The blame game. 07/04/13

I’m back out again on weekends “sharpening the saw” as Mr Stephen Covey of “7 habits” fame would call it. When I’m not out with clients on a weekend looking to snap up a bargain for them, I tend to hang out at auctions on a Saturday to get a dose of reality.’

I check the places out, do a little due diligence, figure what I would pay for them and then watch the auction go. I even predict where I see things finishing on my twitter account @thepropertybuyer , and see how close I get. Last weekend was quite interesting actually.

I attended four properties in Parkville, Brunswick, Northcote and Coburg. All sold at auction. On average the prices they attained were 7.5% over the top end of the quote range. The prices ranged from $543,000 to $855,000, so it was a fairly decent spread. For the most part I thought the quote range and the reality position for the buyers was spot on the money. One listing did seem a little under quoted, but maybe that was to drum up interest as the television cameras from Foxtel were there. Who knows?

The buyers were a decent spread too. Single mature woman for the 2 bedroom in Parkville. Chinese family for the Brunswick place. Some guy with a cowboy hat in Northcote and another young couple in Coburg for the last house. From what I could tell it looked like three purchases to live in and the cowboy bought an investment. As a result of the good clearances I posted on twitter that real estate was alive and well, because let’s face it, four from four aint half bad if you are selling them.

As a result I saw a return tweet suggesting that it wasn’t really alive and well, it was out of reach and the suggestion that it was investors that were causing this issue. It’s a valid opinion I guess and everyone is entitled to their opinion. No doubt I will see a few opinions as a result of what I’m writing here, however in my humble opinion, blaming the investors alone for property price heights isn’t quite right. It is a little narrow in it’s focus and fails to take a whole range of other things into consideration.

Whilst on social media again I was linked in to another article that appeared in the paper on the weekend that carried the same theme. It suggested that everything in the city in the first home buyer range was a dive. Properties were underquoted all the time. Negative gearing is the reason prices are so high. Investors speculate and damage the market and finally the baby boomers, or whatever the media or popular culture theorists choose to classify a certain age demographic as, never had it as tough as today’s generation.

Ok, time for my two cents worth. It’s my opinion and I urge you to feel free to have your own.

Property is not out of reach of buyers, whether they are first, second or third home buyers. You can buy in outer suburbs of Melbourne or in areas that carry less infrastructure and planning. In new developments and new subdivisions. The places cost less than $300,000. So when you go to school, graduate as an engineer after living at home with mum and dad for the four years you were at university, and eventually start work on a base of $60,000 plus a year, please tell me how you can’t find the money to raise a 5% deposit. The truth is you could raise the $15,000, but you don’t want to buy in the areas I’ve just discussed. You want to live in a house 5 minutes from the city and you are upset that where you want to live is not where you can afford to live. Newsflash, when I got married 20 years ago, neither could I.

Properties are not underquoted on a regular basis. Sure some are, but for the most the agents are pretty spot on. If you see a quote range of $700,000- $770,000 and you expect to buy a place at auction where there is more than one bidder for less than $770,000, then I’m afraid you don’t quite understand property marketing. I suggest you accept this practice as the norm and search accordingly. I do, that’s why I don’t disappoint my clients. If you want to avoid the guessing and the competition that drives up price, stay away from auctions and buy at private sale.

Negative gearing and investors are not your issue. Wanting to buy something that you cannot afford is your issue. I want to buy a Lamborghini but I can’t afford it because it is limited in supply and production costs are high. It’s the Italians fault. Why don’t they make them in China? Investors provide stock for rental. Rental is for people that can’t afford to buy where they want to live but won’t compromise where they want to live. So they rent at 4% of property value instead of paying a mortgage at 6% of property value. Of the auctions I attend on weekends, most are families buying for the second or third time to live in. I guess I need to see the percentage of dollars spent by investors on property every week compared to the percentage of dollars spent by people who buy homes before I am convinced otherwise but unfortunately at the moment all I am getting is emotional opinion.

Whilst I’m on emotion, let me finish with this one. Apparently today’s first home buyer has it tougher than anyone has ever had it before. So you guys are paying mortgage interest rates at above 16% then? And you are trying to get by on $20,000 a year full time income? When I was married 20 years ago I had to save a 15% deposit and pay 17% interest on a loan for a house that was 20klm away from where I wanted to live. Sure the place only cost me $120,000 but it was a rundown place. It required a bit of upkeep but it was home. The car travel cost me a bit, there was a 45 minute walk to the train and no bus, the locals weren’t the best but we did ok. It was a start. Today, if the new engineer on $60,000 plus a year can’t buy an immaculate 3 bedroom home 10 minutes ride from work its everyone else’s fault. I suggest you look to understand the four variables of real estate, price, location, size and condition and understand we are all faced with the same challenges in life. It’s whether we do something about it or blame someone else for it that makes all the difference.

Don’t “cry me a river” over how hard it is, send me an email at . I am sure there is an answer to your problem , it’s just understanding what the problem is in the first place rather than blaming someone else for your life. As always negotiate hard but fair. Have fun and buy well.

Garry McPherson

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2 Responses to this article


cool post. very informative. Thanks and keep posting

garry April 30, 2013 Reply

Thanks for the feedback. always appreciated.

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