Buyer Advocacy Architectural Advisory
Off Market Residential Homes
Market Report
www.offmarket.com.au
www.jamesbuyeradvocates.com.au
Summer 2008 Market Update
Price will really matter in 2008
What happened last time property fell
What happens to property when the stock market goes off
How and what to buy in 2008
New www.offmarket.com.au website
Architectural Advisory Service
New offices opening in mid-2008 in Hawthorn and Toorak
What is going to happen in the high-end residential property market after
two boom years? In many areas, we have seen 30-50% growth and, before
that, 10 or more years of steady growth.
Let’s look at some history and look at the world market as a whole.
History - Stock Market
Last big stock market shock – September 2001 – high-end property
unaffected. After the 1987 stock market shock – high-end property continued to perform well and in fact went into boom mode until the turn of the
decade
.
Interest Rates
We have had a sustained period of lower than previously normal interest
rates and there is no doubt that the overall residential property market has
benefited from this in terms of wealth building by virtue of increased housing
prices. However, interest rates don’t always control the property market
(and especially the high-end) as evidenced by the boom in the late ‘80s
when the residential market was hotter than hot and rates were at record
high levels. Eventually, punitive rates do affect the market, but there is a
good case to say it indirectly affects businesses and employment, which
then has the flow-on effect of decreasing housing prices.
So what does affect the high-end markets?
In our opinion: “New Migration” and “Local Confidence”. As of Australia
Day 2008, both “local confidence” and “new migration” are still strong.
Whether the pre-Easter market continues on and follows the upward trend
from last year’s incredible levels, or goes a whole new way, only time will tell.
Footnote: By “New Migration”, we mean interstaters or overseas (often
expats) or buyers from the outer suburbs whose financial circumstances
have changed through business etc.
Normal property growth is price growth that comes from demand exceeding supply – simple. That is why Docklands and outer Melbourne has not
performed as well as inner Melbourne over the long haul. Demand does not
exceed supply. Abnormal price growth, as we have experienced at the
higher levels over the past two years (inner Melbourne only) has been
Brighton
Hawthorn
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triggered by “New Migration” into these areas and the offerings looking very
affordable by “New Migrants” standards. The “New Migrants” might say “I’ll
pay you $2.3m for that $2.0m house” and the local buyers let it be sold.
After this is repeated several times, the local buyers recognise that $2.3m
is the new benchmark and if their “local confidence” is high enough (in
employment, profits etc) they begin to match the $2.3m on the next property offered. In super hot times, the “New Migrants” then offer $2.7m on
the future offerings and the “local confidence” is dragged along if they are
to compete. 2006 and 2007 inner Melbourne experienced this with $2m
homes becoming $3m homes within a period of 18 months
.
Falling Markets
Japan has been a lousy market for 15 years – although the worst-affected
sector was commercial, there has been patchy recovery of the higher-end
properties for a few years now. There is sound argument to say it is a
reflection of the stock market, as the Nikkei has been underperforming
compared to other world markets during this time. However, in our opinion,
the housing market has been affected by “New Migration”, as in very little
of it and limited overall population growth. Japan’s population is predicted
to be the same in 2050 as it was back in the 1970s. Australia and Melbourne are forecast to have substantial population growths in the foreseeable future. While supply of Japan’s housing is even more restrictive than
ours, the demand factors required to increase prices seem to have been
very poor.
Melbourne. There is no doubt that in the early 1990s, the saying “the
bigger you are, the harder you fall” was found to be true, as some of the
worst-performing suburbs, where the median prices fell by a far higher
percentage, were inner areas such as Toorak and Brighton. Of course that
is to be expected as in many cases there was simply no demand for some
properties that had to be sold. Middle Melbourne geographically, like Glen
Waverley and even Albert Park as it was then, rode the 1990s reasonably
well because there was still strong demand (unlike Toorak and Brighton)
and supply tightened because of fewer developments
.
Toorak
Albert Park
9591 0199
Buyer Advocacy Architectural Advisory
Off Market Residential Homes
Market Report
www.offmarket.com.au
www.jamesbuyeradvocates.com.au
In 2008: Price Matters
OK, so what does this all mean?
In 2008, price becomes even more important than it was in 2006 and 2007.
The green line is the trend line. You may have bought above the trend because you didn’t research the price or it was
a very competitive auction and you chose to win the prize. Below the trend lines means you bought well (or you had a
brilliant buyer’s advocate – only joking), or you were fortunate to find an inexperienced selling agent, other buyers
simply weren’t there or couldn't see its potential.
In Figure 1, you buy expensively - say $2.1m (A) - when all the square metre land prices of the precinct say you should
have paid $1.85m. However, because the market is rising, your “mistake” is disguised somewhat when you
come to sell or revalue (C).
In Figure 2, you buy expensively and your “mistake” (A) is exaggerated to such an extent that you become restricted in
your choices (B) for future homes or even in some your ability to sell that property.
In Figure 3, you bought well (A) and, while the market has not been helpful, it hasn’t really hurt you. Should you choose
to upscale at (B) you will be in a strong position to buy well again and “profit” in a falling market.
In Figure 4 Above we have been talking about 3-5 years and that’s important. However, long-term ownership (10-20
years) is what generating wealth through property is all about. Figure 4 shows it is far better to have all the ups
and the downs on a good property than brilliant buying and selling on a piece of rubbish.
Upward Market 2006/2007
Master of Business M.Bus
Principal Buyer Agent
Downward Market (Future?)
Today’s
Value
Your
Buy Price
Peter Sinclair
Future
Value
C
Buy Price
A
A
B
B
Better
Buy Price
Fig. 2
Fig. 1
Downward Market (Future?)
But long term, the key is still to buy quality
Future
Value
B
A
Same Suburb – Brighton, buy and sell 11 years apart.
Same Initial Price - $400,000 approx
No renovations to either
A One sold for $2.25m
(we bought it in 1994)
B the other $535,000
(we didn’t buy it in 1994)
GAP
Fig. 4
Your
Buy Price
Fig. 3
Brighton
Hawthorn
www.offmarket.com.au
www.jamesbuyeradvocates.com.au
A
A
B
B
1994
Toorak
Brighton
2005
Albert Park
9591 0199
Buyer Advocacy Architectural Advisory
Off Market Residential Homes
Market Report
www.offmarket.com.au
www.jamesbuyeradvocates.com.au
In 2008: Architectural Advisory
Overcapitalising, Architects, Councils & Who
In 2008, we are planning to expand our Architectural Advisory Service. Having run my own practise for 10 years
and having completed hundreds of inspections for Archicentre over a long period of time, I suppose I have some
knowledge about the do’s and the don’ts when buying the more expensive houses – about what works and what
doesn’t. It was a big decision to join James Buyer Advocates last year but Mal is a persistent kind of guy and I can
really see the need for buyers (people) to get some advice before they purchase a home, before they sell or
renovate a home and even before they commit to an architect and/or builder.
Since starting at James Buyer Advocates, work has been one of great interest and variance. Our clients buy
properties in the 5 councils as shown below and as we all know (or at least should if we are planning to renovate)
each and every council has different regulations and overlays, different setbacks and rules. So one week you are
looking at your dream home with some plans but it sells for far too much. Next week, another home three streets
away is for sale, but in a different council zone. You are now faced with a very different set of regulations. It can be
frustrating, but more importantly, it can be very expensive if you buy the wrong house - and we don’t just mean
from a financial point of view. Emotional outcomes in homes are just as important when buying. Light, space and
form that you like leads to a greater enjoyment in your home for you and your family. How much is it worth?
Overcapitalising is less of a problem with the better position and land size, but it is a question we get asked all the
time. Floor plan and orientation are such important factors that many times we advise clients not to proceed on
certain properties because, even though it maybe $100,000 less than another that may seem similar, it will, in the
medium to long term, prove to be a false economy. In most cases, the rule is that land appreciates and buildings
depreciate. The more you move away from good architectural principles (to your taste of course), the more likely
you are to lose on the changeover in the future and the more likely you are to not enjoy the home as much as you
were expecting to.
Adam Woledge
Registered Architect
Principal Buyer Agent
Fees, Speed and Work Output
Since joining James Buyer Advocates, I have been exposed to a whole new regime of information and communication as an architect. My main role is assessing and buying properties and my secondary role is assisting in
architectural decisions before and after purchasing. Recently on a very large purchase my role after purchase was
to co-ordinate architectural selection. There is no misunderstanding, ongoing exploding costs and no further
obligation unless you wish there to be. We outline what we can do, what we will cost and when we will have the
job completed.
Option 1. Before deciding to buy, sell or renovate (or engage us as buyer advocates), we can provide drawings
and a home value report (before and after) about any home for non-clients for a fixed fee of $5000 plus GST for
homes valued at under $2m and $7000 plus GST for homes valued at more than $2m. We guarantee seven
working days turnaround or there is no fee for our work. There is no obligation to continue with us after completion.
Option 2. To buy properties, our company charges between 1 and 2% + GST of purchase price. We usually take
between one week (you already have a home selected) and six months. The average is around four months.
Option 3. Post-purchase work. After we have bought a home for you, you engage us to assist in the selection of a
builder on the smaller jobs and an architect/builder on the larger jobs. All work is carried out by myself or Mal at
$250 per hour plus GST
.
Brighton
Hawthorn
www.offmarket.com.au
www.jamesbuyeradvocates.com.au
Toorak
Albert Park
9591 0199
Buyer Advocacy Architectural Advisory
Off Market Residential Homes
Market Report
www.offmarket.com.au
www.jamesbuyeradvocates.com.au
Off Market is an increasing trend
Half the homes over $2 million we look at are Off Market
By “off market” properties we mean not advertised in the conventional manner or not negotiated in a normal manner (eg, may be
expressions of interest or even tenders). Some agents suggest that, in certain areas, up to 50% of their property sales are off market.
Sometimes the vendor wants to “test the water” before embarking on a conventional marketing program and may sell if the price is
right and all done with a minimum of fuss. If you are looking to buy a home around and above $2 million, then you cannot ignore the
strength of the non-advertised, early-to-market, expressions of interest and auctioned but not sold properties which make up a
significant proportion of available properties. In our business, we still buy more on market properties than we do off market, but the
latter is fast catching
.
Mal James
Principal Buyer Agent
0408 107 988
What you see
What our clients see
Last month we bought (on and off market)
South Yarra –
Sandringham –
Caulfield –
Malvern East –
Brighton Middle –
Camberwell –
Brighton –
Hampton –
Barwon Heads –
A quiet sale property in excess of $7m.
A beautiful north-facing building block in Sandringham at auction - under $1.1m.
Apartment in Howitt Road – only four on an 1100 sq metre block - under $830,000. Imagine the cost of an alternative on 250 sq metres of land.
This was a great lateral thinking buy for a young first-home buyer.
Quiet and successful representation for a property bought over $3m.
Building block under $200 per sq ft in a good location (not a main road).
Moorhouse Street. Under $1.2 m - 600+sq metres of land – good period home potential.
Small period home bought before auction.
At auction - renovated family home $1.5m on 750 sq metres within 100 metres of Hampton St and not far from the beach.
Engaged to act at auction three days prior – recommended a no buy – then bought a better Barwon Heads alternative.
Going forward
1. Our websites - www.jamesbuyeradvocates.com.au & www.offmarket.com.au - have more information.
2. Ring us - head office number + 613 9591 0199.
3. We ask you a few questions and answer a few of yours on the phone.
4. We can look at a property or send you some recent data before we meet.
5. We meet you privately at our office, your home or a coffee shop - your names are not passed onto anybody.
6. At our first meeting, we want to know about you, how you want to live and what's important to you.
7. You can then decide to get more information, engage us, or move on - no obligation, no cost for the first meeting.
Brighton
Hawthorn
www.offmarket.com.au
www.jamesbuyeradvocates.com.au
Toorak
Albert Park
9591 0199