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Your Buyers Advocate NewsWhat the Internet Means for Buyers and SellersThe advent of the Internet has revolutionized the way buyers and sellers are completing real estate transactions. The real estate web portals have replaced newspapers as the prime marketing tool of selling agents. By accessing the major real estate web portals, buyers can now locate opportunities anywhere in Australia where they used to be restricted to their local area. Also, buyers no longer have to personally visit real estate offices to enquire about suitable properties for sale. Urban Planning System in DisarrayOne of the major causes of the current housing shortage in Melbourne is the fact that our town planning system is in disarray and has been for many years. The Brand MythMaking a decision to appoint a real estate agent based on brand is flawed thinking. While marketing gurus argue that building a strong brand is an important part of any marketing strategy, and many real estate agents have followed this advice, it is a myth that one real estate brand is superior to another when it comes to getting results. Property buyers and sellers shouldn’t believe the hype. The Absurdity of Vendor AdvocacyThe idea that one real estate agent would oversee another real estate agent in the sale of a property seems absurd. Yet it happens: it’s called vendor advocacy. Vendor advocacy is a service whereby a real estate agent who calls himself a vendor’s advocate will appoint another real estate agent to sell a property. The vendor’s advocate will then oversee the real estate agent ensuring he performs his duties properly. This relatively new phenomenon preys on uninformed vendors. The vendor’s advocate has essentially convinced the vendor that he is the good guy and the real estate agent is the bad guy. This is a dangerous situation for the vendor as unquestioned trust – which is essentially what the vendor’s advocate is expecting – in any substantial financial transaction often results in a less than satisfactory outcome. Melbourne: a City of Real Estate SegmentsOver the last 20 years Melbourne’s population has steadily increased and as a result new major infill developments have been built to cater for the increased demand for housing. Melbourne has now evolved into a city of real estate segments. It is no longer accurate to make sweeping generalisations about the Melbourne market as a whole. Melbourne Property Market Snapshot July 2011As expected the first six months of 2011 has seen prices decline or remain stagnant in every segment of the Melbourne market except the quality segment. With continuing high demand and limited supply, this segment continues to produce exceptional results. It never has been and never will be a buyer’s market with quality property. However, home buyers whose purchase is not solely based on capital growth aspirations have been able to enjoy substantial price reductions provided they had the necessary negotiation skills to take advantage of the current market situation. Passionate About the BuyerAs Buyers Advocates we have always prided ourselves on being totally independent. We have never and will never accept any form of remuneration from a third party. We are not aligned to any particular selling agent, property developer or any other organization where a conflict of interest could arise. When we search for properties on behalf of our clients the whole marketplace is examined without favour to anyone. The optimum property selection is made that best fits our client’s criteria. Too Little too LateHandouts rarely achieve anything and that is certainly the case when it comes to grants to first home buyers. These grants have been handed out on mass and have resulted in no real benefit to first home buyers or the economy. In certain circumstances a grant can be as much as $26,500.These handouts have only succeeded in increasing house prices by the amount of the grant therefore adding fuel to inflation. Also, it’s relatively easy to rort the system. I certainly believe first home buyers should be given assistance, however this should be done through the first home savers account which was introduced by the federal government to encourage first home buyers to save for a deposit. The first home saver account rules as they stand at the moment do not give enough incentive for first home buyers to save for a deposit. Beware Self Managed Super FundsResidential property investors should be extremely wary if contemplating buying real estate using a self managed superannuation fund structure (SMSF). This structure which has created a lot of media attention lately may prove to be a fad that burns many a property investor. At the time of writing more than 400,000 investors are running their own do it yourself super fund, holding total assets worth more than 400 billion dollars. Recipe for DisasterThere have been amendments to the Estate Agents Act effective from 1 January 2011 regarding real estate agents, their employees and family members buying homes directly from their vendor client. These changes could result in unscrupulous agents buying properties at below market price. The proposed legislation enables agents to buy property from clients with the written consent of the seller and a legal practitioner, conveyancer or accountant representing the vendor. The agent will be required to notify Consumer Affairs within seven days of receiving consent. All Aboard the Capital Growth ExpressBeing within short walking distance to a tram stop or railway station in Australia equates to substantial extra capital growth in the medium to long term. As our roads become more congested this is a feature that rates at the top of the wish list of both buyers and renters. Melbourne Property Market Snapshot February 2011The last six months of 2010 have played out as expected in the Melbourne property market. Prices and activity platued in May of 2010. Previous to this there was a sharp increase in prices especially in the quality segment. Taking this into account the recent spring market was always going to be a more difficult time for sellers as the market had reached its maximum price point. This resulted in less buyer demand combined with a greater supply through vendors looking to take advantage of the recent price increases. As usual quality stock was in short supply however with clearance rates hovering around 60% buyers were able to snap up property that would provide some genuine high performance at reasonable prices. The Melbourne rental market tightened slightly in the September quarter 2010 with a vacancy rate of 1.4% compared to 1.9% for the August quarter. Melbourne Property Market Snapshot August 2010Over the last 5 years the Melbourne property market has been more volatile compared to any other time in its history. This has mainly been due to events that have occurred in overseas markets such as the global financial crisis. This type of volatility is more common with share markets than property markets. Foreign Investment DebacleThe changes to the rules governing foreign investment in residential property announced by the assistant treasurer in April of this year have done nothing to benefit the Australian economy or struggling first home buyers desperate to enter the market. Building Clause BewareThe standard Real Estate Institute of Victoria building defects clause that is used by real estate agents has proven to be ineffective by a recent decision of the Victorian Supreme Court. The clause states that a buyer can only avoid a contract of sale if a "major structural defect" is found. I have never agreed with the insertion of this clause and have always advised my clients to insert a clause which includes all defects. Specification SpecificWhen buying off the plan the most important documents in the transaction are the plans and specifications. In this situation the purchaser is essentially buying two elements, the land and the plans/specification document. Unfortunately many buyers are not aware of the importance of getting these documents absolutely right. Their Property your Land TaxVictoria's current land tax regulations for residential property is not a fair system and is in need of change. A buyer is liable to pay land tax on a property purchase based on the land holding of the vendor. We have the farcical situation where the amount of land tax the buyer pays is based not on their own situation but on another person's property portfolio. Wrong, Wrong and WrongIt's surprising how many times inaccurate information is conveyed to buyers of real estate by selling agents. Without proper independent research this can potentially lead to a bad buying decision. An example of this is a situation I encountered at an open for inspection for the sale of an apartment recently. Beware of Blind CordsTragically at least 15 Australian children have died in incidents related to curtain and blind cords since the early 1990s. Most recently, two Victorian infants died after being strangled by cords in August and September 2009. Financial Institutions place restrictions on lending for 1 bedroom apartments - must be 50 sq mtMost financial institutions place restrictions on lending in relation to genuine 1 bedroom apartments based on internal floor area. This policy is ridiculous and archaic. The fact that these financial institutions place such a high emphasis on floor area only demonstrates that they do not understand the fundamentals of real estate, an amazing reality given their resources. Legal Chat - By Andrew Padanyi B.A., LL.B.Despite recent changes to the Sale of Land Act in Victoria (the Act), it’s still possible to unwittingly create a terms contract (as distinct from the usual cash contract) where the vendor gives possession of the property before settlement. This occurs where the contract provides that the purchaser is entitled to possession before final payment. Dummy Bidding Alive and WellA real estate agent situated in Melbourne's inner west has resorted to using a dummy bidder on properties that are unlikely to attract multiple bidders. On the 23rd of May of last year I attended an auction in Yarraville with a young couple hoping to purchase their first home. The dummy bidder placed several bids before the property was passed in. I was immediately suspicious as I was aware that this person was an associate of the selling agent in that he provided maintenance services to their property management division. Melbourne Property Market Snapshot March 2010The second half of 2009 saw the Melbourne property market surge forward on average by 10%. Consumer sentiment changed dramatically as people realized that the global financial crisis wasn't going to impact Australia as it had other large western economies. Confidence was restored with the resulting effect on property prices. Amazing Results - selecting the best investment property for capital growthOur firm has always prided itself on being extremely discerning when selecting an investment property for our clients. The property has to meet strict criteria before we would recommend a purchase. The difference in capital growth between a good choice and the optimum choice can be hundreds of thousands of dollars in the medium to long term. Recently there have been 3 resales of properties I selected on behalf of investor clients. The capital growth was substantial in a relatively short period of time. Melbourne Property Market Snapshot October 2009Over the last 6 months prices for quality residential property in Melbourne has remarkably increased substantially. This has occurred because of a record shortage of supply of quality stock and continued low interest rates. Also, confidence is returning amongst buyers as the effects in Australia of the global financial crisis hasn’t resulted in the economic turmoil that many were predicting. Prices have now bounced back to surpass the heady heights of 2007. Beware of Statisticians who don’t attend auctions.You can rarely make generalizations about property markets in major cities. Unfortunately many statisticians are prone to such errors. Generalizations about property markets are based on the incorrect premise that all properties perform the same from a capital growth perspective. Unfortunately most statisticians who are not in regular contact with buyers and sellers or attend auctions regularly make incorrect observations. Legal Chat - By Andrew Padanyi B.A., LL.B.The obligation on a vendor to provide a statement under section 32 of the Sale of Land Act 1962 (the Act), commonly referred to as the section 32 statement, is reasonably well-known. Intended to be a consumer protection device, the statement is required to set out various pieces of information regarding the property being sold, eg. land use information, a description of restrictions affecting the property, rates and other charges levied on the land etc WaterproofingOne of the most common causes of building faults in residential buildings is incorrect or inadequate waterproofing and surface drainage. It is always a bonus if it is raining during a property inspection. In this situation you are able to observe exactly where the water is flowing. Is the water running away from the building? Is the guttering and down pipes leaking? Is water ponding on the roof structure or near the building? These are just some of the important questions that can be answered if you are lucky enough to inspect a property during a downpour. Over time water can cause serious damage to a building, the following are just some examples. Top Ten Real Estate MistakesBelow are the top ten errors that buyers make when purchasing residential property for investment purposes. Market Snapshot - April 2009Despite all the negative sentiment in the media over the previous 6 months the Melbourne property market has weathered the storm reasonably well. Changes to Foreign Investment RegulationsRecently there have been a number of changes made to the regulations governing foreign investment in Australia. I have outlined a few of the more significant changes. A more comprehensive explanation of the recent changes is outlined on the Foreign Investment Review Board website. Property Management ReviewThe inner Melbourne rental market is still extremely strong with quality properties attracting multiple applications. For investment purposes it is important to purchase a property not too far above the suburbs median price as this will result in the rental asking price being also around the median price for the suburb. This is where the greatest pool of potential renters will be. In a tight rental market this could be the difference between a rented or vacant property. Legal Chat - By Andrew Padanyi B.A., LL.B.In September 2008 changes were made to the form of contract of sale of land used in Victoria. The old contract note has disappeared, having been replaced by a new universal form which has been designed to be used in all situations. This article explores some key changes for purchasers of real estate in Victoria. When a Proprty Bargain is not a Bargain!I always get a little concerned when property buyers start talking about buying a bargain. More often than not their interpretation of a bargain is flawed. What they have purchased or are going to purchase is a cheap property that will not perform very well from a capital growth perspective. Top Ten Tips When BuildingThere are many traps and potential pitfalls when building a house. Below are my top ten tips however they are by no means exhaustive. Always seek advice from a range of building professionals at every step of the way. RestumpingI have always been amazed at the amount of substandard restumping jobs that are carried out. Until recently anyone could pick up a hammer and call themselves a restumper. Again I have always found this incredible as restumping is such an important part of the building process. The quality of workmanship of the sub floor and foundations will impact on the entire building. Over the years I have seen many cases of floors not leveled properly, incorrect spacing of stumps, not enough stumps inserted, footings incorrectly constructed, ant caps missing and substantial amounts of rubble left in the sub floor. All this leads to costly repair jobs in the future. Legal Chat - By Andrew Padanyi B.A., LL.B.It is common for a purchaser of land to nominate an additional or substitute purchaser to complete the purchase at settlement. This usually arises where the person who signed the contract as purchaser wants to add their spouse or another family member. Alternatively, the named purchaser might prefer to complete the purchase in the name of a company for investment reasons. At present, the only restrictions are that the words "and/or nominee" must be used in the particulars of the contract, and the nomination must be made at least 14 days before settlement. Property Management ReviewI have experienced the strength of the Melbourne rental market first hand. With the advent of our property management department we have rented out a number of properties within 10 kilometers of the CBD over the past 6 months. I have been amazed at the amount of high quality tenant applications submitted. It is very reassuring to investors knowing that their properties will not remain vacant for an extended period of time. Blue chip inner urban properties will always perform well from a capital growth perspective this in turn leads to regular rental increases. Rents across Melbourne, especially inner Melbourne, have skyrocketed over the last 18 months. Property Management - Why Choose UsThe aim of our property management department is to add extra value to our owners. To all our property owners we are prepared to offer the following at no extra cost. Market Snapshot - Oct 2008Over the previous 2 months the Melbourne property market has again gathered momentum as the upward movement in interest rates has come to an end. The start of 2008 saw a general price reduction of between 5 and 10 per cent after last years record price increase. Once again we are seeing multiple bidders at quality property auctions. Quality properties are attracting a lot of interest while other properties are taking longer to sell. These conditions are symptomatic of normal market conditions. Market Snapshot - May 2008The Melbourne property market has returned to a more sensible and sustainable level of activity in 2008. Last year will go down in real estate history as experiencing the sharpest price rise in a year ever seen. The upward movement occurred between February and November. The upward price movement was excessive and hence so far this year we have experienced a slight downward correction. We are in my view now back to normal market conditions. Consecutive interest rate rises have certainly had their effect on the level of demand. Last year quality property was attracting 3 or 4 bidders, this year that number has been reduced to 1 or 2. Australian Property MarketHouse prices across Australia increased in every capital city over the last 12 months to June with the exception of Sydney. In the June quarter all capitals increased except Perth. Median prices in all capital cities except Sydney are now at their highest point ever. Over the last 5 years every capital city has experienced a significant upward movement in price over a period of between 12 months to 3 years. Why such a healthy market? Quite simply the Australian economy has experienced an unprecedented 17 years of continuous positive GDP growth. Auction FiascoMelbourne is the auction capital of the world. I personally believe it is an overused method of selling a property. Before choosing the best method of marketing a property a number of important determinants need to be assessed before a correct choice is made. The current state of the market, likely level of demand for the property and a vendor's time frame are some factors that need to be examined before a decision is made. Legal Chat - By Andrew Padanyi B.A., LL.B. - Who is responsible for paying levies?On occasions property owners are required to pay levies struck in respect of their property. Common examples include owners corporation levies for major work like re-painting and local council charges for street construction or drainage works. These are one-off impositions and, importantly, are treated differently to recurring charges such as quarterly maintenance contributions and annual council rates. Property Management"The complete service for you, the buyer" has always been our motto, we now offer property management to our already vast array of services. The feedback we have been getting from our clients is that most real estate property management firms do not provide a level of service that landlords are satisfied with. Lack of communication, not returning phone calls, not attending to routine inspections, rents not being reviewed regularly are just some of the negative feedback we are hearing Market Snapshot - November 2007The Melbourne property market has experienced substantial growth this year. This upward movement has been the result of a relatively flat price growth over the previous couple of years. As always quality properties, i.e. properties in exceptional locations with scarce and unique features have benefited the most from this latest upswing. Chattel or Fixture?The question of whether an item is a chattel or fixture has caused many disputes between vendors and purchasers. This issue arose during post auction negotiations on behalf of one of our clients. The property had passed in and after a protracted negotiation a price had been agreed. We proceeded to sign the contracts when the selling agent on behalf of the vendor claimed that the stereo speakers which were fixed to the ceiling should be retained by the vendor. In my view these speakers were clearly a fixture and should remain with the property at settlement, the contract did not mention otherwise. When the vendors made their claim the price had already been agreed so this was a very unfair request. Needless to say their request was denied. Real Estate Investment Tip - Why Property Reports are essentialBefore purchasing a piece of real estate it is so important to examine all aspects of your purchase namely the real estate, building and legal issues. Our property reports has saved our clients much grief, I would like to take this opportunity to cite some examples. Tenant's ChecklistTenants checklist prior to signing a lease. Market Snapshot February 2007As predicted in our previous issue, the Melbourne property market has experienced moderate growth over the previous quarter. The recent interest rate increases have only slightly dampened the Melbourne market. Quality properties are still attracting multiple bidders and achieving excellent prices. These conditions are symptomatic of normal market conditions. Much of this demand has been driven by owner occupiers however we have noticed more interest from investors over the December quarter. Is Your Advocate 100% Independent?As property consultants we have always prided ourselves on being totally independent. We are not aligned to any particular selling agent, property developer or any other group where a conflict of interest could arise. When we search for properties on behalf of our clients the whole marketplace is examined. Our clients can be assured that we will submit properties that best suits their individual needs without fear or favour to anybody. A growing trend amongst buyer's advocates is to advertise their services on the websites of selling agents. In this situation I believe these buyers advocates are setting themselves up for a conflict of interest. Will they favor that particular selling agent when submitting properties to clients? What about a situation where they are negotiating the purchase of a property that is listed with that particular selling agent. Because the selling agent has allowed them to advertise on their web site, are they going to go soft on them with negotiation? I believe there is potential for a conflict of interest. All Your Building and Renovating Questions AnsweredOne of the most important reports we produce for our clients is our pre-purchase building report. Being Registered Building Practitioners we are qualified to offer this valuable service to our clients as part of our standard packages i.e. the report comes at no extra cost. Our pre-purchase building report investigates the property from a building perspective, commenting on all major building faults. We inspect the building in accordance with Australian Standard 4349.1-1995, Inspection of Buildings Part 1: Property Inspections - Residential Buildings. We take great pride in this report and believe it is the best in the business. Market Snapshot February 2006As predicted in our previous issue, the Melbourne property market has experienced moderate growth over the previous quarter. We are finding that there has been an increase in the number of properties that are selling prior to auction. Quality properties are once again attracting multiple bidders on auction day. These conditions are symptomatic of normal market conditions. Much of this demand has been driven by owner occupiers, over the last twelve months the number of buyers looking to invest has reduced significantly. With these improved market conditions we believe more investors will return over the next twelve months. Market Snapshot August 2005As predicted in previous issues the Melbourne property market has experienced further softening over the previous quarter. In our opinion only lower quality properties have been affected by this price reduction. Well-located properties close to village-style shopping centres, schools and public transport are still attracting strong interest and hence good prices, however other properties are struggling. The bayside suburbs continue to be very popular places to invest for our clients. We are also finding a growing number of our investors purchasing in the inner west of Melbourne. These investors are taking advantage of the substantially reduced entry prices and hence buying costs. Capital gains in some of these suburbs have been as good as anywhere in Melbourne. Market Snapshot February 2005As predicted in previous issues the Melbourne property market has experienced a correction of between 0 and 10 per cent over the past twelve months. The beginning of the slowdown can be traced back to the second week in November of 2003 where there was a noticeable reduction in activity levels. We believe that this correction has now stabilized. There has been a noticeable increase in activity since the recent federal election in October of last year. Towards the end of 2003 the market was in danger of becoming overheated and hence this downturn avoided another boom\bust cycle. Market Snapshot July 2004The Melbourne median house price fell 0.8 per cent, down from $371,000 to $368,000 for the March quarter 2004. This latest result takes the annual increase to 6.1 per cent, the lowest annual growth since March 1996. However, Melbourne’s median house price has increased by an average of 2 per cent for the previous 11 quarters. The Melbourne apartment market recorded a fall of 2.1 per cent for the March quarter, down from $289,000 to $283,000 taking the annual increase to just 0.9 per cent. The inner-city apartment market has been largely affected by a significant number of new apartments coming on to the market during the last six months. Market Snapshot March 2004Melbourne house and unit prices have grown 11.2 per cent and 8.0 per cent respectively, over the year to the end of the September quarter. The median house price has increased to $368,000 and the median unit price has increased to $290,000. This represents a 2.5 per cent and 3.9 per cent increase respectively from the previous quarter. This also represents the 10th consecutive quarterly rise. As can be seen by these figures, the market is still in a healthy state. Housing affordability continues to be a concern, with only four suburbs in Melbourne recording a median house price under $200,000, compared to this time last year when there were seventeen suburbs under $200,000. What can I claim?Property investors are entitled to claim a number of tax deductions in relation to their rental properties. This article contains a checklist of the most common allowable deductions with respect to deriving rental income from tenanted properties. Market Snapshot June 2003The bayside suburbs continue to be very popular places to invest for our clients.We are also finding a growing number of our investors purchasing in the inner west of Melbourne.These investors are taking advantage of the substantially reduced entry prices and hence buying costs. Capital gains in some of these suburbs have been as good as anywhere in Melbourne. Choosing a BuilderThe ten golden rules to choosing a builder Feng Shui ideasA list of Feng Shui Ideas to invigorate the spaces you live in Feng Shui strategies help increase home valuesKerry Tabor of Spirit of Design says many people are using her Feng Shui advice to enhance not only the chances of sale, but also to increase the feelings of peace, balance, comfort and beauty in their homes.
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