Hi all,
Being a new contributor, I would like to begin by opening a discussion on the practices and behaviour of agents and buyers in boom times (eg now in Perth). And I would love perspectives from people over East that maybe related to this three years ago before the boom ended.
At the moment in Perth, especially within 10km of the city, agents will advertise properties for a price eg lets say $700,000. Therefore all buyers within that range see it and think “thats in our range lets go and see it” after a call to the agent, the agent tells the interested buyer “actually its from $700,000 and we have already had five cash buyers looking in the $800,000 range, so better be prepared to come to the table with your best offer”.
Shouldnt the agent be better at determining the real price?
And if a price is advertised as a fixed price then if someone offers this price doesnt it make sense that you cant then say “sorry – its now changed”
This is happening so often now that there are many buyers out there suffering emotional distress from the continual disapointment of this situation. Many buyers in this market are buying anything to alleviate the fear of somehow missing out and never being able to get into the housing market if they dont buy now!
From an outsiders and objective view – it would be easy to see that this is not normal behaviour and cannot continue.
I cannot complain, I have done alright out of this market and I understand that agents work for the best interest of the seller, I am just concerned what this effect is doing to peoples existence and loss of perspective.
I would be interested to hear opinions from people in the east that may have experience this a couple of years ago.
(as a newbie, I apologise if I have posted this topic in the wrong section).
Cheers,
Perthman
Yes, agents should be better at determining values (or more honest with sellers and buyers). Some are excellent. My wife and I sold our PPOR earlier in the year. The agent gave an appraisal. Range of appraisal was $4,000.00. The appraisal was about 15% higher than our estimate of value was. Agreed sale price $1,000 below range. Excellent work.
Subsequently we started looking for another PPOR in our new town, a large regional city. After having looked at over 60 houses over a number of weeks, we only came across 2 agents (out of about 16) who actually pointed out virtues of the house they were selling. One of these agents is semi-retired and had a very successful business. Easy to see the agents not to list through.
One agent last week had listed a house in our price range in our desired location. My wife went to the first open house. 200 people through the house, the house sold for substantially over the advertised price that day, which should have been quite obvious to those agents from their local knowledge.
Does anyone have a view on this?
I understand that as an investor the emotion is taken out (or should be taken out) but we are also all home owners as well.
Look fwd to a reply
Thanks CRJ,
The difference is that in Perth, these prices are varying $100-$200,000. You also might have heard that agents now use an EOI (expressions of interest) which is basically an auction without having an auction.
What you described pretty well sums up Sydney in 2003.
People excitedly jumping up and down about buying a fixer upper ( …start the bulldozer Lenny) that three years before they would have laughed at….just to get in the market.
Agents would say, that the market is moving that fast they could not get the numbers right, but, yeah, it also created the desired, “we will never be able to afford if we don’t buy now”.
Perth’s time will come. If Perth goes much farther, the buyers should think of moving East.
its funny you say that gmh because from my persepctive in Perth the quality and choice (and price) of some of the properties in Sydney far outweigh that in Perth (especially some of the terrace houses in inner sydney).
I noticed that a couple of years ago here in Perth, people were busy renovating before they sold to increase value – now they dont bother.
What you find now is properties for sale that need alot of work and i dont think people are factoring that in. Investors over here are just thinking of capital growth without realising that the rent and income from an IP plays a crucial role in lean times.
At the moment everyman and his dog are making money, but i believe that true investors understand that there are both ups and downs, and its the ability to ride through both that make a successful investor.
Wouldnt you agree?
And I bet you are hearing the same arguments for capital growth we had,
“it’s different this time because of ….
deregulated banks
first home grants
twin income family’s
my cat is over weight ….well whatever…Plus you have the minerals boom will never end, just like the IT boom of the late 90’s or the Tiger economies of the 90’s.
Oh yeah I forgot…”.Property doubles every 7 years …and inflation and wage rises are NOTa factor. ” ……sigh
Makes great viewing from here.
Many will make great Cap Gains, and think they are visionary investors, and not just specualators and many coming in now….well there will be tears…
Yep Enmore, Stanmore Annadale etc within 10 klms of CBD sound like great value to me.
Nice post, but guess you are sailing against the wind.
Yep – it sounds familiar.
What I find amazing is that people in Perth believe that they are so removed from the rest of Australia that what happens over east wont affect us.
Yes we have resources, increased migration from cashed up places like south Africa, and yes Perth is the greatest place to live in the world (biased) but these are cycles not established fundamentals that go on forever.
That said, I would never advise anyone not to look at buying a property now – its just the expectation of 100% growth in three years that will be peoples downfalls. It will be this failed expectation to be another’s opportunity for long term gain.
I am interested to know what was the official or biggest sign in NSW that things were slowing down in 2003, and was this same sign reflected in what agents were saying?
I am also interested to know if there are any people out there that are confident that the Perth market is sustainable for another two to three years?
Cheers
Signs, well when it came to an end, there were none. We were expecting a nice show, fireworks would have been good, some melodrama wringing of hands and the “end of the world is nigh” headlines, but nothing really happened.
We had RE agents saying the market will go for another two years BUT expect ONLY 10% return from now on, run concurrently with attempts at detailed forecasting by various papers, on page four, that were hard to follow.
Guess the first real signs was when the property hype TV shows could not sell their properties at record prices, and these dropped off the air. This was then followed by a long pause.
Think Perth may make a little more noise, cause it is way more heated.
Think trigger will be things in China. End is pretty predictable.
Hope we get some fireworks.
Thats very interesting gmh.
I must admit that I have been reading these forums for about two months before i decided to join in.
I had a look at all the archives from 2002 and I couldnt believ the activity of forums over east – absolutely amazing – everyone wanted to put there 2 cents in. Then all of a sudden there seemed to be a huge gap in the contributions and people over there obviously lost interest as making slow money over a long term is boring to alot of people that are looking for that quick buck. SO i supposes the secret for all those perth investors is to have a look at the posts and see how many of them are positive as opposed to cautionary. I know I seem to sound a bit negative at the moment – but it could not be further from the truth – i have been a successful investor for the last 10 years and practice what I preach. I am just getting upset by the amount of distress this is causing many people, and I am not happy that this is not being addressed in the current situation.
By the way gmh – if you read my first post about the mispricing – an agent who did this has now taken the advertised fixed price off after 2 days and replaced it by an EOI thereby suckering them in and enhancing the fear in the buyer. Great ethics eh?
I see that in the last two days there have been almost 200 reads but only a couple of replies – I would have thought that this subject might have stirred up some emotion in you guys over east and that you might have words of wisdom for us perthites. Any takers?
Perthman, was thinking the same. Where did the Easterners go.
A lot of my clients two years ago beaming with pride over how “clever” they were now just don’t know what to do.
As BAD (bid audio dynamite sang) … “do I stay or do I go”
IF they decide to all go at the same time, THEN it could be interesting.
Can see the headlines now. REI say “never been a better time to buy”
And I too am positive about my investments, just a little more conservative.
Can read between the lines, the Perth posters are sounding very 2003
Hi Perthman
I am also from Perth and am a bit frustrated with the RE agents and current market we have here. I have a couple of properties here and am happy at the CG after only having them for 2 years. At the moment I am looking for a PPOR so my requirements are different to an IP. There is emotion involved when you expect a certain quality for your money and also location plays a part. When I buy an IP I just go by the numbers which makes it a lot easier.
My first house bought 2 years ago was a 3 x 1 on 1800m2 block near the river, I picked it up for just over 200 000 It is now rented out and is pretty close to neutrally geared. Unfortunately it is no where near my work so I now have to look for something better suited to my situation. The value of that place is now above 350 000 with out doing anything to it and the equity has certainly helped with other purchases.
So now I am in the market for a new PPOR and a house in Perth is unheard of at 200 000 actually you wont even find a house with a backyard for under 320 000 let alone 1800m2. I have spoken to about 40 RE agents and keep hearing the exact same thing as you are talking about. I went on the REIWA website 2 weeks ago and got the sales evidence for Forrestfield which is roughly 14 km’s from Perth, now the average price is about 250 000 for a 3 x 1 on 700m2. If you search the suburb on RE.com there is nothing under 300 000 and when I have made offers on places which are similar to previous sales under 300 000 the agent says I wont even present that offer to the owner. Most prices are now always advertised as from such and such or offers above such and such or like you say EOI.
I guess while we all keep running around paying too much for property the market will not slow its all about demand and there are so many people jumping in and buying a unit for an investment etc because they hear all the hype in the newspaper and TV. What I cant understand if the median price is 250 000 for a suburb but all the houses are advertised over 300 000 and when you call up the agent says we have already 2 offers at the asking price so you will need to come in above that what you are supposed to do? I hope that by the end of the year it has slowed down and our number of places for sale goes back up to roughly 10 000 at any one time instead of 5000 which it is a present because everyone is hanging on hoping for another 25% growth this year. At least then there would be some bargaining power for the buyer again. Until then I might just by a tent LOL.[blush2]
Thanks for getting into the discussion Roodog. What you said in your last paragraph holds very true for alot of buyers (especially first time buyers) in that a property already has two offers and you are expected to make an offer higher than that so you dont miss out.
SO what are your choices – as you say you can hold out or you can join the frenzy and end up buying a PPOR that you may not be entirely happy with but bought because you were afraid to miss out.
By the way – I wll give everyone here a bit of inside info. It has been noted that a quite a few property owners (especially around the wealthier suburbs) are selling up and deciding to rent for the next 6-12 months, and the people that are doing this are definately not silly.
Maybe someone can care to explain this phenomenom?
Maybe they’re trying to cash in on the capital appreciation at the top of the market. It costs less to rent than it does to pay off a mortgage in an up market like Perth at the moment
As for RE agents advertising a lower price to attract people then selling $100,000 higher. Yes it is a tactic to play with peoples emotions but is also illegal, it falls under the banner of missleading and deceptive conduct and they should not be doing it!!!
Xenia Ioannou-Mena
Property Manager &
Property Sales Consultant
E: [email protected]
M. 0412 437 582Originally posted by perthman:By the way – I wll give everyone here a bit of inside info. It has been noted that a quite a few property owners (especially around the wealthier suburbs) are selling up and deciding to rent for the next 6-12 months, and the people that are doing this are definately not silly.
Maybe someone can care to explain this phenomenom?
Damm, you are kidding. It also happened with Balmain Waterfronts (expensive) in around early 2003 from memory. Have a friend who lives there and her hubbie does reno style building for many.
BAD SIGN for Perth, as this starts to become a self fulfilling prophecy. Makes interesting watching.
Hi GMH,
IT seems like a bit of dejavu for you.
Can I ask the reason for there being no words of wisdom or caution from other readers and contributors may be due to the fact that they are all agents or people who work in finance that make a buck out the property frenzy.
Because if thats the case – there really is no point in getting advice from the same people who are responsible for creating all the hype.
I am more than happy to stand corrected.
Originally posted by perthman:By the way – I wll give everyone here a bit of inside info. It has been noted that a quite a few property owners (especially around the wealthier suburbs) are selling up and deciding to rent for the next 6-12 months, and the people that are doing this are definately not silly.
Maybe someone can care to explain this phenomenom?
Hi Perthman
I guess people might be thinking that if they take advantage of the “frenzy” now and make a good profit at a later date they will be able to buy back into the market under the price they have sold at.Maybe it is just a smarter strategy for creating wealth??
After considering my options I think it would be a wiser to move into a rental and just buy another IP.
When you consider that you cant claim any tax benefits from a PPOR so all those rates [grrr] and repairs etc would just have to be taken on the chin. If I were to move into a rental all those things would be the responsibility of the owner, the costs associated with my “new IP” would be tax deductible and I could also take advantage of depreciation etc.
This way like you say you could rent the kind of house you want to live in and not be disappointed because you had to pay too much and settle for somewhere where you would not even have considered living a year ago.
Cheers
Hi Perthman,
Been on long holidays so I have only just had time to ‘join in’ here.
The signs you and GMH mention should give every new Perth ‘investor’ cause for concern. The upbeat attitude about the Perth market is very similar to that experienced across many eastern capitals around 2003.
I might also add that some of your arguments can also be extended to regional parts of WA.
Me fears most of the current raft of purchasers are those who make their investment decisions based on what is reported in the popular press and are herd followers. This is very similar to those investors (and I use the word lightly) who bought at the top in eastern states markets and who are now sitting on minimal or in some cases negative equity, or those who purchased shares at the height of the 87′ crash.
Why did they purchase? Because the popular media was reporting the massive gains being made by other investors and they thought ‘profit’ was a foregone conclusion. It is this type of investor who is making offers well above asking price, or alternatively meeting exorbitant asking prices. As someone who has an eye to what is happening in Perth – some of the advertisements I see in the weekend papers simply do not make sense.
A more informed investor, on the other hand, will do their own research and will attempt where possible ahead of the herd – thus they experience the greatest gains of all. A more informed investor also knows that everything goes in cycles and that every asset class has it’s day in the sun and also in the rain and is prepared to work within these constraints and with this knowledge to the fore.
An article I read today mentioned that the rental returns in Perth are now the lowest of all Australian cities. Now I am an out and out ‘growth’ focussed investors but one also has to consider the cost of holding an asset and in Perth at the moment these are (generally) too high – even allowing for depreciation the holding costs are enormous.
In conclusion – Perth will come to a halt and when it does there will be some sorry people. Many of these people will be burnt and they will then run around telling friend that ‘property is not a good investment’ – in reality their research and decision making processes are flawed and some inspection of themselves is in order.
Cheers
Derek
[email protected]
http://www.pis.theinvestorsclub.com.au
0409 882 958
Skype – derekjones2113Hi Derek
Hope you had a good holiday and are well rested.
That is an interesting point about rental return for W.A, I think this would be the case if you bought now, the ROI would be rather low. If you had bought before the boom though I think you would be enjoying low vacancy rates and high demand for rentals now.
Rent in W.A and invest over east?[tired]
Thank you also for your informative email my reply is on its way.
Cheers
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