Melbourne house prices stagnate, with lowest quarterly growth since 2012

Post to Facebook on 26/4/2018 at 10:05 AM
Commenting on “Melbourne house prices stagnate, with lowest quarterly growth since 2012”
https://www.domain.com.au/news/melbourne-house-prices-stagnate-with-lowest-quarterly-growth-since-2012-domain-group-20180426-h0z8ak/

Don’t just read my blogs like you read a story. If I give you and exercise to calculate the worst case scenario of the auction clearance rate, make an attempt to calculate it.

Reading without understanding is time wasted, and half-bake knowledge may lead to making a worse decision.

For a while, I estimated the weekly clearance rates reported by the regular sources to be in the vicinity between 50% and 60%, nothing like over 70%.

There are a lot more houses sold by private sale, and the results are not reported. In other words, there are plenty of overpriced houses out in the market not attracting any interest. These properties will sell if the price is right.

For the past few years, many gurus had been giving free get-rich quick seminars - looking out for development sites and offer owners above market value for the property, buy run down property and do a quick-and-nasty jazz up job for a sale, buy off-the-plan property and land and sell it before settlement.

Temptation turns into addiction, and confidence drives one to be greedy. That’s is why it is important to understand facts and figures, rather than just rely on hearsay.

Even after reading my blogs, you should not just accept my words as gospel. Read, think and analyse is the way to learn about the real estate market or any subject. When in doubt, hang on to your hard earned money. In the meantime, be frank to admit your doubt or even your shortcoming, and seek help and further advice.

Houses prices may have stagnated, but is that all? Will it continue at this status, or will it fall further? What should you do now?

Thank you for reading.

A city on steroids needs money for its growing pain

Post to SinFongChanRE.Wixsite.com on 26/4/2018 8:40 AM
Commenting on “A city on steroids needs money for its growing pain”
https://www.theage.com.au/politics/victoria/a-city-on-steroids-needs-money-for-its-growing-pains-20180424-p4zbgq.html

Hong Kong population is growing, too. New suburbs are popping up. Greenies have been on the government’s back, and the precious land with trees and “forests” must not be touched and turned into high rise buildings.

Being resourceful, Hong Kong reclaims large areas for new suburbs accommodating many more high rise dwellings and shops.

People who have been Hong Kong know that it has very efficient public transport network. In fact, the infrastructure is all mapped out before a new suburb is created, unlike what has been happening in Melbourne.

For years, different Victorian governments had done injustice to the people. New suburbs opened, but infrastructure was not in place. Sometimes, I wonder with our low population density, is it worthwhile to have so many new suburbs created. It does not need an Einstein to explain why the high cost providing services.

State election for Victoria is coming in November. The money collected for the real estate boom in the past few years, especially from stamp duty and land tax collection, gives the state premier Daniel Andrew, the opportunity to splash on removal of railway crossing, sky bridge, new train stations, etc. in mainly Labor stronghold electorates. The question I like to raise is, “is there a master plan for the public transport system?”

Thank you for reading.

Be smart. Get your foot in first

Post to SinFongChanRE.Wixsite.com on 26/4/2018 12:37 AM
Commenting on “Be smart. Get your foot in first”

House prices are going up everywhere, be it in Hong Kong or China.

Before the first home buyer grant and stamp duty exemption are removed or reduced, buy a property [which you can afford] as a primary residence, even though it may be a bit far from workplace. A year later, use it as an investment property, use the rent to pay off the mortgage while you rent somewhere closer to workplace.

There is no perfect world. A few years ago, I worked in the City, and I took the 6:08 am train from Syndal Station instead of Glen Waverley Station, because I could find a carpark there. I returned to my car at 10:40 pm. I worked long hours for two days a week.

Why did I take such early train? I was just using my commonsense. The train was not full, and I managed to have a seat. I could take a 30 minute nap, arrived at workplace relaxed and refreshed.

Infrastructure may not be ideal where you live. By planning your journey properly, optimising the route and managing your travelling time wisely, your stress level will definitely go down and your performance improves.

Thank you for reading.

Selling a property and buying another of the same price range cost a lot of money

Post to SinFongChanRE.Wixsite.com on 23/4/2018 11:56 PM
Commenting on “Selling a property and buying another of the same price range cost a lot of money”

I received a phone call this afternoon from a former real estate client. For years I have been giving her free advice - not only did I insist that she must proceed with the purchase of a property around the ibis Hotel near City of Monash building two decades ago (when the hotel was not even around), but I also stood firm that she should NOT purchase an overpriced property around the same area about 5 years ago.

If I had not known her for over 2 decades, I would not have given free advice that is likely to help her save over 1 million dollars in expenses today - her husband’s intention to sell a property and then buy something of similar price bracket.

The agent that lured this person's husband into signing the Authority to Sell was not ethical enough to give him an honest advice. The agent advised the vendor that he could get a better return by keeping the sale money in the bank, until such time he found something suitable. What the agent did not mention was that interest earned is taxable.

The property in question is in prime location and will continue to experience growth. It is nonsensical to say that the bank interest earned gives a better return than having the property left unsold.

It is important to note that when you sell a property which is not your primary residence, the profit is subject to capital gains tax. 50% of the profit is added to your assessible income.

The agent will take a good cut as a commission. In this depressed market, an agent may not be as greedy as before, knowing that if they don't take a smaller commission, they may even close shop tomorrow because the number of property listings is getting scarce.

The third cost is marketing expenses ranging from a few thousand to tens of thousand of dollars. Then there are the legal fees, preparation of documents, etc.

Other expenses include tidying up the property and compound to attract buyers.

To buy a property of similar price bracket, the stamp duty is about 5.5%, plus expenses in checking out the soundness of the property and legal fees if needed. The property may require certain maintenance before you can move in or lease it out.

I hope this person is not going to make such a silly move. I do feel really good, even though I get no financial gain for this.

I have done another good deed!

Thank you for reading.

Melbourne auction clearance rates fall across most suburbs as property market cools

Post to SinFongChanRE.Wixsite.com on 18/4/2018 3:22 AM
Commenting on “Melbourne auction clearance rates fall across most suburbs as property market cools”
https://www.domain.com.au/news/melbourne-auction-clearance-rates-fall-across-most-suburbs-as-property-market-cools-20180412-h0ynob/

Many people use the weekly auction results published by two major companies as guide to property market sale. If you have been following my posts, you would have read that many properties sold through private sale or private treaty.

Real estate agents love vendors / sellers to use their service to auction the properties. The cost of advertising does not only cover the marketing pitch of the property, but also the name of the real estate agency and contact. In other words, it can take up one third of the auction display board promoting the agency with the compliment of the vendor.

In my Facebook page, I post extracted information of published auction results and ask readers to work out the best and worst case clearance rates. In many cases, the clearance rates no better than just slightly iver 50% versus 65% or over.

Are there anything else not disclosed?

Thank you for reading.

Melbourne apartments face resale issues

Post to SinFongChanRE.Wixsite.com on 18/4/2018 3:22 AM
Commenting on “Melbourne apartments face resale issues”
https://www.domain.com.au/news/melbourne-apartments-face-resale-issues-as-experts-report-saturation-of-stock-20180417-h0ywhn/

I have been warning about investing in apartments in Melbourne and other interstate cities. I do not make such warning lightly. For many migrants from Hong Kong and Southeast Asian countries, they come with very fixed mindset that apartments will give them good capital growth despite unsatisfactory rental return.

Just so happen that I had dinner with some Hong Kong friends, and the subject on property popped up in our conversation. Most Hong Kong people live in high rise apartments, and some high end apartments are priced at HKD 50,000 per sq ft. On the other spectrum, it still costs HKD 1,500 per sq ft. No one expected property prices could soar so high after GFC. I asked a rather cynical question, “if no one expected such increase, can the reverse take in the future?”

Hong Kong experienced big property price slump before, and many faced bankruptcy leading to committing suicide. Not unlike Melbourne, many countries face housing affordability crisis. Young people just do not have the ability to raise the initial down payment for their home. Those with aged parents who own a property or two, are able to chip in.

The population of Melbourne and Sydney are still relatively small, and the growth rate is far below the rate of apartment availability. In the past decade, far too many apartments have been built to lure investors from overseas or newly arrived migrants. The prices are above the asset worth. Such demand hype also attracts local buyers who think they know property investment inside out after attending a few free seminars.

Property prices in Melbourne will continue to fall, and the apartment prices will take more punches. The initial investment may be small, but the long term return may be just negligible.

Thank you fro reading.

Long and painful: Peter Costello’s rate warning for households

Post to SinFongChanRE.Wixsite.com on 5/4/2018 8:21 AM
Commenting on “Long and painful: Peter Costello’s rate warning for households”
https://www.theage.com.au/business/the-economy/long-and-painful-peter-costello-s-rate-warning-for-households-20180320-p4z5bj.html

Peter Costello could have been a better Prime Minister. I think he is smarter and wiser than the several clowns we had as Prime Ministers and opposition leaders. Well, he was a bit impatient to wait for the baton to be handed over by John Howard.

After many years as the Treasure, what he says in recent time about the pain will hit many mortgage holders as interest rate increases must not be taken lightly.

It is inevitable, not about when the rate increase will take place, but how much it will increase. I believe it is sooner than many experts have predicted, and there will be two increases.

I have warned many times if you are a hands-to-mouth wage earner, and you are considering to purchase an investment property while your own home has not been paid off yet, proceed with great caution in your property hunting.

What have I to gain by asking you to think twice or even thrice before you make your move? I am not selling you courses, or luring you to buy a share in my investment project.

Thank you for reading.

Construction of 10,000 apartments in Brisbane indefinitely deferred

Post to SinFongChanRE.Wixsite.com on 5/4/2018 8:20 AM
Commenting on “Construction of 10,000 apartments in Brisbane indefinitely deferred”
https://www.domain.com.au/news/construction-of-10000-apartments-in-brisbane-indefinitely-deferred-bis-oxford-20180404-h0yc1t/

Real estate is not a consumable product, and I am glad to see that foreigners are not allowed to buy up and speculate for future growth.

Unlike a consumable product, once bought and used, another may be required and does create another sale for the benefit of the supplier of product. Real estate investor can hold the product, and thus creates scarcity, thus bumping up the price.

Foreign investment is an important evil, but using our own scarce resource to make money out of our people is not something I can see eye-to-eye with. By that I mean, most foreign investors are not owner occupiers, and the properties are let out to local residents/tenants.

Queensland is an interesting state in terms of tourism and investment opportunities. Since I am Melbourne base, I reserve my comments.

Thank you for reading.

Sydney, Melbourne property prices continue to slide

Post to SinFongChanRE.Wixsite.com on 5/4/2018 8:21 AM
Commenting on “Sydney, Melbourne property prices continue to slide”
https://www.theage.com.au/business/the-economy/sydney-melbourne-property-prices-continue-to-slide-20180403-p4z7i2.html

It takes a lot of guts for me to predict property falling prices months ago, and believe that the higher end market will continues to do so for a much longer period.

If you go shopping around and find that the asking prices remain very much the same, it is because many sellers are in the la-la land, and many real estate agents are not honest enough to advise the sellers that they have to face the music. It is not the asking price that counts, what you must understand is that the final transacted settlement really matters.

There are other reports showing house approvals have improved lately, that does not imply the prices are rosy. If you have been a good heckling shopper in flee markets, or some Asian shopping alleys, you may sharpen your bargaining skill and front up the real estate agents. They can only say no to your offer, but there is no harm in trying.

The asking price can go up, and go down, as long as the both parties do not come together and agree on it. The property is not sold if both signatures do not appeared on the dotted line in the sale contract.

I have also mentioned that April 2018 may see some signs of plateauing and even some upward movement. However, the rise is very small, and not to get too excited. The over $1.5 million properties which are not new will have difficulty in selling.

Many young people with the finance provided by their parents, who are so gung-ho in bidding way above the reserved prices few months ago, will find themselves in diabolical trouble. The purchase price affects many rates and charges, and insurance. If they cannot afford to keep up with all these expenses, they may have to offload the houses at much reduced prices.

Are you ready to shop now?

Thank you for reading.