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Is creating fear the answer, maybe addressing the issues is a better solution.

Focused or Dreaming? Sam Inan (Hocking Stuart), sells 14 Pine Avenue, Elwood under hammer, $1,316,000, 2 bidders

At 6.00 pm on  Saturday, the James Clearance Rate for Melbourne’s $M+ was 74% on the 39 auctions we covered. The , our bidders per auction measurement continued its impressive run at 2.4.

Overall Summary of Melbourne’s Million Dollar Plus Auctions:

  • Ducks ($M+ auctions with no bidders) 11%
  • Lone Rangers ($M+ auctions with one bidder) 22%
  • Norms ($M+ auctions with 2 or 3 bidders) 36%
  • Volcanoes ($M+ auctions with 4 or more bidders at auction) 31%

Another big week for the Volcanoes – a consistent volcanic Bidderman means only one thing in relation to price.

A Market Opinion:

Effect of Interest Rates and Fear on the Inner Melbourne Market:

Each week for almost 2 years we have heard auctioneers proclaim now is a good time to buy as interest rates are low. In the media recently, we now read we are in a housing bubble.

If there is to be any Interest Rate changes this time around, they may have to be particularly punitive to have an effect on the current Inner Melbourne $M+ market.

Why?

Because we feel it is not a low interest rate that is the direct key driver of the currently strong Inner Melbourne $M+ market?

In our opinion the current key drivers of this market are

  1. Population/Locals/Demand with long term increased “non debt” wealth.
  2. Chinese Nationals

1. Locals with Wealth: When you are not using debt to fund your homes, or if you are using say 50% debt, then interest rate movements do not affect you as much as if you were using 90% debt to fund your home. From our experience of buying 100+ homes every year, we see that very few Inner Melbourne $M+ homes are bought on 90% debt ratios.

We note that interest rate increases can dampen business demand, which ultimately affects a business-owner homebuyer. But that takes some time to have an effect if the business owner is low on debt as many are since the GFC – we are.

The Inner Melbourne $M+ market has at its foundations a lot of local professionals who are immune from interest rates effecting their businesses such as doctors.

The Million dollar super fund that buys is now an active phenomenon that wasn’t here pre GFC. And of course there are other tax advantaged investors who create demand and limit supply.

2. If you are a Chinese National then Australian interest rates only seem to refocus your home buying activities when there are major changes in the Australian Dollar such as 10 or 20 cents rather than 1 or 2 cents. This we see when competing against and acting on behalf of Chinese Nationals during times when the Australian dollar is fluctuating dramatically.

We think minor Interest Rate changes have little effect on above.

Inner Melbourne Home buying demand is a bit like Inner Melbourne traffic – demand is so deep and supply so restricted that game changers that worked 20 years ago such as new freeways may not work today.

Right now interest rate changes may not change the strength in home buying demand – a new tool is needed and we’re not sure fear of higher interest rates is that “new” answer and besides it’s not new anyway.

Fear is a primal behaviour changer. There’s no question the media talk since the Winter break has changed and now has a focus on fear such as bubble, unsustainable, record and so on.

But will fear have the desired effect? And who will affected the most?

Is the Inner Melbourne $M+ Home buying market a more sophisticated, seemingly less debt orientated market, more overseas based than it was pre GFC? We think so.

The Inner Melbourne $M+ waterhole has limited capacity and holding back the herd through fear can only work for a while – ultimately we all still need to drink. When you are actively increasing the size of the herd, maybe you need to look there; rather than trying to change the behaviour of the herd, if a sustainable future, especially for younger homebuyers is a worthwhile goal.

Don't Panic Robert it'll sell. Kew East: 25 Boorool Road (Robert Ding, Marshall White), after auction, undisclosed above $1,480,000, 4 bidders

Are Stock Levels causing this current market to do what it is doing?

With two big auction weekends coming up – any talk of market strength being solely due to low stock levels will be proved or disproved.

We think it will be disproved as we see an underlying strength across the board – except right at the Top. At the Top the market is not quite as consistent as it is at the lower levels.

Bidderman has consistently been well above 2 bidders per auction each week and that says to us the bidder depth should be able to soak up this first wave of Spring stock – meaning buyers will have to compete.

But if we’re wrong then you’ll read it here soon.

Biggest Auctions:

  • Canterbury, 25 The Ridge (James Tostevin, Marshall White), after auction, undisclosed above $3,225,000, 2 bidders
    Not a cloud in the sky, great day for the auction of this well-updated family home in The Ridge, one of Canterbury’s better streets…(See More in Auction Reports)
  • Malvern, 3 Willow Street (Marcus Chiminello, Marshall White), after auction, $3,300,000, 1 bidder
    This contemporary residence saw the crowd slow to build until Marcus Chiminello emerged to launch into his opening spiel…(See More in Auction Reports)
  • Malvern East, 44 Clarence Street (John Bongiorno, Marshall White), under hammer, $3,130,000, 5 bidders
    John Bongiorno was our master of ceremonies here…(See More in Auction Reports)

Bidderbuzz:

  • Brighton, 2 Canterbury Place (Julian Augustini, Hodges), under hammer, $1,405,000, 8 bidders
    Having been quoted at well below $1,000,000, it was quite surprising that a total of 8 bidders took the price of this Brighton property…(See More in Auction Reports)
  • Camberwell, 24 Kingsley Street (Steven Abbott, Jellis Craig), under hammer, $2,380,000, 5 bidders
    With sweat on his brow and the beating of the afternoon spring sun, auctioneer Steven Abbott was made to work hard at this auction…(See More in Auction Reports)
  • Caulfield South, 7 Filbert Street (Charles Boyd, Jellis Craig Bennison Mackinnon), under hammer, $1,235,000, 5 bidders
    Classic, contemporary, stylish were the three words used by auctioneer Charles Boyd to describe the home he was charged with selling today…(See More in Auction Reports)

Biggest Pass Ins:

  • Toorak, 8 Carmyle Avenue, passed in, $4,825,000, 1 bidder
    Tim Derham doesn’t need a microphone. On the first sunny Saturday morning in Spring…(See More in Auction Reports)
  • Hawthorn, 50 Hawthorn Grove, passed in, $3,550,000, no bidders
    Drawing a crowd of approximately 80 including a Channel 10 camera crew…(See More in Auction Reports)
  • Toorak, 17 Maple Grove, passed in, $3,200,000, 1 bidder
    Jeremy Fox says that it’s hard to find a single level house, which is much sought after by those seeking to downsize…(See More in Auction Reports)

The Young Homebuyers Guide has been one of our biggest viewing Masterclass articles ever and that was only the first week.

Today we continue The , THE AGE Domain, James Buyer Advocates 2nd part of a 7 part series written for Young Homebuyers.

Click Here:

http://theage.domain.com.au/real-estate-news/how-to-make-a-milliondollar-property-plan-20140905-10d44y.html or

http://www.theweeklyreview.com.au/property/news/9966-young-buyers-guide-week-2/?nav=Y2F0X2lkLzY0Nw==#.VA074f8cSUk

If I told you I could give you a , no strings attached, would you be interested? In the next few weeks, I will give you advice that will be worth a in your pocket – seriously.

First, the internet is not a plan. Used well, it is a tool like a hammer or a calculator. Used poorly, it is a distraction like a gossip magazine. Yet many of us begin home-hunting by jumping on the net and reacting to superficial feelings and urges, then we react to advice from agents and so on, like a mouse on a wheel.

Is that what you want? What you really want from a home are good emotional and financial outcomes. These outcomes can be boiled down to what we call the three “Ps” price, property and position.

……………

Get the plan right from the start and you won’t waste money changing houses. Each time you change homes, it costs about 10 per cent of the property’s in stamp duty, moving costs, fees, etc. If you change homes in the first few years, a lot of your deposit is lost; move a few times and all your hard-earned starting savings are gone.

Click on here for the full Young Homebuyers Masterclass article:


Agent Survey:
After reading Mal’s article for young home buyers, what is your best tips for those starting out in today’s market?

Gary Peer (Gary Peer, Caulfield North):” I liked Mal’s article and his focus on assisting people on the start of their real estate journey and creation of wealth. It is hard to get started , but I believe it always was , and won’t get any easier. Mal’s principal , or example/case study , revolves around buying in a great location and buying something underpinned by land – which I fully subscribe to and endorse. New properties offer luxury living , but depreciate ( much like a new car ) , which is why they often have an accompanying depreciation schedule. Conversely older properties , underpinned by a land component , will appreciate…so the old theory of buy the “ worst house in the best street “  still rings true!! My recommended book is “ The Richest Man in Babylon “  an easy to read , light hearted , but very relevant guide to saving and investing wisely.”

John Clarkson (Hocking Stuart, Brighton): “Young buyers looking to purchase should take their blinkers off and widen their search. If they lived in a particular area, often they want to purchase back in that immediate location . It is imperative to think outside the square and widen their search to adjacent suburbs. It is also vital to go to open for inspections and auctions to get a first-hand view of demand , prices and market activity . But the best tip of all is to be patient and realise you will not buy your dream property in an A-grade location by the beach on your first go!”

Glen Coutinho (RT Edgar Boroondara, Kew): “My best tip is to get to know a few agents you can trust and ask for their opinion on the property before you buy it.  Like anything 3 independent opinions from agents will point you in the right direction. I would also suggest looking at comparable sales and market history and have a lawyer review the contract first. When buying, always think long term.”

David Wood (Hocking Stuart, Albert Park): “My best tip for young home buyers would be for them to decide what is not negotiable and what is negotiable on their wish list.  Invariably, something has to give when you first set out with a wish list, compared to what you can afford.  It could be car parking, location, bedroom accommodation, renovation standard etc. Say if you decide for example that you really want a specific suburb or geographic area, then you may have to negotiate on something else such as parking to achieve that goal. Another example is that you wanted an apartment in a specific area, but wanted to avoid large complexes, then you may need to compromise on the internal condition, that initially will result in a lower rental return, but ultimately give you better capital growth. Life is all about compromises, but you should stay strong on what you will NOT negotiate on, and location should be at the top of that list, or very close to it.”

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