Melbourne Boom ?

There is no doubt that the correction in Melb has been shorter and shallower than many thought it would be. It turns out that Melb is outperforming most of the other Cap Cities right now.

Keep in mind though, that the Age and the Herald Sun are city/suburban papers and will concentrate on the "postcode" suburbs mostly – always have. it's more glamourous to talk about Camberwell and Brighton than Dingley or Airport West.

If you want the real stats, look in the Investment Magazines and places like Residex. You know; the places that only investors and not 90% of the public look.

Let's first look at AUCTIONS from the AGENTS' point of view:

Be careful about the auction results listed in papers. These stats are supplied by agents to the reporters.
A true stat is when the property sells at auction on the day of the auction.

Anything else is not an auction sale. It is a private treaty sale. Look at how many sold before auction, after auction and how many were passed in on the day to get the real stat.

Why do agents misrepresent the figures like this?

MONEY – They always get a result with an auction – good or bad for the seller; quite often bad. The agents get their commission when the property SELLS. Many times in private treaty campaigns the agent doesn't sell the property before their sale period contract runs out.

Of course, there are always a few properties that go above the listed price. The listed price is the one advertised by the agent to attract buyers. They want a grand show; lots of people, lots of bidding. A lower advertised price attracts more people because there are more people with less money than there are with lots.

Agents don't particularly care if the advertised price is too low either; if there isn't much interest at the advertised price, they "condition" the Vendor to drop the price over a few weeks leading up to the auction because "that is what the market is telling us".
They still get the sale, but the paper will report a good result, while the Vendor has lost thousands.

Look at it this way; if you can spend $500k, and the next nearest bidder only bids $450k, are you going to put up your hand and say $455k or $500k to get the property?

Now let's look at AUCTIONS from the NEWSPAPERS' point of view:

Newspapers make MILLIONS of dollars every year from real estate advertising' and agents make many hundreds of thousands out of their Vendors from the ads that they place in papers.

If the market is bad, there is not much money to be made by either party. So why hype up the figures and the state of the market?

They need people to be confident, to feel good about buying and/or selling. No one wants to be the dummy who sold in the slump, or the buyer who bought in the boom and found out the prices dropped. The agents need sellers to provide the ads, the papers need the ads.

The newspapers can't afford to have a prolonged period of no sellers to give them those lovely advertising dollars. There will always be buyers; people have to live somewhere, but buyers don't place ads.

If the market is bad sellers disappear along with their chequebooks.

Blogs, where are you looking?

You are probably looking in the areas that are possibly experiencing a resurgence; this is not where you want to be investing anyway. If the boom is fully blown as you say – you're too late and the houses are now over-valued for the area.

What are the rent returns on these houses in question? is there any leg-room to add value and increase rents?

If the rent returns are crap, if the boom is underway, if the value you can add is next to nothing compared to an already renovated property in the area, then this is a bad sign. You've got a property that won't go up much more in value for several years with a terrible rent return on top.

My gut feeling is what I said before – under quoting by agents, over-hyping by papers (and agents) to stimulate some real interest and of course the property sells for around what the vendor sets the reserve at anyway unless the agent has conditioned them down. The result looks good on the surface.

Mind you; I hope you are right; ours will be worth more.

Of course. I don't doubt it all.
Do you think this is an accident? Do you think that agents are all this incompetent and don't know their market?
They know the market very well.
This is proof that they under-quote to get buyers interested (and more importantly; to get details at the open for inspections from future sales contacts).
It would be interesting to know how many auction sales that reached the reserve in the last month sold for much more than it.
My guess is not many.

Foundation You are the most interesting person on this forum by a mile as far as im concerned. I do agree that the average price has fallen I belive this is due to the ever increasing sales of units and appartments flats. I could be wrong.

I sold my house late last year settled around september and started looking to buy a house in an area I want to live, essendon strathmore around there somewere, things were a little slow from what I could see. But in the last couple of months oh my god, I saw a house advertised for 439k and want to buy it for that price about 60k over what one 2 doors up sold for in november anyway the agent hasent got the 32s yet so I cant fill in a contract. Just so happens a house about 5 doors up went to auction on the weekend so I thought might as well have ago .The house was advertised for 390k + im thinking mabe 430k 440k , I bidded to 480k sold for 508.5k   90k above reserve . Anyway as soon as I got home I called the other agent about the house that was addvertised for 439k to see if he had the 32s yet . He answered no not yet still waiting and by the way the owners want to change the price to 474k. I tell you what I felt so sick I could not sleep that night I reakon just by waiting a few months I will have to pay about 130k more. 130k more imagine haveing to work and save that 130k . I earn about 90k a year I reakon out of that I save 10k a year if im lucky  thats an extra 13years of savings in a few months. And I know its easy to say there are plenty of cheaper areas but I grew up around these areas all my family and friends are there its what I love its important for me to stay around here.   ( all the propertys Im looking at are in poor condition and I only want them for the land am going to pull down and build a new home all theses houses are on the same size block just to let you know i am compareing apples with apples ) The place is going mad and it does not look like it is going to stop