Melbourne market still up as buyers fight for bluechip locations

Post to Facebook on 30/7/2018 at 1:43 AM
Commenting on “Melbourne market still up as buyers fight for blue-chip locations”
https://www.domain.com.au/news/melbourne-market-still-up-as-buyers-fight-for-bluechip-locations-20180729-h13a6x-755094/

Number Listed Auctions: 687
Number Reported Auctions: 507
Sold: 320
Withdrawn: 43
% Cleared: 58 %

I must be very thick. The report reckons the clearance rate is 58%, but I think is less than 50%.

There are far too much uncertainty at present, and buyers are in fact more cautious than before not to bid recklessly at auction.

A dated property can present a bigger headache than it is worth. Unless you have a proper building inspection to certify that it is in sound condition, you may be living in nightmare for years to come, and likely to cost more than you budgeted for in renovation or restoration.

If you are buying the first home, I do not advise you to buy a very dated home, even if you are very handy. During the first few years, you may feel the pinch in paying your mortgage, and involve in a lot of adjustment in your lifestyle.

For those who have the money, but they are still classified as first home buyers in Australia, think twice before signing the contract for that McMansion. Domestic maids are not around to help you to do the household chores, and the utility bills can be very expensive.

Get into the real estate market for your needs first. You must not make yourself a slave to your house.

Thank you for reading.

Investing in boutique apartment

Post to Facebook on 28/7/2018 at 3:17 AM
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https://www.facebook.com/groups/62692350000000000981964/permalink/713879138953066/

Boutique apartments are a new trend in the real estate market. Boutique is defined by Oxford Dictionary as “a business that serves a sophisticated or specialized clientele”. Within this definition lies the meaning of Boutique Apartment. It is a small, unique and luxurious space.”

So if you are buying something trendy, you are buying something shortlive. When you are buying something that will become a Salvo or Venny secondhand store, or Krispy Kream Donuts which commanded extremely ridiculously high price but the franchise lasted for less than 5 years.

Some people still ask me the question about investing in apartments. My answer is to ask them to read my blogs. It is not that I am rude not to give them an answer, it is because I have repeated many times about my sentiment, and I do not to saying the same thing like a broken recorder or demented sufferer.

I had a great morning enjoying free breaky hosted by a developer of a big apartment project. Many were booked / sold during last week’s launch with start price of $1.18 million to cool $1.55 million. Many buyers are from Malaysia, Singapore, Hong Kong and China. That was the order one of the salesperson put it.

Good luck to all those who can afford, and hopefully the prices will have risen a lot more when the project is complete in 3 years time.

Thank you for reading.

Apartments in Melbourne’s inner-city are selling at a loss

Post to Facebook on 28/7/2018 at 1:24 AM
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https://www.domain.com.au/news/apartments-in-melbournes-innercity-are-selling-at-a-loss-agents-say-20180727-h137d5-754821/

Land, land, land NOT air, air, air!

When you buy a high rise apartment which occupies very little land on the ground, because the total land size occupied is apportioned proportionately to the various apartment owners.

You can’t extend or modify the external of the apartment, and enlarge or contract the boundary. You can’t demolish it no matter how much you do’t like it.

Yes, you are paying expensive space, or air space, which incidentally not the same kind of Air space for a plane to fly over.

Many readers by now know my sentiment about apartment investment, and often I do not want to advise those owners, who never listened to me and went ahead to buy those apartments, how to minimise their losses.

In fact, I had an hour chat with the principal of a local law firm that many people would not value free advice. Well, well, well, you have been reading my free blogs from this “dummy”!

True, there are people with ulterior motives, because you and I are reminded repeatedly that there is no free lunch. It is important for you to assess the validity of the advice, either paid or free, and make your final decision.

Living in an apartment is a life-style choice. If you choose to invest in an apartment for capital grow, you are taking too much risk.

Remember, if you are contemplating to buy and live in an apartment after years of living in a house, either you are downsizing or want to join in the hustle and bustle of the city life, I suggest you to take up a one-year lease of an apartment and try it out. If you do not like it, the financial loss is minimal.

Most, if not all off-the-plan apartments are sold at inflated prices, especially those also market to overseas buyers. Who do you think pay for all the overseas marketing and promotion expenses, not to mention the sales representatives overseas want a cut as well.

I cannot be any more blunt than to say cut your losses sooner!

No matter whether you are buying or selling any property, and if you have doubt, do consult your qualified investment/financial advisor.

Thank you for reading.

Australia’s house prices to remain flat over 2018-19 financial year, BIS Oxford Economics report tips

Post to Facebook on 27/7/2018 at 12:41 PM
Commenting on “Housing slump set to be the largest in nearly 40 years”
https://www.domain.com.au/news/australias-house-prices-to-remain-flat-over-201819-financial-year-bis-oxford-economics-report-tips-20180625-h11q27-441379/?fbclid=IwAR16v6lf28dvmPnd77PcJVfPh61qvoK85wk4Md-kJ54Zs44EgUPfa97joto

The house prices will be worse than flat in coming months, but continues to go down. It is not just about credit availability, but also borrowers’ fear of losing their jobs.

How reliable is the ABS unemployment rate? Can you believe what the government claim the number of new jobs created?

Have you heard adults or even the whole families move back to live with their parents?

Job seekers get disillusioned after months of trying but without success, they give up. Some retrenched workers used their final payment to start a small business. They are not in the statistics.

As for job creation, the number is a compounded figure. It is not the net job creation number, that is the number does not deduct the job losses like the recent news about Toy R Us and Telstra.

One permanent job loss may result in creation of 3 or more part-time jobs. This is terrific way to increase the number of jobs.

In the most cynical case, a department is disbanded and a new one created. Some existing staff may be redeployed or moved over to the new department. Some will retire and some unfilled positions will make available for open contest by the public.

While it is difficult to have concrete data to support the analysis explained above, we can only rely on consumers’ buying pattern or retail data. Furthermore, we can also attend auctions to observe how eager the attendanees are, and the number of bidders participating at the auction.

If the overall economy is not as rebust as what the economists and government have been telling us, then we can foresee further decline in houses prices rather than flat.

Thank you for reading.

Why you should resist peer pressure and focus on fundamentals when buying a home in a quiet market

Post to Facebook on 27/7/2018 at 12:22 AM AM
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https://www.domain.com.au/advice/why-you-should-resist-peer-pressure-and-focus-on-fundamentals-when-buying-a-home-in-a-quiet-market-20180724-h12qfr-753745/

Think with your head, buy with your heart, pay with your bank loan. Do not follow the pack and bid in an auction or make offer impulsively.

My conservative philosophy seems to pay off my property investment portfolio.

My wife did make a final bid once, and I did not even know even though I was standing just metres away. She did not make a mistake, because she did follow the basic principles I mentioned earlier.

Let me take you through from the start to the signing the contract.

I used to work at Chisholm TAFE in Dandenong. Sometimes my wife would come with me to the library and then went for a ride.

One day, after we left the college, I drove to the street in the northern end. We saw an auction sign board in front of a neat wire-cut house. It was used as a student accommodation house. It was about 4;30 pm. I called the agent, whose agency was not far away, hoping that he could let us into the property to check it out. The agent was quite far away and was unable to obliged.

We never gave it another thought of buying the property.

The following week, my wife decided to go to Dandenong market, which was not our usual routine to do our marketing. As the car was about to pass the street where the auction property was situated, my wife remembered that the property would be auctioning in about 30 minutes time. She wanted just to be a busy body to find out how much the properties in the street worth.

Many people were already inside and outside the house. We left with only 20 minutes to inspect the house. It was really a quick zip through. It had 6 bedrooms, a lounge, a kitchen, two bathrooms and two toilets. The backyard was of reasonable size, and there was a gate that opened to the border of Chisholm.

As we were walking in the backyard, my wife asked me how much it would go for. I did a very quick mental calculation, not about the price of the house, but what the breakeven was if the rooms were rented out individually. What is the difference between the house price and breakeven price?

The former is a lower figure, because the full potential was not realised. The latter was the allowable price one could offer above the normal market value.

No, I was not a genius. It so happened I did a similar analysis for a property in Glen Waverley, and I could apply similar assumptions in the calculation.

We stood separately in the nature strip. There was a tree in the nature strip, and I had no idea where my wife stood. I was more interested in observing the auctioneer's performance and the bidders' responses.

The bidding went well, but it came to a halt. The auctioneer went inside the house to consult the vendors. The property was not in the market yet. The auctioneer asked for more. Then the auctioneer called out the next amount - an increase of another $250. There was no further bid. To my surprises, that was the final and winning bid.

I did not hear any bidder called out the final bid, because I was not paying much attention then. The auctioneer walked towards the final bidder, who was standing not in sight where I was standing.

I walked towards the bidder's direction. My jaw dropped, and I nearly fell onto the ground. My wife bought the property!

At an auction, the buyer is supposed to pay 10% deposit. You can never guess how much I had in my pocket. I had only $50 in my wallet, and my wife had not much more. I told the auction and the vendors about this, and what else could they do, except to take our words that we would bring the cheque on money.

Obviously we had enough credit from the bank to bid in an auction, I had done similar preliminary calculation to work out what the maximum price we would pay for the house, and my wife's heart was not just to buy a house, but a property that could be use to run a business - student accommodation.

We did not follow the pack, neither would anyone pay any attention to us and paid extra $29,750 to purchase the property. We were prepare to pay that extra, but we did not need to.

From my estimation, we paid $29,750 less than the breakeven price!

Thank you for reading.

Sydney house prices record biggest annual drop since global financial crisis

Post to Facebook on 27/7/2018 at 12:20 AM
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https://www.domain.com.au/news/sydney-house-prices-record-biggest-annual-drop-since-global-financial-crisis-domain-report-20180726-h1338x-754186/

When I talked and wrote about property prices would drop between 20% and 50%, some people thought that I was from the la-la land. There is no point denying that this drastic fall is just a figment of imagination, because when sudden surge in demand stops, the fall will behave the same way In the opposite direction

Many people were buying on impulse, and bowed to peer pressure. So they believe! Let’s wind back the clock. Were their peers around to pressure them to go to auction or buy the houses at ridiculous prices? No, there was no one, except their mind was playing tricks on them.

Do you still remember the so-call two-speed economy? The mining boom created many winners the West, while those in the East suffered from manufacturing decline. In a few months time, normality will return and property prices stablised once again.

Many overseas Chinese have a good taste of property investment in the East and very likely get burnt with the downturn. News can spread quickly, and they may be cautious not to repeat the same mistake. However, the West may present a better option, especially it is closer than the East.

A new mining boom is looming in the West, and it is interesting to find out how soon my prediction will come through.

Thank you for reading.

Before you include property in your investment portfolio, do consult your qualified investment advisor.

Low clearance rate shows Melbourne sellers determined to hold out for desired prices

Post to Facebook on 9/7/2018 at 11:08 AM
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https://www.domain.com.au/news/low-clearance-rate-shows-melbourne-sellers-determined-to-hold-out-for-desired-prices-20180708-h12ems-751563/

Some reports actually say that property prices have contracted, and some have reverted back to the 2016's. Months ago, I predicted that 20%-50% price fall depending on the suburbs was forthcoming.

It is not easy to make predictions, no matter for good or bad outcome; about the economy or real estate marketing; or any subject matter. In order to make a close to accurate prediction, one must remain cool-headed, not bias, be independent of other influencing parties, and ignore the sceptics and critics.

I do have a secret of success to share with you, that is , "be a pessimistic optimist". This is one step better then the scout's motto - "be prepared". I do look for the light at the end of the tunnel, but I have to envisage when I should do if I ever have to enter a tunnel without light. If I have go through the tunnel, I will. However, is there another option to reach the end of the tunnel without going through, and what other risks are involved?

Although I am not an economist, I have "arguing" that the RBA's move in keeping the cash rate constant for so long. It does not make curb rising house prices and ease housing unaffordability. It has prolong the pain until now. RBA could have done the reverse, and collaborated with of both state and federal governments offering better incentives and concessions for genuine owner occupiers.

Banks, being commercial entities whose main objective is to make profits to survive and keep the shareholders happy, finally suddenly experience hard landing with the strict lending and credit control imposed by the government.

The banks are at a state of dilemma. The low interest rate does not attract depositor which provide the short-term funds for loan to customers. This funds accounts for 80% of the total. Although the number of loan applicants has fallen, the banks do need the money to be there to lend out, or else they have to pay others to top up. The banks have no choice but to increase interest rates to attract more short term cash from depositors, and in the meantime increase the loan rate to keep the business profitable.

There are always winners and losers. In very rare occasions, there are win-win situations, which normally still involves certain sacrifices.

I have been advising you, the readers, to hold back on your house buying decision. Impatience does have its downside. However, you must take this slack time to go round to learn more about the various suburbs, because "Knowledge is Power"

Have you been working hard, saving more and spending less? You do need to "suffer" for at least two to three years if you are serious about owning your own home sooner.

Thank you for reading.

Why this house price slump is different from the last one

Post to Facebook on 12/11/2018 at 5:00 PM
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https://www.theage.com.au/money/investing/why-this-house-price-slump-is-different-from-the-last-one-20180613-p4zl7u.htm

It is easier to be an “expert” on hind sight. Being able to foretell before a price slump is the job of a Spherical Thinker who uses more than a virtual crystal ball, but has very perceptive mind.

If there was no “Chinese” invasion around 2011, the slump after 2009 would be unbearable. After the floodgate was opened, Australian real estate market went on a tailspin, and created a very unprecedented surge of property prices.

The then toothless tiger FIRB was to be revamped, and government given those in breach of the laws an amnesty to dispose of their properties acquired illegally.

New FIRB caused a stir, but many did not take heed. There was no credit squeeze yet, because many investors and agents underestimated the new investment policies, and in fact, these people were arrogant and showed respect to the aws.

I the meantime, China was also controlling the outflow of money from China. This double whammy was the start of the Chinese retreat. The hype began to die down, but there was no other market segment to fill the void.

The Australian lending establishments came in at the wrong time to tighten the credit in an attempt to curb the overheated real estate market. Property owners who purchased during the peak time paid too much, and will have difficult to recoup what they spent if they are to liquidate their properties now.

It is a scenario of stalemate. Many people who want to upsize or downsize need to sell their own houses first. Unfortunately, if no one is willing to budge to lower the prices, demand and supply will stall.

Prices of new buildings have also increased tremendously, and therefore many will be left unsold.

During the real estate boom, economy grows too. The state government can sing and dance but not for long because the amount of stamp duties and land taxes collected during the past few years were phenomenal. City Councils also benefited from Council rate collection, too. Although most clothing retail sales suffered, hospitality and other service industries did well.

Circumstances change, as I often wrote, house owners will have to sell the houses, not at the prices they expected to achieve.

The first batch of houses will be from mortgages who have difficulty in serving their loans. Paying high prices at peak time means many years of high mortgage payment for years to come. These mortgages need not necessarily be owner occupiers, they can be investors who have been conned to believe negative gearing the best investment strategy since the invention of slice bread.

The ageing population results in many have to sell their own homes in order to have sufficient fund to buy a place in an aged care home. Time is not on them, and they do not have an upper hand to demand an extraordinary price.

I still hold firm that the prices will continue coming down until 3rd quarter 2019 before they become stabilised.

Just simply blame the credit squeeze as the cause of price slump is laughable. I had to raise 40% as deposit to buy my first house, and I experience pay 18% for my housing loan.

Thank you for reading.

‘Buyers have the upper hand’: Cold Melbourne weather leads to lukewarm auctions

Post to Facebook on 5/7/2018 at 10:24 AM
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https://www.domain.com.au/news/buyers-have-the-upper-hand-cold-melbourne-weather-leads-to-lukewarm-auctions-20180701-h123m1-442361/

Once again, report has it that buyers have the upper hand at auctions. The adjusted auction result for Melbourne for last weekend was slightly more than 50%.

It is close to one and three quarters years when the real estate hype started to fizzle out. For those who were not ready to let go their properties for various reasons just missed out having the extra thousands or even tens of thousands in their bank account.

Timing is everything, whether you are in the market buying or selling. The best strategy to adopt is to “buy low, sell high”. However, it is easier said than done. On hind sight, everyone can be an expert, but in reality, such strategy is extremely difficult to implement.

Such strategy does not only apply to the property market, but also other form of investments such as shares. Unlike the share market, property trading has a much longer lead time and generally costs a lot more for each parcel for the ordinary participants.

It is easier for me to make predictions of real estate market than share market, because I Real Estate is my passion, and there is always sufficient time for me to analyse the market and respond to it.

A home owner does not behave like a property invesror. When a home owner sells his home, he needs another place to live in, whether it is another dwelling including an apartment, retirement village or aged care home. They need to finance the next move, while an investor have more options - to hang on to the sale money, invest locally, interstate or overseas, or buy land. The urgency between the home owner and an investor is also very different as well.

Some properties can be in the market for months, some get snapped up in hours. The former are overpriced properties and they do not meet market expectation. Some of these vendors may not need the money that desperately, or they paid too much at peak time and want to recoup what they had paid.

During real estate hot market, buyers are out of their mind and pay extra in fear of missing out, and stupidly bragging about their purchase.

I did not like to take charge of open-for-inspection during cold wintry days, especially in houses with poor lighting and had no heating. It made me feel miserable, and unmotivated. It is true that many people including house hunters would stay home or go to a shopping centre to enjoy the comfort of a warm environment.

If you always think differently like most people, probably including me haha, you will take that opportunity to attend open-for-inspection to keep the agent representative company. Very likely, you receive undivided attention, enabling find out more about the building, the length of time in the market, the reason of sale, and what else in the market.

The property is NOT the agent’s representative’s office; it is a neutral ground and therefore NOT his territory. He does not have an upper hand over you, and very likely he feels more comfortable to talk about things that he cannot in the office, because his colleagues are around.

Many rookies get very excited to have someone paying attention to their “existence” (not “presence”), and will provide you a lot of useful information to help you place your bet. Unfortunately, some of them forget the word “privacy” and reveal too much information they should not have.

Everyday in every way, I help you to be a wiser house hunter / property investor.

Thank you for reading.

https://www.domain.com.au/news/buyers-have-the-upper-hand-cold-melbourne-weather-leads-to-lukewarm-auctions-20180701-h123m1-442361/

Home prices fall for ninth month as tighter lending bites

Post to Facebook on 4/7/2018 at 9:56 AM
Commenting on “Home prices fall for ninth month as tighter lending bites”
https://www.theage.com.au/business/the-economy/home-prices-fall-for-ninth-month-as-tighter-lending-bites-20180702-p4zozl.htmlNote that I use the word home instead of property in this post.

Month after month for the last nine months the press and real estate experts confirm that home prices across Australia's major cities have been falling. This is definitely good news for home buyers and investors who have the ready cash to buy in the coming months.

On the contrary, it is bad news for the home owners who have bought their next home and need to sell their current one. Their homes will be in the market at reduced price.

A word of warning for the potential buyers who are in the hand-to-mouth financial position. You may have enough for the deposit/down payment, and in addition, you may have just enough to scrape through monthly repayment.

If you are to buy a house for $600,000, you need to have 20% and borrow 80% of the valuation. For simplicity, we just assume 80% of the house price, or $480,000. Banks are unlikely to let you repay interest only but principal and interest on monthly basis.

If the loan is for 30 years, and you are lucky to get it for 4%, your monthly repayment is $2,292. If the loan interest is to rise to 4.5%, the monthly repayment will go up to $2,344, that is an increase of $52 per month or $13 per week. If the interest rate jumps to 5%, then monthly repayment becomes $2,577, or $285 per month or $71.25.

The latter increase is not just doubling the former; $71.25 per week is substantial additional expense.

It is important to note that when interest rate increases, the rest of your bills are more than likely to increase In payment. Some may argue that there could be a wage increase by then, but I can assure you that the wage increase may not be enough to cover all the increase in additional expenses.

In order to overcome the shortfall, you need to increase your income like moonlighting, taking on another job by other members in the family, and preferably cut expenses at the same time.

RBA’s monthly meeting deciding the cash rate is no longer a reflection of the real interest rate charged by the bank.

When I talk about buying a house or any form of property within your budget, you must also factor in your ability to repay should the increase rate is by 1 to 1.5 per cent for the next 2 years.

Thank you for reading.

https://www.theage.com.au/business/the-economy/home-prices-fall-for-ninth-month-as-tighter-lending-bites-20180702-p4zozl.html