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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: Property Buying Tips

Unrenovated Homes – First to Feel the Pinch

Very noticeable at the moment is the struggle of unrenovated property.  It seems to be the first section of the home market that falters in a given suburb when times get a little tougher.

The thought of spending money in uncertain conditions is dampening buyer interest and this has sprung to some exceptionally low priced homes compared to just 6 months earlier.

While this market is by no means immune from further price falls.  It is now much better value for the handy type.

Median Price and Transactions Numbers Down

Although Melbourne still sits second in the least affordable city in which to buy a home, it appears buyers have become more cautious this year the overall number of transactions dropping falling by 17% and with the Melbourne median house price dropping 6% this quarter to $565,000 – down from the Decemeber quarter median of $601,000.

This softening in price will come as a relief to many buyers already in or looking to enter the property market this quarter. With fewer property coming onto the market and fewer buyers entering the market it’s likely prices will continue to remain at this level over the next quarter.

When it comes to settlement time..

The hardest part is usually over once the searching is over and contracts are signed, however there are a few things to remember pre-settlement to ensure for a clean and straight forward settlement day.

Under the terms of your contract of sale, the vendor must deliver the property to you at settlement time in the same condition it was on the day of sale, except for fair wear and tear. This does seem pretty straight forward, however if you fail to do your due diligence on the property you may be faced with some unwanted surprises come time to move in.

Prior to purchasing the property get a building inspection done – this will ensure you are not surprised with any structural damage or leaks etc once you move in. Another good step to follow is to take some video footage and photographs and note down the overall condition of the property and fixtures at the time of sale.

By taking these precautions, you will be well armed for final inspection and have information and proof required, should any issues present themselves. Should any new major damage be sighted at final inspection, you should bring it to the attention of the selling agent immediately, so the issue can be remedied prior to settlement.

Sometimes there are new scuff marks on walls or light globes not working , these things do happen when old owners move out. Don’t get hung up on little things like this. It’s time to enjoy your new home!

Deposit Bonds – The case for and against

The use of deposit bonds it not viewed to be a common practice within Victoria and often make the selling agent and vendor a little uncomfortable. A deposit bond is a guarantee by an insurer that a purchaser will pay the deposit when it falls due, either at settlement or upon recession.

Probably some of the biggest conflicts with the use of a deposit bond include –

•    It becomes a concern for vendors & agents, as money has not physically changed hands and they hold nothing of monetary value as a deposit on the property other than the guarantee.
•    Vendor’s who intended to use the funds for their next purchase and require early release of the deposit will be reluctant to accept a deposit bond.
•    Many contracts for the sale of real estate within Victoria specifically forbid a deposit bond from being accepted as as form of deposit.

Some things to consider when presented with a deposit bond as a deposit –

•    Is the deposit bond being insured by a known and reliable source?
•    Does the contract allow for a deposit bond to be used as a deposit?
•    Is the vendor depending on that 10% deposit to use in their next purchase?

If used properly, and in accordance its terms and conditions, in many cases a deposit bond be of benefit to all parties involved in a real estate transaction. However, it is important to know the limitations and rules associated with the use of the deposit bond and how it will effect the sale of that given property.

Has the market turned a corner?

It’s a question almost everybody is interested in.  The sluggish nature of the market has been incredibly unpredictable in the early part of this year.

The weekend felt better in my opinion in some sectors of the market.  Yet plenty of mixed signals prevailed.

I think we are going to most likely see continual flatness over the next few months.  1st home buyers will most likely drift back into the market deeper into the year.  If this is the case then this could propel property in the higher price ranges also.

A good house is still a good house.  Competition can still be immense.  Yet some places that are perfectly good places are failing to attract the interest expected.  These places are the ones which can be swooped on for value.

Past investment review – how we would have gone

Back in June 2008,  we reviewed a property at 2/449 St Kilda Road. We didn’t buy this property which was a shame. Yet I wanted to fast forward and try and understand how this property might have performed in today’s market.

The property is part of the Kio Ora building,  an Art Deco building on St Kilda Road that benefits from close proximity to everything.

I’ve listed below some points on the positives of this property for an investment:

• Scarcity :  How many Art Deco apartments are located within walking distance of Melbourne’s centre?  Very few.  Also the period appeal of an era never to be re built also adds a certain scarcity factor.
• Spacious and Ground Floor :  This gives the property the widest possible market appeal in my opinion.  It suits baby boomers,  young professionals and investors.  Also the older nature allows for bigger interior spaces than most developers will offer.
• Lifestyle and Location :  A tram or a short walk to wherever you want to go.   That says it all.  These factors also allows the property to be very flexible as an investment.  Long term,  short term and furnished rental are all options for an investor who wishes to maximize returns.  This is literally right in town.
• Special Attributes : Balcony overlooking garden, natural light, carport and genuine fireplaces are those extras which help separate this asset from the next.  It appeals strongly to the owner occupier market.

The price paid then was $485,000.  This was excellent value and a great purchase.

The last sale in the block was unit 29.  In my opinion not in the same league yet sold for $675,000 at the end of 2009.   My thoughts on value now would now be $710,000 – $730,000.  Maybe a touch more under intense competition.

A very healthy return indeed.

Presentation Counts

When looking to market your investment for lease, it’s important to consider how it will appear to potential tenants. Just like when selling a property, a rental property should be presented in the best light.

To really make your investment appeal, it’s a good idea to consider having professional photos taken. When a property is presented well on the internet, higher quality tenants are attracted and stronger rents are possible.

We’ve have had experiences where clients have elected not to go down the professional photo road and it is a detriment to the quality of tenant.

Always check your property when listed on the net, and ask yourself is it being shown off as best as it can be?

A quote price is now helpful

Quoting prices are now more helpful.  As the tentative market takes hold.  A number of places are selling for within the quoted range.

We should start to see less media on quoting issues.

Now this is not a given on every property.  Yet overall, I think quoted ranges will work well as a guide over the next few months during this ‘adjustment period’ of owners expectations.

The truth behind real estate advertising

It’s often difficult to gauge what a property is really like simply by viewing the marketing on the internet or in the local paper. Through the marketing, we will only see the property how the vendor and their agent want us to perceive it.

Here’s a few tips to help you decipher the code of real estate advertising –

  • If the advertisement shows only a photo of the facade (looking great), the property is likely to require some serious works on the inside, be sure to ask the agent about the condition inside before wasting your time going to view!
  • If the property is described as a ‘Renovator’s Delight’ – the property is likely to be an absolute mess and will require a lot of time and care – not really a ‘delight’.
  • When a property is described as being in ‘livable condition’ it is likely to be right on the fence, heading towards to the unlivable – only very basic living needs will be fulfilled.
  • Property said to be ‘neat & tidy’ is likely to look like your grandmothers house – yes it’s tidy, however improvements required!
  • Often property described as renovated, simply isn’t. An improvement to a property cannot be described as ‘fully renovated’. Be sure to check the photographs to ensure they match what is described in the text.

Nothing can beat seeing property in person, however there is often so much time wasted on property you thought was the one for you and upon viewing it realised it wasn’t! It’s important to get all the details of a property prior to viewing!

Where is the next boom suburb?

A consistent question asked by investors and home buyers alike. But very difficult to answer, many parts of Melbourne are still underrated and potentially undervalued.

As the property market has general increased over the past decade it is not surprising that buyers are looking for undervalued suburbs. These suburbs do exist but can come with some drawbacks, particular for investors. Many parts of the inner west of Melbourne are hugely underrated compared to their eastern suburb equivalent.

Purely looking at the physical distance from the CDB, Maidstone, Brooklyn & Footscray are on an par with Hawthorn, Kew & Northcote, but the values of the Western suburbs are miles apart from those in the East. Many factors play a role in these prices, particularly transport and road links, which have been lacking for many years, keeping many suburbs landlocked.

So, there are still properties that provide good value, but may have a few limitations. A bargain is in the eye of the beholder.