Author Archive
Cautious optimism as home sales trend upwards
The clearance rate for the first weekend of the autumn home auction season in Sydney was strong but it is still too early to gauge the underlying sentiment of buyers.
The auction clearance rate of 71.6 per cent on Saturday was well above the 48.2 per cent reported for the corresponding weekend last year. But with only 76 properties offered at the weekend, compared with 111 last year, a clearer trend will not emerge until the number of properties on offer increases.
Of the 63 reported auction results, four were withdrawn and 48 sold at an average of $550,000. The median price of houses sold was $595,025.
The most expensive Sydney property reported sold at the weekend was a three-bedroom house in Burwood for $1.17 million. The most affordable was a three-bedroom townhouse in Campbelltown that sold for $186,500.
Last year ended on a subdued note for the Sydney auction market with year-low clearance rates in December despite significant numbers of properties being offered for sale.
Although considerable numbers of first-home buyers were active in the marketplace over the last three months of the year, the market generally had run out of puff by year’s end.
Sydney was clearly the best performer of all capital city housing markets last year with median house prices down by just 1.3 per cent over the year and unit prices down by 0.9 per cent.
The resilience of the Sydney market reflects the underlying shortage of accommodation in the city, with a chronically tight rental market.
This year is set to be one of gradual recovery in the Sydney market with median house prices expected to rise by between 3 and 5 per cent over the year.
First-home buyers will be quiet early in the year as demand from that group was brought forward at the end of last year.
But expect this to be offset by increased activity from change-up buyers in the middle price sector of the market and investors in the lower sectors – particularly the unit market – that will keep buyer activity ticking along.
Although the prestige market will remain relatively subdued initially, expect some momentum to build through the year on the back of increased activity by aspirational buyers seeking value in quality properties in prestige locations, particularly in the $2 million to $3 million price range.
Unemployment in Sydney has increased in recent months, but the outlook remains positive despite indications of further job shedding, particularly in the finance sector.
The positive outlook will be enhanced by a further fall in official interest rates expected to be announced by the Reserve Bank board after its meeting tomorrow.
Written By Dr Andrew Wilson. Sydney Morning Herald. 6 February 2012
House prices may have hit bottom
Australia’s house prices fell in every quarter last year but they may have hit bottom, new figures show.
Housing data released by RP Data-Rismark today shows that the rate of decline in house prices across the nation slowed towards the end of last year.
“The December quarter was the year’s smallest quarterly decline,” RP Data research director Tim Lawless said.
Capital city house values fell nationally, in seasonally adjusted terms, in the last three months of 2011 by 0.5 per cent, RP Data-Rismark’s figures show.
That followed a larger decline in the previous June and September quarters of 0.8 per cent and a substantial national drop of 1.5 per cent in the March quarter for 2011.
Last week, rival data provider Australian Property Monitors released figures for the same period which showed national house prices stayed largely the same for the December quarter.
The figures suggest the rate of decline in house prices is tailing off.
Sydney’s house prices, the country’s most resilient because of a shortage of housing and state government first home buyer incentives, rose in the December quarter by 0.7 on seasonally adjusted terms, RP Data-Rismark’s figures show.
According to RP Data, Melbourne’s prices fell 0.5 per cent in the December quarter, contradicting figures from APM and the Real Estate Institute of Victoria which show house prices rose by 1.1 and 1.9 per cent respectively in the same period.
The housing market in all other Australian capitals apart from Sydney continued to soften in the last few months of 2011, RP Data said.
Perth values fell 2.1 per cent, Melbourne’s 1.4, Brisbane’s 1.3, Adelaide’s 1.2, Darwin’s 1.1, Hobart’s 1 per cent and Canberra by 0.1 in the December quarter, RP Data said.
Revised figures show November was better than previously reported, with growth of 0.5 per cent seasonally adjusted, the figures show.
“One of the things we’re expecting to see following the interest rates cuts last November is more activity,” Rismark managing director Ben Skilbeck said.
“We expect transaction volumes to pick up in February and March,” he said. “We would expect the negative growth to abate.”
Written by Simon Johanson, Sydney Morning Herald, 31 January 2012
State by state guide to 2012 house prices
CALLING the residential property market for this year is a simple matter: things are going to get better, unless they get worse, and some parts of it will just go sideways.
Industry specialists are quick to allude to economic uncertainty stemming from Europe, but are also fairly quick to abandon commentary on that and concentrate on the strengths they see in the domestic market. And most, having delivered the European caveat, are surprisingly confident of a strong and robust year and are quick to name places that show the most promise.
“The best bets for 2012 are Perth followed by Brisbane. Sydney is solid as a rock. But don’t expect much in Melbourne ’til the third or fourth quarter,” says Andrew Wilson, senior economist at research house Australian Property Monitors.
“Canberra is a good prospect: there’s always a shortage of housing,” he says.
Jason Anderson, senior economist at property research and forecasting house Macroplan, says: “Sydney and Perth are the two that will outperform in 2012 and, for Sydney, it will be the first time in years.”
Anderson says Perth’s rental market is getting tougher and with interest rates coming down, more people will seek to buy. “The equation looks quite good. A 5 per cent price growth this year is a reasonable expectation.”
“And,” he says, “we’re very optimistic about the Hunter Valley in NSW.” Unemployment is at 4 per cent, there is a very strong construction cycle starting in upper Hunter mines and in road, rail and ports. Housing shortages there are as bad as in Sydney, he says, so the Hunter is suffering Sydneyesque rental pressures. “Strong wages growth will attract people and tighten that pressure. We expect price rises of 7-8 per cent this year. The Hunter is on the cusp of a breakout. It is the standout area in NSW,” Anderson says.
L. Janusz Hooker, chief executive of LJ Hooker real estate group, says Newcastle, the Hunter hub, is a main beneficiary and, while still affordable, is under strong knock-on pressure from the Hunter’s mining boom.
What is very clear is that the closer experts are to a particular market, the more sanguine they are about it.
Wilson says Hobart and Adelaide will “move sideways for most of the year” with a slight chance of some movement in Adelaide by the end of of the calendar year, and Macroplan’s Anderson believes Adelaide is “in for a bit of a rough time for the next 12 to 18 months. There’s no point beating about the bush: it will have trouble. If Adelaide can keep house prices flat, that would be a good outcome.”
But the South Australian Property Council’s chief executive, Nathan Paine, says Adelaide is “looking pretty solid”. Housing starts are holding their long-term average and he sees the possibility of more strength with new buyers entering the market.
The Canberra-based Real Estate Institute of Australia couldn’t be more forceful in its position. “Well, despite what you’ve heard, there is no housing bubble so don’t expect to see the housing market crash this year or next year,” says REIA chief executive Amanda Lynch. “Property is a sound investment, particularly in Canberra because, despite small hurdles along the way, the ACT has higher wages than the rest of the country and a low unemployment rate,”
Wilson believes Darwin will resume its usual growth pattern and strengthen. “I wouldn’t be surprised to see double-digit growth in house prices there,” he says.
“As for Perth, it’s a no-brainer. Its housing market is still 10 per cent below where it was four years ago, so there are good bargains there but it will soon catch up to its old level. There’s $100m in infrastructure projects in the pipeline for this year; there’s corporate growth and a significant influx of labourers looking for gold, all of which is putting pressure on housing. I expect double-digit price growth in Perth by the end of the year.”
Not everyone is confident about Brisbane. Brian White, chairman of the Ray White real estate group, describes Brisbane as “subdued” and Hooker says “it’s not taking off by any means but after the big price falls there, we might at last be seeing a floor”.
Those lower prices, Hooker says, mean “there are some great bargains to be had as there are also on the Gold Coast and, to a lesser extent, the Sunshine Coast”.
Kevin Seymour, executive chairman of the Seymour Group, a Queensland development and investment company, believes the overall Queensland market will be sluggish except in mining boom towns such as Mackay, Rockhampton, Townsville and Gladstone, where he expects to see strong price growth.
UBS’s head of property analysis, John Freedman, thinks Brisbane’s outlook is constrained and that at best we will see a “mean reversion rather than a recovery”.
What all seem to agree on is Victoria.
“Melbourne? Oh dear,” says Macroplan’s Anderson. “More interest rate cuts would help but, if we don’t get them, I can see Melbourne’s house prices falling a further 5 per cent.”
Harley Dale, chief economist of the Housing Industry of Australia, believes there will be bigger declines in Melbourne than anywhere else and, according to RP Data’s senior research analyst Cameron Kusher, even rental yields in Melbourne are low.
Wilson, however, says houses around Macedon and Wood End northwest of Melbourne offer good buying now.
For JPMorgan economist Ben Jarman, a characteristic of the Australian market is poor housing starts. These fell 6.8 per cent in the September quarter last year, “the fourth significant decline in five quarters”, and he predicts more weakness to come.
This weakness in housing starts has little to do with confidence or the economy: it is largely the result of planning and regulatory complexities and costs.
According to the HIA’s Dale, “more than 40 per cent of the final cost of a new house is taxation”.
Bob Rose, chief executive of the family-run development company The Rose Group, says the situation is critical. “The NSW requirement is for 25,000 new dwellings to be built each year but we’re only building 13,000. Approvals in September per 10,000 people were 47 in NSW, 109 in Victoria and 73 in Queensland. This is crook for NSW. In new growth centres in Sydney’s west, government and council levies on each house/land package are more than $100,000, and that’s without extra huge costs if special reports are required.
“The system desperately needs review. Big listed developers might survive but I can’t see the small ones making it. And if the development industry closes down, who will build the houses?”
To sum up, with the economy comparatively solid, rates falling and housing stock in short supply, the likelihood is that prices will continue to hold or, more likely, rise.
Source : Jo Studdert of the Australian Newspaper. 14 January 2012
Tips for borrowing through your DIY super for property investment
Suddenly, borrowing to invest in direct property through self-managed super funds is much more appealing. Following the recent release of a SMSF draft ruling, countless fund trustees would be feeling more confidence in the strategy – particularly when investing in older properties.
In the draft ruling, the ATO explains in detail its interpretation of the SMSF borrowing laws in relation to the purchase, maintenance, improvement and other fundamental changes to geared real estate.
And the regulator effectively provides a blueprint for SMSF trustees on how far they can go in looking after and improving their properties within strictly-controlled borrowing arrangements – according to its interpretation of the law.
For most SMSF investors in geared direct property, the draft ruling suggests they can maintain their assets with a fair degree of freedom using money borrowed under the original loan arrangement.
Meg Heffron, co-principal of specialist SMSF administrator Heffron and a former member of the Cooper superannuation review, puts the draft ruling into perspective.
“This is a ruling – and a draft ruling at that – rather than a legislative change,” Heffron emphasises. “It is simply the view that the ATO intends to take in regulating SMSF borrowing.”
Although noting that a court could one day reach different interpretations on some issues, Heffron realistically adds that many SMSFs prefer to follow the ATO’s thinking rather than risk a clash with the regulator.
Sydney tax lawyer Robert Richards succinctly adds: “The value of the draft ruling is the examples [see case studies below] as to what will, and as to what will not be, acceptable to the Tax Office.”
In other words, SMSF trustees who are considering gearing property should pay close attention to the draft ruling.
Although the final ruling will no doubt contain some changes after consultations and submissions, it will almost certainly mirror what has been described as a pragmatic and practical approach to interpreting the laws involving maintaining and improving geared property in SMSFs.
Previously, many SMSFs would have been uncertain about the extent they could go to with renovations, maintenance, improvements and changes to geared properties without contravening the law – or at least the ATO’s interpretation of the law. (The final ruling will apply to gearing from July last year when key changes were made to the SMSF borrowing laws.)
SMSF advisers are typically expecting a marked pickup in the gearing of properties by funds. It would be difficult to believe otherwise.
Here is our three-point, no-nonsense guide to the draft ruling:
Understand what is an acceptable geared asset
Detail: In July last year, superannuation law was amended to stipulate that a SMSF is only permitted to borrow to buy what is called a “single acquirable asset”. This means that a separate borrowing arrangement is necessarily for each geared asset. A difficulty is that it is not always clear to fund trustees whether a property – such as a building constructed across two titles – is a single asset or not.
Draft ruling: Here the ATO displays its pragmatism. “Fortunately,” says Heffron, “the ruling indicates that the ATO will take the view that where the two [assets] cannot be separated, they will be treated as a single asset.” This is the position even if a property is over more than one title.
“This is a new, far broader and more practical interpretation,” Heffron adds. “Previously, the ATO has effectively equated ‘asset’ with ‘title’.”
Case studies from draft ruling: A factory is built over three titles yet, under the draft ruling, the ATO would treat the property as a single asset that could be acquired with a single borrowing arrangement.
An apartment and its car park are on separate titles. And state law, in this case, does not allow the properties to be sold separately. Under the ruling, the ATO would treat the properties as one asset.
A SMSF wants to buy two adjacent blocks of land that the vendor will only sell together. However, there is no physical or legal reason why the blocks are not sold separately. The ATO would treat the blocks as separate assets. And therefore, the fund must enter into separate loan arrangements to gear the properties.
A SMSF wants to buy an off-the-plan apartment. Under the draft ruling, the ATO would allow the fund to use its own cash to secure the purchase. And then the fund could enter a borrowing arrangement to buy what the ATO would treat as a single asset.
Source : By Michael Laurence. Property Observer Wednesday, 12 October 2011
Market update – January 2012
Market update – January 2012
Now that 2012 is upon us, it’s time to reflect on the year that has been and starting thinking forward in to the new year. Overall 2011 was generally a good one for buyers of Sydney residential real estate and not necessarily a bad one for sellers, especially those upgrading to larger homes.
According to the latest available quarterly statistics by Australian Property Monitors (APM)), overall Sydney median house prices fell by 1.6% for the year to September 2011, whilst unit prices recorded modest growth of 0.6% over the same period. For the September quarter however, both houses and units recorded falls, of 1.8% and 0.4% respectively. These figures reflect an overall flat market.
Auction clearance rates hovered around 50-60% throughout most of 2011. Interestingly though, most agents in our main areas of operations (North Shore, Eastern Suburbs, Inner West and Northern Beaches) report that taking into consideration post auction negotiations, the results would have been closer to a 75% success rate a week later.
For these above areas that we mostly operate in, our experience of the performance of the residential property market depended on the price level. Our observations are generally as follows:
Lower end of the market. ($400K to $800K). This market segment experienced strong demand from first home buyers taking advantage of the expiring stamp duty concessions for existing properties, and from investors attracted toincreasing rental returns (and more recently reduced borrowing costs). Overall the market performance was reasonably strong.
Mid market ($800K to $1.5M). Quality properties in this market segment experienced good demand (those in desirable locations, in popular streets and in good condition). Less desirable properties in poor positions withdifficult floor plans or building issues, struggled however, with weaker demand from buyers.
Mid/Upper market ($1.5M to $2.5M). Demand from buyers was generally weak, with prices falling 5-10% in some areas.
Premium market (above $2.5M). The weakest market sector, experiencing the greatest buyer caution. Price falls, some significant were evident.
Several factors influenced the buyer wariness and the softening of prices experienced over 2011. Concerns over the international economy, massive stock market fluctuations, debate over the impact on household finances of the introduction of the carbon tax, and poorer employment figures have all had an impact. The high $A has also largely kept expats out of the market.
So what is in store for 2012?
Assuming the international economic situation continues to stabilise and European country debt issues are resolved, the signs for the Sydney property market are generally positive.
Significantly the Reserve Bank of Australia (RBA) decided to decrease the official cash interest rate by 25 basis points in November and then 25 basis points in December to 4.25%. These were the first interest rate decreases since April 2009, and many economists are expecting further decreases in the short to medium term.
This gave home buyers new confidence at the end of 2011, and is expected to continue over the coming year.
The situation for property investors improved over 2011. To the end of September year in year, Sydney house rents increased by 3.1% and unit prices 4.5%, whilst vacancy rates remain very tight. Investors are seeing more favourable rental returns as a result, and with current international economic uncertainty, we are experiencing the return of investors to the safety of “bricks and mortar”.
We think Sydney is now offering some of the best property buying conditions for quite some time, particularly in the mid to upper market segments.
Some factors contributing to a positive outlook for Sydney property in 2012 are :
- Unemployment remains relatively very low – 5.3% in November 2011 according to the Australian Bureau of Statistics (ABS)
- Interest rates are relatively low in historical terms, and with recent decreases by the RBA the outlook by most economists for interest rates is downwards
- Immigration is still very high to Sydney, and the population increases continue to exceed the amount of new development, putting further pressure of existing housing
- Australia’s economic growth rate was 2.5% for the year to September 2011 according to the ABS, which exceeds most OECD countries, and with continued growth expected
Please contact us for a discussion on how you can take advantage of the current buying opportunities in the Sydney market, or for specific advice on what is achievable with your budget in the various suburbs across Sydney.
Written by Henry Wilkinson of Homesearch Solutions. January 2012
Statement by Glenn Stevens, Governor: Monetary Policy Decision – Interest rate decrease of 25 basis points on 1 November 2011
At its meeting today, the Board decided to lower the cash rate by 25 basis points to 4.5 per cent, effective 2 November 2011.
Recent information is consistent with a moderation in the pace of global growth, though fears of a major downturn have not been borne out so far. The pace of US economic expansion picked up in the September quarter, but is still only moderate and leaves considerable spare capacity. China’s growth has slowed, as policymakers there had intended. Output in Asia has now recovered from the effects of the Japanese earthquake, and domestic demand in the region is generally expanding. Trade performance, however, is starting to see some effects of a significant slowing in economic activity in Europe, where the prospects are for economic weakness to continue. Commodity prices, while still at high levels, have generally declined over recent months.
Financial markets have recovered somewhat from the turmoil of recent months, helped by stronger economic data in the United States and by signs that European governments are making progress in their efforts to deal with the sovereign debt and banking problems. Equity markets have gained ground and the Australian dollar has risen significantly as risk aversion has lessened. But it is likely to be some time yet before concerns about the European situation can definitively be laid to rest and the effects of the recent turmoil on confidence may result in a period of precautionary behaviour by firms and households.
Information about the Australian economy suggests moderate growth overall. The terms of trade have now peaked and will decline somewhat in the near term, but they remain very high. In response, investment in the resources sector is picking up very strongly, with much more to come. Some related service sectors are enjoying better-than-average conditions. In other sectors, cautious behaviour by households and the high exchange rate have had a noticeable dampening effect. The unemployment rate has increased a little over recent months, though it remains close to 5 per cent.
After underlying inflation started to pick up in the first half of the year, recent information suggests the subdued demand conditions and the high exchange rate have contained inflation more recently, notwithstanding continuing sizeable increases in utilities charges. CPI inflation on a year-ended basis remains above the target, due to the effects of weather events last summer, but is now starting to decline as production of key crops recovers. Moreover, with labour market conditions now softer, the likelihood of a significant acceleration in labour costs outside the resources and related sectors in the near term has lessened. Accordingly, the Bank’s current judgement is that inflation is likely to be consistent with the 2–3 per cent target in 2012 and 2013, abstracting from the impact of the carbon pricing scheme.
Financial conditions have been easing somewhat recently, with market interest rates declining a little and competition to lend increasing. But overall conditions have remained tighter than normal, with borrowing rates still a little higher than average, credit growth subdued and asset prices lower than earlier in the year. The exchange rate has been very variable over the past few months, but on the whole has remained at historically high levels.
Over the past year, the Board has maintained a mildly restrictive stance of monetary policy, in view of its concerns about inflation. With overall growth moderate, inflation now likely to be close to target and confidence subdued outside the resources sector, the Board concluded that a more neutral stance of monetary policy would now be consistent with achieving sustainable growth and 2–3 per cent inflation over time.
Source : RBA website http://www.rba.gov.au/media-releases/2011/mr-11-24.html
Sydney & Perth house prices to rise by 20 per cent
RESIDENTIAL real estate has created more millionaires in Australia than any other form of investment but there may be bigger money to be made over the next decade.
Residential property has eclipsed shares as Australia’s highest-returning asset class over the past 24 years, but over the next decade it will be outperformed by commercial property, according to research by ANZ.
ANZ forecasts that equities will become the strongest performer over the next 10 years, but suggests that when risk is factored in commercial property will also generate similar returns.
Commercial property covers a range of options from office and retail space through to car parks and industrial properties like warehouses and factories.
The report, Asset returns: Past, Present and Future, said owner-occupied housing had made annual average returns of 12 per cent over the 24 years since 1987 even when costs and taxes were factored in.
Simple historical comparisons of equities and property are often used by property analysts to demonstrate housing’s superior capital returns but ANZ included costs, taxes, interest on loans and factored in the risk associated with investing, the SMH reports.
It found that owner-occupied housing had the highest returns in part because of capital gains tax exemptions. Investor housing was the next best asset class, performing slightly better than equities over the time analysed, the report said. They were followed by government bonds, term deposits and commercial property.
But the bank’s analysis of future asset-class returns suggested equities would be the strongest performer over the next 10 years.
Commercial property also shows strong returns, sitting between equities and owner-occupied housing,” the report said. Risk-adjusted forecasts show that equities and commercial property will have similar returns.
However, considering the housing shortage, it is likely there will be many Australians who will make their fortunes out of residential property within the next decade. New data points to house prices rising by up to 20 per cent in some capital cities within the next two years.
Economists are predicting a double-edge sword for Sydney’s property market, forecasting the median price to boom from $644,000 to $770,000 in the next three years – on the back of the housing crisis.
The report, prepared by BIS Shrapnel, says the underlying strength of the Australian economy, stable interest rates in the short term, high immigration and a dire shortage of houses in Sydney, will be the main drivers of this growth. It forecasts the Sydney median house will lift by 19 per cent to $770,000 over the three years to June 2014.
The rise in home prices and shortage of accommodation is also expected to force up rents. This compares with 20 per cent in Perth, 16 per cent in Brisbane, 8 per cent in Canberra and only 6 per cent in Melbourne. It also predicts that first home buyers will start to re-enter the market in greater numbers next year as the outlook for the economy improves. This will in turn encourage others to return, especially upgraders, as demand for their properties improves.
”Sydney hasn’t fallen in a hole and house price growth has been minimal but has held up over the last 12 months,” said Robert Mellor, the managing director of BIS Shrapnel.
But he predicts this will jump to about 5 per cent in 2011-12 and 7 per cent the year after, before growth will start to slow as a result of higher interest rates in 2013.
”At some point in the next few years rising interest rates will become a concern and that will bring a slowing in residential property markets,” Mr Mellor said.
BIS Shrapnel chief economist Frank Gelber warned the Melbourne market was “running out of steam” as supply levels for new homes increased to satisfy demand.
Would-be house buyers would be deterred by a likely 100-basis point increase in interest rates over the next few years. Such a rise would take the official rate to 5.75 per cent.
“The property market will stay stronger over the next few years but there will be no huge increase in (residential) property prices over the next five years in Melbourne,” Mr Gelber said, speaking in Melbourne.
“The next big increase in Melbourne property prices won’t be until the next upward phase of the economy.”
Separately yesterday, the number of home loans approved in August rose 1.2 per cent to 50,965 from an upwardly revised 50,363 in July, official figures show.
Economists’ forecasts had centred on a one per cent rise in housing finance commitments for the month.
The Australian Bureau of Statistics (ABS) said total housing finance by value rose 1.0 per cent in August, seasonally adjusted, to $20.848 billion.
Source : Money Matters. News.com.au, 12 October 2010
A slice of the auction
With demand remaining low, and your research done, now’s the time to do your bidding.
‘I’m cleaning up at the moment,” buyer’s agent Amanda Segers says.
”There’s some good properties out there and nobody is making decisions, so I’ve got no competition.”
Segers is buying about two houses a week for her clients and is finding the best deals in the $750,000 to $3 million range. One of these was a three-bedroom townhouse in Wollstonecraft that she bought for $895,000, down from $950,000.
Despite there being some strong sales across Sydney this spring – with some going hundreds and thousands over reserve – the market generally is full of opportunity for buyers. Auction clearance rates have nudged 60 per cent recently. But an auctioneer and the director at Cooley Auctions, Damien Cooley, says the market is not as strong as he had expected and there are ”some exceptional buying opportunities compared with previous years”.
So if buyers are going to capitalise on this opportunity, they need to understand the auction process.
Pre-auction
Rather swallow razor blades than bid at an auction? Then buying beforehand will seem like a great idea. With agents often struggling to find enough buyers for an auction, many will jump at the chance to secure the sale beforehand.
But Rich Harvey from propertybuyer.com.au warns you must do your research on comparable sales in the area to ensure you aren’t paying too much.
”We find in many cases the vendors will want a premium price prior to going to auction,” he says.
Another risk of making a pre-auction offer is that it allows the vendor’s agent to use it as leverage with other interested buyers – whose counter offers you are not privy to – and, ultimately, to drive up the price, says a buying consultant with Rose and Jones, Stuart Jones.
You could find yourself, in effect, in a silent auction, he says – one that isn’t transparent like a real auction.
”A fictitious other buyer may appear to try to make you bid up and you don’t want to be bidding against yourself,” Harvey says.
You could ask the agent to show you the offer in writing. If that doesn’t work, the best thing to do, he says, is to make your best offer and tell the agent you will not be making others. If someone else has deeper pockets, so be it. Or it could proceed to auction. If you’re still interested but don’t want to bid, you could ask a friend or a buyer’s agent to do it on your behalf.
Don’t forget, in the current uncertain market, you could get it for less than you expected.
The auction
There are many strategies when it comes to bidding at auction but one thing all experts agree on is that buyers need a spending limit and need to be firm about sticking to it.
A buyer’s agent from Homesearch Solutions, Henry Wilkinson, says he is always amazed at how many bidders don’t have this limit nutted out before the action starts and instead are guided by others.
This indecision is a recipe for ”buyers’ remorse”, Jones says, which can happen if buyers just miss out or pay slightly more than they can afford. His suggestion: walk away when you’ve reached your limit.
As well as having a maximum price, you should always bid confidently and strongly, buyer’s agents say.
Segers also cautions against talking between yourselves while the auction is under way as it gives an air of uncertainty and could tip off other buyers, the auctioneer and agents that you’re close to your limit. ”Make it look like you’ve come in with plenty of money and you’re there to buy the property,” she says.
Cooley says auctioneers read the body language and confidence of bidders to gauge who are the most likely to buy the property.
Another big no-no, Jones says, is bidding against yourself, which can happen if a vendor’s bid is placed after yours and you are asked to bid again. Auctioneers also encourage this by telling bidders to raise their last bid so they have a better chance of buying. In this instance, Harvey says, bidders should resist offering more until the property has passed in or there are other bidders.
However, Cooley says raising an offer is sometimes necessary at an auction if a bidder is going to buy the property.
When deciding how to bid at auction, buyer’s agents say there is no hard-and-fast rule. One strategy is opening the bidding low – but not ”offensively low”, Cooley says – and then offering small bids rapidly after the previous bidder.
Another is to wait until the bidding has slowed to small increments and then come in with a strong bid over the top.
Whatever the method, Wilkinson says it’s important to try to push the bidding increments down. For example, if the bids are going up in lots of $25,000, ”you may have paid $24,000 too much”.
However, Harvey says, a big bid at the end can often knock out the competition: ”It depends on how much you want the property.”
Passed in
If the bidding has stalled before reaching the reserve, after asking the agent to consult with the vendor an auctioneer will pass in the property. The highest bidder is usually then given first opportunity to negotiate a price. But Segers says this is not a ”right” or a law, just ”agent talk”. Anyone can make an offer. ”They’re not going to say, ‘Go away, we don’t want your money,”’ she says.
But McGrath agent Ben Collier says giving the highest bidder the first chance to negotiate is ”a protocol that most agents adhere to”.
Segers’ strategy if a house has passed in is to decide on an amount with her buyers, then write the offer on a contract, get the buyers to sign it and hand the contract to the agent: ”If they choose to exchange, that’s up to them.” Once the auction has finished, the advantage goes to the buyer ”big time”, she says, as most buyers walk away at that point.
However, Collier says, buyers don’t always walk away. At an auction he held recently, none of the eight parties made a bid before it was passed in. Afterwards, six of the eight groups wanted to make an offer, turning the negotiations into a silent auction. Each group was told the reserve price and asked to give their best offer.
”That was frustrating for the other buyers once it got to that stage because they couldn’t see if they were going to miss out by $2000 or $20,000,” Collier says. ”Then they felt they should have put their hand up at the auction.”
The property ended up selling for $50,000 more than reserve.
Good advice
- Do your homework: find out how much the house is worth.
- Always have a spending limit and stick to it.
- Never bid against yourself.
- Always bid confidently and strongly.
- Don’t talk to the auctioneer or agents during the auction.
- Never talk, or look, at your spouse or partner during the auction.
- Have a plan of how you are going to bid.
- Try to bid in small increments.
- Consider a knockout bid.
‘You have to be ready to walk away’
With a decade of buying and selling under her belt, the principal of Good Deeds Property Buyers, Veronica Morgan, is no stranger to the auction process.
In her other guise, as a presenter of Relocation Relocation Australia, a new show on Foxtel’s LifeStyle channel, she has more eyes on her than at a typical Saturday auction.
For example, in the show’s first episode, which screened on September 28, she bid on a house in the inner-Brisbane suburb of Paddington – for a Sydney couple, Rae and Karl – and managed to win the property right on her clients’ limit of $540,000. Watching her, however, you would think she had thousands more to spend.
Morgan started confidently against another bidder, quickly jumping in after every opposing bid, upping the price by $5000. At one point she stopped to see whether the house would be put on the market. When it was, she came back quickly with a knockout bid.
”What the other buyer didn’t know was that that was all I had in the tank,” she says. ”One of the things we often do is make it look like we’ve got bottomless pockets. My goal is to psych out the other parties … [show] I mean business, I’m going to keep bidding.”
Morgan says her strategy depends on a host of factors, such as who is bidding and how many bidders there are. She always has an upper limit above which she does not bid. This is decided after ”very rigorous price research” and discussions with her buyers.
”And if someone’s prepared to pay more than you, you have to be very comfortable to walk away.”
Source : Antony Lawes, Sydney Morning Herald (Domain), 8 October 2011
Tamarama loses some glamour as post-GFC prestige sales find their feet
The architect-designed Tamarama house (pictured above) owned by Dan White, the Bellevue Hill-bound great-grandson of the founder of the Ray White real estate empire, and his wife, Sam, has been sold.
At $6.6 million it was a little short of its desired $7 million selling hopes when initially listed through Ray White Double Bay’s Elliott Placks.
The suburb’s record $11 million sale – and another at $10.5 million – were achieved in mid-2008 just before the global financial crisis and its ensuing prestige price re-adjustment.
While certainly no longer commanding ambitious boomtime prices, it’s the second prestige home to sell at Tamarama in the past month.
The Bellevue Hill-bound plastic surgeon Robert Drielsma has sold his Tony Masters-designed Tamarama house (pictured above) for about $6.75 million.
The four-bedroom house last sold for $6.1 million in 2004 when it was bought from the Rubicon bigwig Gordon Fell and his wife, Pip.
The contemporary, three-level house in Wolaroi Crescent was built after the 501-square-metre block was bought for $1.45 million in 1997.
Bordering the gully reserve of Tamarama Park opposite the beach, the three-level house is set in landscaped gardens designed by William Dangar.
The house sold through Pauline Goodyer of GoodyerDonnelley Real Estate and Belle Property’s David Vereker, who were aiming for $8 million.
Its initial hopes last year were $11 million.
It’s now been listed at $5,000 a week through Sydney Slice Executive Rentals by its new owner.
The White couple sold because they’re upgrading to a 2,460-square-metre Victoria Road property in Bellevue Hill with tennis court.
The four-bedroom, four-bathroom Tamarama residence constructed three years ago has interiors by Briony Fitzgerald, the interior designer daughter of the acclaimed designer Ann Gyngell.
Drielsma and his wife, anaesthetist, Debbie Hong, have upgraded to a Bellevue Hill residence they bought for $9.85 million earlier this year. It had been listed in August last year with $14 million hopes.
Source : Jonathan Chancellor, Property Observer, 4 October 2011
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