equal.

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When do you know the market is turning?

I used to work with an old wise man named Jim who sold real estate in the inner north of Melbourne for decades and is still active.

We used to talk about the first signs of a market slightly cooling and the 'double negative' factor for which he affectionately named it.

When talking about a double negative we are referring to a property that has 2 negatives that might hold potential property buyers back from buying it, in sizzling markets like 2007 these properties were selling without delay and competition was still fierce for these not quite perfect properties.

As markets change and the accelerator is slightly released, properties with the double negative factor tend to be the first properties to feel the pinch, often the blue chip properties still often require a premium to be paid in order to secure them, even when a slight dip does occur in the property market.

An example of a double negative might be a double fronted property on a main road that has had all its period features stripped away. Another would be an apartment on the fourth floor of a building which does not have lifts and the body corporate fees are far too high.

Generally the properties classified as an 'renovators delight' which are not in the best of positions also tend to struggle especially when they have a small land component and buyers become cautious about putting to much money into homes when the market is not quite so buoyant.

Considering the 'double negative' factor is always good to consider when making a property purchase and gauging as to how the market is performing, of course if the property has 3 negatives then I think its 3 strikes and you’re out! Best to leave that potential property purchase alone!

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A good buy?

DrummondStreetLast night I went and looked at this apartment in Drummond Street, Carlton North (Melbourne)

Position of the property is great, not far from the Uni's and in between Rathdowne Street and Lygon Street. The apartment would be easily let for between $320 – $350 per week.

One thing I really like about this apartment is the fact it’s on the ground floor, this means you are not discounting any markets when you decide to let or sell the property. For example a baby boomer might not be interested in a property on the second floor because of the amount of stairs to climb.


The property is spacious inside and has two good sized bedrooms (one slightly larger that the other) with built in robes in both. The apartment also has Laundry facilities in the unit which is important.  The ad for the property describes the apartment as 'renovated' however I would more describe this as 'updated’.

Negatives on the other hand are the fact it does not have a car park on title (one is allocated but it’s not official according to the section 32), no outside space is being offered and the complex has many other units in the block.

The quote price is $380,000 – $410,000. Even if you managed to buy the apartment for $400,000 you would only receive a little over 4% return for the investment. The true value comes from the capital growth expectation for Carlton North which I still think has some value left in it.

In short, I think it’s a good apartment that will continue to grow in value. I still think you could do better though by eliminating some of the negatives, even if this means paying a little more for something else.


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Buyer hesitation

Often when property purchasers are looking to buy property they go one of two ways. The 1st being they find a property they like and end up buying it, the 2nd and more common way is that the buyer holds off and keeps looking for the 'perfect one' or when the market cools.

I have been speaking with a professional couple who started looking a year ago in Melbourne's inner city, they hesitated about buying a single front terrace in a good suburb and had the opportunity to buy it at a reasonable price after a failed auction. The couple knocked it back and the rest is history, the market has moved up 25% in Melbourne with the particular suburb Brunswick East moving up just under 50% in the last year alone in its median sale price.

Now the couple are looking at apartments rather than a single fronted house and still look back at a missed opportunity!

Predicting where the property market will be in the near future is never an easy task, the one thing you can do is buy a good property in a good location and when setting your budget for how much you are willing to spend factor in some interest rate rises to be on the safe side.

Humans procrastinate; this is a normal reaction as people try to delay big decisions for as long as practical!

Remember that while delaying purchasing a car is perfectly fine as prices tend to be quite steady, house prices on the other hand can both directions very quickly and most often in the upward direction meaning if you miss out today will you be sacrificing your favourite suburb or a bedroom to make your purchase possible in 6 months?


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Real estate agents and offers

I was talking to a lady yesterday who recently put in an offer on a property in Melbourne (Private sale) to a local real estate agent. The estate agent told her that the offer would be kept confidential even within his group of colleagues. She was very doubtful that this was true and asked for my opinion as to whether her offer would be ‘shopped’ around.

Most often agents will protect offers on listings they receive for the following reasons:

1. If they say they will then ethically they should

2. Internally in an estate agency it is very competitive and the last thing the salesperson wants is for a competing colleague to come along and produce a buyer with a more attractive offer and they miss out on the sale and the commission!

Always check how your offer will be treated if accepted by the vendor.  Many agents operate very differently, most typically a 24 hour ‘tender process’ will begin once an offer has been submitted on contract and has been verbally accepted by a vendor.

Other methods such as boardroom auctions, Dutch auctions and immediate sale are also very common. Remember before making an offer on a property ask how the rules will be applied if your offer on a property is accepted.

Early Australian housing

earlyaushouseAustralia day has just been and gone but if you where living in this country in the late 1700's, how did you build your home to be comfortable and adapt to the climate?

Well obviously comfort was never an easy option for early Australian settlers!

Early Australian homes where very primitive and built mainly from the abundance of timber. These early homes often had no walls and the timber was used for used for walls, roofs, floors, doors, windows and even chimneys.

The Australian property mindset has always been 'the detached house on a quarter acre block'. We have started to see a shift in this way of thinking in our capital cities for some time but expect a massive change over the next 5 years on how we live and build!


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Good buying in Queensland

Queensland to me has always seemed the place where the more 'established' people among us migrate to get some warmer weather.


Currently in a boom, Queensland is growth rate is nothing short of spectaclur with great forcasts ahead, So where do you buy in this roaring state? I say you go where the Mangoes are, Tullip is only 25 km from Townsville are is surging in vale however pricing is still we below nearing towns and with an expected inflow of 20,000 migrants over the next 2 years due to the food boom this could be a good chance to profit.

Enjoy the mangoes!

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