Rents are falling where i live, outer north east Melbourne, rapidly developing urban growth corridor (Plenty Corridor -35km from CBD). Bargain rents compared to other areas and states. $300 to $350 for 3 or 4 brm, 2bth, dlug, smaller blocks 450m2. Blind Freddy can see that there’s an oversupply of developer and investor stock, but still suckers are buying house and land packages at inflated prices. This is due to a lack of seeking quality independent advice, lack of correct market analyses, laziness and too much trust in those who have a vested interest in getting hold of commissions eg salesman, broker, lender, financial planners, accountants and property spruiker marketeers at seminars.
Most buyers did very well from 2001 to mid 2010 despite paying too much at the time, they were saved by rapidly rising prices, however, the tide appears to changing and silly mistakes will be punished harshly in the current property cycle. In my humble yet very experienced professional opinion, the safest property bet appears to be selective areas of QLD. My knowledge of the Brisbane and GC extends over 17 years. I’m also a price expert in north and east suburbs of Melbourne. In other states, I’m of no value. In my daily business I see many suckers; first home buyers going in with almost zero deposit artificially pumped up by dodgy building and land contracts and developer scams (rebates). Developers have become savvy and instead of disclosing finder commissions (20K) they do a deal with builder and pump up the building costs ($20 to 30K0 which then gets back handed back to the developer after construction. It becomes obvious for a valuer to see the kick back commission when the proposed dwelling contract costs analyse at $1,100/m2 or higher (living area only), excludes garage @ $650/m2 and alfresco @ $400/m2). Some building contracts show $1,300/m2 or higher for living area which is well in excess of normal commercial building costs. Experienced valuer analyse dozens of contracts on a daily basis and become very good at understanding commercial building costs and when a contract id dodgy. A double whammy of overinflated prices occurs when the vacant land sale price is also loaded (typically 20k). A local agent re-sale on the local market will sell a typical block for $185k (400m2) however the developer price will typically be $200k to $220k. Many unfortunate/lazy/imprudent buyers cop the double whammy and can often be 30 to 40k behind the eight ball when the keys are handed over. it may well be that these buyers get taxation benefits of first home buyer grants, however the total loss is far greater. I have seen this day in day out for many years but as a I said before, the initial loss is eventually recouped in a rising market. The phenomenal gains we have had in the past 10 years, global economic uncertainty and mining boom slowdown are important factors to consider. I’m by no way a doomsayer or glass half empty thinker, however good times always have a finite period, and storm clouds brew for a while and the sun shines again. I can see grey clouds in the horizon.
in my opinion, seeking quality expert property advice by a Certified property Valuer (CPV) who is an Associate Member of the Australian Property Institute (AAPI) with over 10 years experience is highly recommended in the current market.
Things to consider that the layman may not be aware of includes: -Your bank won’t tell you the val figure if you are an investor (they have no obligation to do so by law - they just say "all is good" assuming that you have sound equity in your home.
-Its important to remember that a lot of people have there fingers in the commission pie, eg lender, broker, builder, land salesman, solicitor, accountant etc. They don’t give one iota if you pay too much as long as there pocket is lined. By adopting the easy/lazy way of buying a house and land package, new unit from developer or building a new house on your block without getting quality independent advice eg valuer and simply relying on someone who looks sharp, tells you what you want to hear and has vested interest in the sale ($commi$$ion),you are destined to be burnt. I’m sick of seeing young, honest and hard working comrades getting their fingers burnt on a daily basis by dodgy/pushy salesman, brokers and developers.
-Developer rebates are very common and are deceptive and fraudulent. Most developers where I work offer a rebate of say 20 to 30k on land sales which is refunded back to the buyer upon settlement. The inflated land price (not showing the rebate goes through as a government recorded sale at an inflated and incorrect price which distorts comparable sales and suburb value stats and data. This should not be happening and I blame the government for not putting a stop to it. Be wary of developer sales when comparing properties. Always look at resales by local agent as this will give you the true/local market value of your property. Developers have enormous marketing budgets that can’t be matched by local agents. At the end of the day, you won’t have the developer resale your property again. I know this seems like common sense but a lot of buyers rely on the advice by developers who report the sales that they have achieved in their complex/estate.
The glory days of the last 10 years appear to be coming to an end in OZ. The cycle has run very hard for the past 10 years, making many wealthy on paper but market uncertainty now prevails and caution is essential. Property is the best long term investment, however entering the market in the current property clock is not in your favour, unless you are prepared for zero/negative growth in the short to medium term, possible 5 years or more. If you need an update on your current asset valuation within all states of OZ or are considering purchasing a property, it is prudent to seek quality professional advice. PS, not all valuers are worth their weight in gold, select carefully. Ask for 10 years plus experience.
Other potential markets worth considering - yield plays, eg US or German markets however they require particular skill, effort, homework and kahoonas. Yields appear phenomenal ie 15% plus however the old adage of location, location, location combined with tenant quality, belief that the oz dollar will fall and sound property management all come into play. The OZ dollar weakness being a major factor. I am happy to correspond privately with anyone
