oc | Sunday 17th February
Artboard 1
Got Questions?


Or you ring us confidentially 03 9804 3133


How bad can it get?

The Beards are Back!

Very blokey – apologies ~Are the Beards back? We reckon in a week that two of them will be gone!

From all recent news reports, this year is going to be a “bad one” in .

And by definition, a “bad one” is poor quality or not as hoped for.

We’re sorry, but we just don’t see “bad”.

We see the market, as we left it in 2018, a superior quality one – more sophisticated and better for the long term than 2015, 2016 or 2017. 

Who is not hoping for our markets to remain more settled and less frenzied than they were 18 months ago?

No, we don’t see “bad” in 2019 as any sort of “given”.

 

G’day and welcome back to Melbourne property 2019 – did you have a good break?

Yes I did, thanks for asking – 3 weeks hiking the backcountry in New Zealand’s north and south island was incredibly balancing, occasionally exhilarating and 10 kilos losing.

Have you read or heard the current property 2019 themes?

Wow, are you depressed yet, ready to throw in the towel and hibernate under a blanket of 2019 misery?

Reading the property news headlines, things are seemingly like the preacher Jack Hawkins states at a poignant moment in the great movie Zulu (1964, Michael Caine and Stanley Baker): WE ARE ALL GOING TO DIE.

Truth is we all will, but it probably won’t be from the 2019 property market and for most of us, it won’t be for many decades.

Poppycock Mal, of course, you’d talk up the business you’re in – you make money from a good market.

Guilty as charged – we do – but we also make a living in  “bad” markets and 2015, 2016 could be described as “bad” markets in more ways than 2018. They were spiralling out of control with rocketing prices, weaker lending practices and seemingly unrestricted immigration purchasing.

If 2015 and 2016 and some of 2017 had of continued into 2018, we would have been as the AAMI commercial says “up ship creek, no no…. ship…. ship creek”

2019 property could very well be a good year if it continues to build on the foundations of 2018.

Why?

Camberwell, 35 Russell Street – QRate today click on pic for audio 

35 Russell Street Camberwell


Before we answer why, let’s address the media headlines issue (me included, as I write in the mass media – Domain Magazine and James Market News)

Rule Number One: Write articles to be read – that’s why you’re paid.

Our very approximate property writing statistics at James Market News.

•          We have 2,000 readers when we write an article about property with a poor headline: such as “Compound Interest is exciting”

•          We have 5,000 readers if we write an article about property, specifically about the market and it has a catchy headline: such as “Melbourne Property Market appears to have changed direction”

•          We have 10,000 readers if we write an article about property, about the market, it has a catchy headline and it’s negative in its slant such as “Market Wipe-out”

Rule Number Two: Reread rule number one AND then write about the market and how bad it can get for somebody, oh and with a catchy negative headline.

We’re following rule one and rule two in this article aren’t we?

This is not to imply that there are no negative things happening in the market right now in 2019.

The media is balanced to report, for instance:

“Many Off the Plans are a disaster” “Developers are Losing Money” “Young People can’t afford to buy”

But off the plans have been disasters for many high-rise apartment buyers for two decades.

Developers are losing money – yes, but that’s their job to lose or make money in the short term markets they play in. In this part of the property cycle it’s now the time for inexperienced developers to lose lots of money.

Young people can’t afford to buy – is one of the few negative headlines with real long term substance and if we are a good society, then hopefully we can address the difficult state the property market for young people (sub say 35s) – stress, affordability, tax advantages to investors but not the young, no access to super to buy a home, poor longer-term tenancy laws, lack of infrastructure further out etc.

However leaving aside for the moment our younger generation and the homeless, what else is there for “normal” buyers and sellers to really dislike about the 2019 Melbourne market?

David, Mal and Halli

David Hart and Halli Moore at 4 Walstab Street, Brighton East today – a property that has started well and for good reason – click on this pic. Declaration: one of four jobs currently underway where we organised the selling agent selection process and pre-campaign work and are receiving a fee for that.

All markets have issues!

From Auckland to Mumbai to Lima to New York; from Paris to the Massai in Tanzania when you talk property the same thing comes up – too little good , too many people want it, too high a price to pay.

I’ve been to all these places and many more in recent times and yes, even the Massai in Africa have  “home” issues – the father allocates the goats and the cows to his sons and there are seemingly agreed pasture “leases” – however as per they have ever-increasing over-population and “traffic/infrastructure” problems.

Melbourne, you will find is no different to much of the rest of the world, with regards to population and overcrowding issues – just different versions thereof.

BUT WE DO HAVE A:

* Solid banking system? – well managed at present by APRA, the Reserve Bank and the government and hopefully reinforced by the Royal Commission and ACCC.

* Infrastructure and more plans?  – sort of, at least we are getting rid of governments or oppositions who don’t focus on these longer-term more important plans.

* Immigration controls? – finally, we have started to bring back into balance overseas buying and it is seemingly no longer driving our market into the unsustainable price stratosphere of a few years back.

Hey aren’t we the world’s most livable city or it’s immediate past champion – pollution, education, transport, gun violence, sports …….

But what about Melbourne prices – they’re falling.

Yep!

But the sky isn’t – just price and this is what happens in the property credit cycle.

A really good video that explains what the market is doing and what a market does.

Watch the first few minutes if your attention span is short – it’s by Ray Dalio. It’s the bit about credit that is really good.

Prices go up and they go down – well they do for land values.

For buildings, they mostly just go flat or down – but more of that on February 9th.

Surely price movements in a market are not a shock to you, it’s been happening for centuries.

We are in a property cycle now – we are always in one.

Prices are not “bad”, they are just falling. Isn’t that good news for many?

Buyers: Cheaper than a few years ago – isn’t that good?

Sellers: Yep, not as good as 2017, but hey you should be up 50% in the last 5 years and only down 10% in last year – isn’t that still pretty good?

Buy and Sell: Better market to do so now than 2 years ago if you are trading up.

Developers: Good luck, true you’ve got issues – but you knew the risks – so you have a management plan, yes?

Investors: Look at the ASX pre and post 2008 and then compare to Melbourne property. Wow, that makes Melbourne land look good – doesn’t it?

And you get a dividend in terms of rent and tax depreciation and …….

Investors, can we ask you two questions?

1) Is property a short or long term buy?

2) Which 10 year period has seen a fall in Melbourne prices? Please, we’d be interested in your thoughts – because we are not aware of one?

Toorak, 4 Fairbairn Road, Ollie Booth – QRate today click on pic for audio

4 Fairbairn QR

Can I digress onto something close to my heart (and wallet) and is getting a lot of attention lately.

Fees and Charges:

Don’t want to pay for good buying or selling property advice?

I hear you and I get it – I have the same issue with my managed super fund alternatives. But let us compare apples with apples, over say 10 years between good managed fund advice and good property advice. Agreed let’s not pay anything for bad advice. Just talking about good professional advice here.

A buyer or seller agent charges a one-off fee, usually between 1% and 2% (maybe including advertising). BUT THAT’S IT AND ONLY IF SUCCESSFUL.

A managed fund agent can charge (when you can find their fees) between 1% and 2% at the start and then every year after that, over the 10 years.

Over 10 years in shares it’s 20% of your asset in some managed fund fees and charges.

For a property with a good buyer or selling agent, even allowing for yearly rental management of say 0.003% (4% yield and 7% rental collection change) it’s 3% to maybe 5% if you sold over that 10 years.

And which does better? Have a look at property prices versus stock prices over the last 10 or 20 years and factor in your costs.

Let us know if we are missing something, please.

Mal and Carla at 84 Chomley Street Prahran

The  always on the ball – one of Melbourne’s top agents – Carla Fetter at 84 Chomley Street, Prahran today.

If you are looking to buy or looking to sell and you are looking to be smart in your decision-making processes, then 2019 feels like any other year.

It could be a very bad one or a very good one depending on what you decide, more than what the market decides.

How is 2019 going to be for you? It’s feeling good to us!

Prahran, 84 Chomley Street – QRate today click on pic for audio

Chomley

 

Upcoming James Market News

 

February 9: The Young Homebuyer and How to Buy a Home. We also cover Homelessness.

 

February 16: What Homebuyers can learn from Investors and what Investors can learn from Homebuyers.

 

February 23, March 2 and 16: 2019 Opening Market Test – 100 Auctions – and Clearances – How the 2019 Market has really started.

 

Screen Shot 2019-02-03 at 5.06.17 am

PS We agree – way too many photos of Mal and it won’t happen again in 2019, we promise.

Subscribe to our Market News Newsletter


Tags: , , , ,

View more MasterClass Articles

Inside James Market News