Obligatory news.com.au link

A few people around the traps here predicted this as interest rates continued to surge. Clearances are hitting an all-time low in major cities and a lot of people are looking to be in trouble.

Do you think that the market will face a serious correction? Do you stand to lose a lot of money?

I have a 280k mortgage which will probably dip slightly into negative equity if the Cairns market drops significantly. With a shiny new baby if I hadn't jumped ship to contracting / running my own business mid last year we would be dead in the water right now, or facing the stupid situation of having my wife go back to work with a 20 day old baby.

As it is I am still looking to make significant gains against the loan via extra payments so we clearly aren't struggling. I wish I had waited another 12 months to get a mortgage but circumstances would have probably made it harder for me now anyway.

So, how are you doing?

i don't really feel sorry for the people that went and borrowed 110% of half a mil for a house.

So does this mean that property value is going down, which will make houses cheaper to buy?

:( i bought a house on wednesday :(

WOOOT! (Kinda, interest will be a paaaiin)
Planning on buying a townhouse or unit (last resort) at the end of the year!
Hopefully everyone will get out, I buy cheap...and then interest rates will go down again!

No debt atm. Just sold a block a few months back, and the last house we built (which we've been living in the last 6 years) we did prior to the brisbane boom - the block was dirt cheap and the house is a cheap little speccie - it'd be real hard to not come out in front on it. Am looking around at land in bris atm but probably won't buy for a bit cos people are still asking for the dollahz.

So does this mean that property value is going down, which will make houses cheaper to buy?

This would be the logical outcome, wouldn't it? But I don't think that's how it works. I don't really get it.

I rent, and my unit just went back on the market. The owners put it on the market about 2 years ago, asking for what at the time, I thought was way too much for it. Now they're asking for even more - having lived here, there's no way I'd pay that much for this place - its poorly constructed (cheap-ass components everywhere that break at the drop of a hat and need replacing), next to a big loud shopping centre, with a big carpark that a******s hoon around in all hours of the night, its comparitively small, etc.

Now as I see it the owners have a couple options - keep putting rent up (which they do) to help make repayments, or just give it up as a bad gig and try and sell it. Because interest rates are so high, there's going to be less buyers (right? that is a complete assumption), so I'd think they'd have to try to sell it for less.

no way, property market will not crash in SE QLD. it's all supply and demand baby.

rising interest rates will dent demand, for a little while at least. but supply is simply not increasing anywhere near as fast as it needs to be and f***ing truckloads of people are moving here every week.

prices will stagnate for 3,6 or maybe even 12 months, they might even take a little dip in some areas, but the long term trend of rising house prices ain't going anywhere til someone (IM LOOKING AT YOU STATE GOVERNMENT) does something about increasing supply. well the trend would still be there even if the qld gov stopped being such s***c***s but it would at least make things more manageable.

edit: just realised OP isn't in SE QLD ><

don't know much about property markets up north hogfather, though it may be the case that the commodities boom is causing a bit of housing bubble up in northern QLD, i.e. too much money chasing too few properties artificially inflating prices. but unless the commodities boom ends (which may or may not happen depending on who you listen to with the current US situation - I reckon it won't) that bubble if it exists won't burst yet.

probably the biggest thing to remember is that even if your house goes into negative equity it doesn't really matter unless you need to sell it. housing prices in australia have a long term upward trend so as long as you can afford to finance it and ride out any short term problems then you really don't have much to worry about. it will go up over the long term.

last edited by taggs at 12:18:22 17/Mar/08

I wouldn't say crashed just yet. A correction at this stage really. But the media needs to hype it up to sell ads, so wotcha gonna do.

And no we're doing fine cause we bought the house before the boom so our mortgage is actually manageable.

taggs is right
all pointers suggest a mild decline - but - the simple fact that the supply/demand in SEQ is so skewed that there is very little chance for things to go backwards, and unlikely for it to even stagnate. A slowing in growth is very likely, probably just bring it back with the way it should be.

They were saying the same thing when we bought our house (Nov 2006). We had a bank valuation (for refinance) in September last year and the house was up 20% with little added value. The media is trying really hard to push the propaganda for a property crash. Where I live (Gaythorne), renovations and new builds are popping up like mushrooms. A few estates are happening in Mitchelton too. Someone is buying them. I have mates at work who are struggling to buy a house because there is too much competition and people paying above the asking price. I'm sure there are a lot of people selling up but no reports say how quick the fire sales are being picked up.

but supply is simply not increasing anywhere near as fast as it needs to be

There are 2, 10 story unit blocks that will be finished with a few months, and more planned. A number of "6 and 10" pack MDUs in Chermside. And a number of unlivable renos nearly finished. All around Chermside, and I'd imagine other neighbourhoods are similar.

So I'd say that supply is affected by people making money off block splitting, renoing, and units ... for profit

The UK and US markets have had big corrections after people worked out it was an investor bubble, investors selling to investors to sell to investors, with little hope of good returns (except by selling to other investors). That plus a few credit issues. And usually we copy those markets ...

I have mates at work who are struggling to buy a house because there is too much competition and people paying above the asking price.

I call bulls***. People don't pay over asking price on houses, they might at an auction.... but thats an auction. Also my brother paid siginificantly under asking on the house he just purchased (2 weeks ago). Remember never believe an agent, they are not on your side, or your friend. Their job is to get a sale and screw you out of as much cash as they can (the joys of commision based selling).

onthehouse.com.au is an interesting site. I have been looking at houses for aaages now. And can remember some of those houses (I email the good ones to myself) and notice most places go for between 10 and 30k under asking price.

last edited by Obes at 12:33:22 17/Mar/08

i dont know anything about property OR finance BUT

I rent cheap, live cheap, jam the extra cash into interest driven accounts and a black s13

nothing tying me down so I can f*** off anywhere anytime. Maybe go live in a tree or some s***. Awesome.

copy is a very harsh word to use obes
our situation, whilst similar, is not the same, and hence if any corrections do occur they would be for our situation.

also that's a good view to have maxe, i did that for a few years until i realised i'd prefer to pour my money into appreciating assets.

chicks dig guys that live in trees

I would expect a serious correction in residential property, as I have predicted earlier. It is the simple multiplier effect of interests rates on loan serviceability.

Over simplified example:

Buyer has debt servicing income of $50,000. At 7% they can service interest only loan of $714k. At 9% they can service an interest only loan of $555K. Their purchasing power as a result of interest rate rises thus has dropped over $100k.

All ships rise and sink in the tide. All buyers are affected in the same way (because next to no one buys a house with cash). As a result we see a major contraction in demand. Sure the buyers are still there but their purchasing power is weaker while interest rates are higher.

Dollars are not real, they are pieces of paper. And interest rates are the way the pieces of paper are made to change value.

Supply and demand are important but when everyone's purchasing power is neutered by the higher interest rates all prices must fall as a result.

Secondly, in this credit nervous environment, banks are more reluctant to lend AT ALL. Because banks manufacture their money out of thin air (through fractional reserve lending), the overall money supply churning through the system starts to shrink. This creates a recession - the money supply is receding.

Our economy is built on paper. When banks issue heaps of paper (home loans and credit) we have a boom. When they stopping issuing paper we have a recession.

This is the mirage no one really sees. But once you realise it, it can give the investor an enormous amount of power. To retain liquidity in a recessionary market means you can snap up assets at seriously deflated prices.

in this credit nervous environment, banks are more reluctant to lend AT ALL

bulls***. almost any old clown can roll into a bank and get a 100%+ loan.

It wont crash for 2 reasons.

1. To many Mexicans. Unless you guys want to ride shotgun at the border there aint no way the demand for housing will slow down.

2. Negative Gearing. No government Lab/Lib would commit political suicide by reducing the tax benefits on investor properties. Even though this is without a doubt the most effective 'lever' to fix the housing crisis.

i dont think its going to crash, mite slow down a little

definately tougher to own a house in the current climate;

Long gone are the days when you could buy a place on one income. And the government wonders why the birth rate is dropping. I wonder when this attitude towards housing been an investment first and a place to raise a family second will come back and bite us. Everyday it seems there is a story on how much homes are worth. This country to me appears to be heading down the extreme greed road more and more. House prices will not drop because people won't let them.

If you think house prices cannot drop you are a fool.

Look at the US. We are merely one phase behind their bubble.

12 months ago everyone in the US liked to talk about how much their house was worth at BBQ's too. Now you can buy 4 bedroom 2 bathroom houses for around $50k.

^ where? In Inglwood? Compton? Flint? Bumf*** Ohio?

I've seen numerous news reports from the U.S on foreclosures. MOst show that standard family homes have dropeed significantly in price but its more like $400k down to $350k.

The problem is that these ppl did what most Aussies have been forced to do and thats borrow nearly 100% to get into the market. This makes their debt greater than their now depreciating property.

We arent quite at that stage yet here.

If you think house prices cannot drop you are a fool.

I wish they would but I am far too cynical to believe they will. Governments do not care, banks have you by the balls and most people will try to rob you blind.

California and Florida are the states hardest hit by foreclosures. They accounted for 30% of all foreclosure starts in the United States last quarter, despite representing only 21% of the mortgage market.

This is all over the US.

^ I still say it wont happen here for 2 reasons.

1. Its a supply and demand thing. In the U.S there is plenty of supply and now waning demand. Here in AUst supply is a big problem and demand is massive.

2. We have a huge migration of ppl from rural areas to the cities in all states. Also migrants (not always) mostly try and settle in cities.

Yes, there is definitely a different market in Australian concerning supply. This may buffer Australia from a harsh crash.

However, you need to find people with money to pay for these houses and as I explained before, everyone's ability to pay the old high prices is limited when interest rates go up.

So fix the supply problem and stop being greedy c***s!

you are all idiots if you dont think the american market is f***ed.

The EUR is going strong ;)

The Aus market is doing OK, but it's not 'great'... we'll see over the next 3-6 months....

I've seen numerous news reports from the U.S on foreclosures. MOst show that standard family homes have dropeed significantly in price but its more like $400k down to $350k.

when I was just in the US the news in the papers was real estate had dropped around 10%, so 400k down to 350k is prolly about right

I've seen numerous news reports from the U.S on foreclosures. MOst show that standard family homes have dropeed significantly in price but its more like $400k down to $350k.

As infi mentioned check California and Florida.

But when you combine that drop with a falling US dollar. They are getting pounded.


People get confused with their houses, if you bought it for 300grand and then sell it for 500grand and have to buy into that same market that you sold into. You won't have made a cent. You still have 1 unit of housing. And if you are investing off your house, be aware that the margin you are borrowing off is entirely notional. Your house is only worth what people are buying it for (the US and UK have shown that can be less tomorrow then it is today).

ps. Negative gearing is losing money. It works when capital gains allow you to make more then you lost (ie. great in a boom, not a recession).

no pain for me :D my mortgage is nearly paid off n i'm on a really low fixed rate for the remainder. orrrjeh.

I purchased property a few days before the % hike in November, and there have been a couple since. Luckily I fixed my % for a year at the time - so I am hoping that by November we will see a % drop or in November - suddenly I'm f***ed... well not really, I make more money now than in November

yer, im not feeling any pain yet either;

got my home loan a few years back and its all fixed for a little while at a nice low percentage

im sure when that period finishes up ill be in for a shock though;

just crank out a few more $5 suckies and you'll be fine.

probably the biggest thing to remember is that even if your house goes into negative equity it doesn't really matter unless you need to sell it. housing prices in australia have a long term upward trend so as long as you can afford to finance it and ride out any short term problems then you really don't have much to worry about. it will go up over the long term.

Is this true? I had heard (maybe mis-heard) that the bank can order a valuation and demand that you bring the loan back into positive equity.

If this doesn't apply then it will be a big load off my mind. It will take a lot of interest rate pain to force us to sell and I''m not planning on letting go of the property for a few years yet min.

when talking dropped prices don't forget japan. they still haven't recovered.

house prices are dropping in spain too, with brits dumping investment properties they bought by borrowing against their homes.

an article I raed a while ago studied the longterm price movements of property in amsterdam over 300 years. in the end, while house prices may vary in booms, busts and bubbles, they are flat against inflation: http://abc.net.au/news/stories/2008/01/28/2148237.htm

Im the same, Idol, but i fixed mine (well Four Fifths of it anyway) for 3 years upon the advice of my mortgage broker (friend of my dads) and i had a look at the government bonds at the time and they suggested that the worst of the rates were going to plateau at about the 2 year mark (nov 09) and then start gradually falling. I estimated that 3 years would be about the time interest rates were back at where they were in nov 07 (7.87 var). Basically im trying to cut off the peak of the rates and re-enter the market no worse than i was in nov 07. Whether it works or not is another story.

I don't like the rigidity of a fixed rate loan; I want to pay this f***ing thing off ASAP.

As to whether or not it costs me money in the long run I have no idea :)

I had heard (maybe mis-heard) that the bank can order a valuation and demand that you bring the loan back into positive equity.

banks can technically call a loan in at any time, but if you have the capacity to keep repaying why would they?

they don't want to go around instigating foreclosures.

Because interest rates are so high, there's going to be less buyers (right? that is a complete assumption)

There might be some correlation between interest rates and buyers... but here's the thing: interest rates effect mortgages all over australia and perhaps elsewhere, whereas the high demand on housing exists in Brisbane regardless of this - so there is no shortage of buyers and renters here at the moment, and in a few other cities in Australia.

There are 2, 10 story unit blocks that will be finished with a few months, and more planned. A number of "6 and 10" pack MDUs in Chermside. And a number of unlivable renos nearly finished. All around Chermside, and I'd imagine other neighbourhoods are similar.

So I'd say that supply is affected by people making money off block splitting, renoing, and units ... for profit

drop of water in a very big pond. yeah, rising prices are causing more unit development and subdivisons etc. but supply is still nowhere even close to demand.

The UK and US markets have had big corrections after people worked out it was an investor bubble, investors selling to investors to sell to investors, with little hope of good returns (except by selling to other investors). That plus a few credit issues. And usually we copy those markets

which aus markets copy which american markets? property? not really - probably only to the extent that similar monetary policy causes them to converge sometimes. business cycle? we haven't followed US into recession since '91.

the big difference between aus and the US property markets is they had a genuine asset bubble, too much cheap credit chasing properties which artificially inflated prices. i don't beleive that was the case in SE QLD, or at least not anywhere near to the extent as in the US and UK. i think the supply/demand effect is much more important in explaining house prices here.

http://media.economist.com/images/20080301/CFN840.gif

edit: infi's right that rising interest rates will negatively affect demand, i think we disagree as to the extent of the effect though.

edit2: just realised that chart isn't dated, it's from 28/02/2009 economist.com

last edited by taggs at 16:19:00 17/Mar/08

Tagg's ... you obviously read around. The AFR had a recent article (2 or 3 weeks ago now, maybe more) talking about the number of unoccupied "units of housing" in the capital cities. It was in the the hundreds of thousands. I was kind of stunned, no idea where they pulled the number from.

i think the supply/demand effect is much more important in explaining house prices here.

An interesting statement. imo there is lots of land, and land values are what have risen (house prices haven't done alot). A little rezoning here, a road or public transport corridor there.

For instance, the government sells all its army bases/land inside captial cities. And rezones to rez A, maybe opens them up to only people eligible for a first home owners grant.

In Brisbane thats Greenbank range, Enogerra, a few spots on the river and some transport yards out at Banyo... and they are just the ones I visited when I was an AJ. (Whats some unexploded ordinance between friends!)

But the government won't want home owners feeling their "investments" have dropped in value. Plus 2 out 3 of the governments benefit from having spiralling land values. So they won't be drastically changing anything.

didn't catch that particular article but that doesn't surprise me, australians want to own houses/land not units. possibly this housing affordability 'crisis' is what's needed to shift that mentality.

An interesting statement. imo there is lots of land, and land values are what have risen (house prices haven't done alot). A little rezoning here, a road or public transport corridor there...

couldn't agree more with pretty much everything else you said, if the state government released more land, improved public transport and removed/reduced stamp duty I think it would go a long way towards improving the housing situation.

edit: obviously they are constrained by their budget but releasing land surely can't be too expensive (honestly i have nfi) and they were supposed to get rid of stamp duty with gst weren't they? public transport looks to be improving though if you don't live on the SE busway or on a train line you're pretty much boned if you want to commute

last edited by taggs at 17:16:19 17/Mar/08

australians want to own houses/land not units

this definitely used to be the case, but I dunno if it is anymore - at least nowhere near as much. the asking prices of units suggest that it's not so much.

bought my place in december and its worth 20k more now than it was then, like someone else said ^ supply and demand
im not worried

"units of housing" was a term they were using to describe any form of residence be it a house, townhouse, unit. Renters and other people at the bottom end of the market (eg. me) are far less picky about the "it must be a house" issue.

Because soon as you start talking supply and demand, people need a place to live. What it is becomes less important.

In Brisbane thats Greenbank range, Enogerra,

They are actually making the Enoggera base larger - over 1000 more soldiers or something. I heard rumours of them redeveloping Enoggera barracks to residential but after this announcement I think it is out of the picture. Maybe reclaim some for the new soldiers??

edit: The government annouced some time last year all the places they are selling up to make residential.

they are actually selling off greenbank, or parts of it

this definitely used to be the case, but I dunno if it is anymore - at least nowhere near as much. the asking prices of units suggest that it's not so much.

yeah that's probably true. im sure that with younger generations looking to become home owners and rising prices more people will change their thinking on this. we're one of the most urban countries in the world and i think the australian dream of a 4 bedroom queenslander for every family just isn't realistic.

Because soon as you start talking supply and demand, people need a place to live. What it is becomes less important.

dunno you what you mean by this?

edit: wrongquotelol

last edited by taggs at 19:02:43 17/Mar/08

like a tent might be acceptable if you are desperate enough i guess.

Exactly. (Except we are talking units vs. houses).

You keep saying supply and demand, demand is driven by a need to live somewhere and a want to own a dream. Price at the bottom end is driven by needs, prices at the top are driven by the wants.

ie. If you can't afford a water front house with 800sq block you scale back until you get what you can afford, as long as you have somewhere to live.

The only reason we currently are in a house is because of pets. As much as I prefer a house to a unit, the pets are the only reason for staying.

Kids might also have that motivation for some. But units atleast will take kids.

That's why lower value suburbs have increased in value faster. Affordability.

People don't pay over asking price on houses

I did.

how come?

The market won't crash, but it will plateau and possibly dip in some areas.

Mortgage belts in western Sydney where entire streets are for sale, will still fetch around the asking price.

People often pay more than asking price, just as they often pay less. Depends on so many facotrs its not worth discussing! Stupid statement to suggest anything else.

I have a substantial mortgage, but my LVR isn't much more than 65% and I am on a 'lowish' fixed rate (7.64) for another 34 months - so I'm not worried. I don;t intend to sell anytime soon either, so just as my shares are freefalling in value, my house can too. I won't be locking in the loss, so its not really an issue for me!

if the government does find some land to release so we have more land to build on all that will happen is the big developers with buy it up and then withhold it from sale until the demand grows again so unless it is made available for private buyers only then releasing more land will most likely not achieve much.

how come?

Money was burning a hole in my proverbial pocket. Too many people going for the same house (was on the market for 2 days) so we decided to blow everyone away ($5k whoa look out) cause I REALLY REALLY cant be f***ed getting into a bidding war over a house. Silly? Maybe... as you might say there would of been others but the house will now be rented straight for 2 years and at this rate I hope it stays that way.

1. Its a supply and demand thing. In the U.S there is plenty of supply and now waning demand. Here in AUst supply is a big problem and demand is massive.

the places where foreclosures are a problem are the same places that had a supply problem. ie: california. supply or demand problems don't guarantee the current prices are rational.

nah I don't think it's silly, I was just curious

Skitza if it was truly an auction with out the auction and you paid what you wanted to pay for it then sure.

But seriously, listing price is what the vendor hopes to get, ie. its usually more then the minimum they will take.

ie.
bob: How much for the apple ?
fred: $1
bob: How bout I give you $2, I really want it.
fred: sure

I didn't pay asking price, I actually paid less like maybe $10k less?. But then I was buying before the boom so was lucky I guess.

I paid $10k below asking price and then i was a c*** and made the old hag get some s*** fixed before i'd sign. I think i did alright. I felt like a bit of a bastard at the time, but it's not my job to look after anyone's bottom line but my own.
PS i reckon my LVR is now about 76%

LVR?

I paid asking price for my Range Rover, but that was before the boom of the subwoofer I installed.
So its prolly worth 5% more because its got gansta sounds now.

at least that
how many subwoofers are driven by maxidrive? not many I can tell you

I know someone that has had LVR. It is supposed to boost your sex drive.

seeing how i missed out on my $120k house in '02 and now it cost about 400k, i hope it crashes. then i buy : )

Loan to Value Ratio. It's a pity most values are complete bulls***.

What you should do is buy an apartment in niseko (ski town) in northern japan which you get on the back of a japanese loan @ 2-3%. Then just move there and caddy in the summer and ski all winter :P

if the government does find some land to release so we have more land to build on all that will happen is the big developers with buy it up and then withhold it from sale until the demand grows again so unless it is made available for private buyers only then releasing more land will most likely not achieve much.

There is plenty of land, they ust won't include it inside the UGB and the approval process takes too long for Developers to absorb the holdings costs throughout the process.

kitza if it was truly an auction with out the auction and you paid what you wanted to pay for it then sure.

But seriously, listing price is what the vendor hopes to get, ie. its usually more then the minimum they will take.

Completely incorrect. Depends on location, demand, urgency and the selling agents chosen tactic. In fact many homes are listed as "High 600's" or "mid 500's" these days.

We paid 19k less than asking price for our house. They kept trying to bargain us up but we weren't emotionally involved with the house; kept telling them that they could take it or leave it.

I actually expected them to leave it but was surprised that they took the offer. Generally unless there is a lot of offers or its a zomg deal I've been told you should be able to get 5-10% off the asking price easy.

No spidz not incorrect, the price is what they are asking for and you can generally expect buyers to offer less then that. If they are saying offers high 500s they are not putting a price on it. Different to a property listed at 579000.

When you buy a car do you randomly offer 1-5% more then the seller wants ?

Paying more then listing is usually reserved for gazumping. Or people who have their "heart" set on a property, and get told there is a bidding war. (The auction you have when you aren't having an auction).

But because its me saying it, and because spidz has to automatically counter anything I say. I offer some links.
http://www.realestate.com.au/review/oct07/what-price-to-offer.html

In most markets (other than during boom times), houses sell for less than their asking price. There is no standard discount, but as everyone knows there will be some ‘argy bargy’ about the price as agents tend to ‘list the property for sale’ at an asking price usually about 5-10% more than the vendor will accept to sell their home. So the asking price is just a starting point for the negotiations.

If you pay what the seller is asking you could be wasting money. The trick is to know how much less the seller will accept. Sometimes it’s only a few thousand dollars. Frequently it’s about 10% or more, but in a seller’s market - a hot market, as we are currently experiencing on the east coast of Australia, where there are many buyers making offers, vendors may not be willing drop the asking price at all.

http://www.smartvendor.com.au/private_sale_property_pricing.html

You may however wish to include a small buffer to allow for some negotiating room. 5% more on the asking price will give enough room to negotiate but will not overprice the property so much that buyers are scared away.

The advice seems to be for sellers set your price higher then your minimum, and the advice for buyers seems to be bargain it down.

you can't compare a car with a house obes. A car is a depreciating asset, a house is an appreciating one. You know in 3 months time you'll be paying that extra 1%-5% anyway, so some people think that paying the little bit extra now and not have to f*** around for another few months is worth the money.

If you pay what the seller is asking you could be wasting money. The trick is to know how much less the seller will accept. Sometimes it’s only a few thousand dollars. Frequently it’s about 10% or more, but in a seller’s market - a hot market, as we are currently experiencing on the east coast of Australia, where there are many buyers making offers, vendors may not be willing drop the asking price at all.

you kinda ruined your own point obes.

But I do agree you'd be silly to pay over the asking price for a house, don't get emotionally attatched to it, there will be others

You can compare the process of buying or selling something.

But ok ... appreciating assets ... Would you do it with shares ? of course not. Buyouts sometimes appear like they do, but they are simply setting the price to get the majority of shares that they need to achieve ownership.

You buy something for what it is worth today, not for an unrealized potential future profit... well you can but that's gambling not investing.

You know in 3 months time you'll be paying that extra 1%-5% anyway

That logic works if the vendor is happy to sit around that long. (At which point they would have been the same off as if they had sold cheaper earlier). Alot of vendors are udner pressure to sell.

Honestly, go argue with the thousands of books and websites that all say the same thing.

hey, im not saying i'd do it nor am i supporting it
im just trying to explain to you what i think some people do.

My parents recently sold their house, and got 90k more than asking price....They put it in at waaaayyyyy too low though. It's a f***ing wicked house though, Move out after 18 years end of this month :(

Heardy I don't think it's silly. But I think telling people that it is normal to pay more then asking is silly.

And it usually happens when gazumping or there is an emotional attachment. Can also happen with undervalued properties. The last 2 only cause it to happen if there is a bidding war (hopefully it is a real bidding war and not an imaginary one made up by the agent)

Whats the next piece of advice from the forum... you should pay rrp on new cars ?

for the people that dont think you ever pay over the asking price: wrong :P ...i had been looking for about 2 years at buying a place... many of the inner city units that i looked at had well over 100 people crowded into them at their open inspections... with that and over 10 offers going in ON THE DAY we had to offer over... for one unit we offered about 2K over the asking and the real estate called us back an hour later saying that we were more than 10K under the highest offer and that there were a few other parties that were above us... (he wasnt trying to get us to come up... basically told us we were out of the running)
...eventually i did endup getting a place for about 5K under what they wanted... so its not all crazyness... but the fact that that is still happening makes me think that the market (at least in brisbane) shouldnt take to much of a flogging... (i hope anyways :P )

for the people that dont think you ever pay over the asking price: wrong :P
...
...eventually i did endup getting a place for about 5K under what they wanted.

So within the same post you've managed to completely argued against yourself. Basically you're agreeing with Obes? Is that what you're point is?

You buy something for what it is worth today, not for an unrealized potential future profit... well you can but that's gambling not investing.

This is financial illiteracy demonstrated perfectly.

The value of all assets is determined by how much they will be worth in the future. It's like, how the whole financial system works.

Perfect example: commercial property sells for around 5.5% yield. Now why should property (which the land owner needs to lease out and collect rent bearing a risk of vacancy) yield less than money in the bank 7%?

Because of the expected future capital growth which is factored into the overall return on investment.

I could make some more complex examples but I think it would just go straight over the top *whoosh!*.

we paid $15k less than asking price, could have been more but i was battling wifey

realestate agent knew wifey was keen so was really pressuring her to pay the extra $5k with the usual tactics

i think what we finally paid was close to the real value of the house, what the previous owners were asking was super ambitious and i guess put people off making offers

i wasnt really expecting them to seriously accept our offer, my place didnt make want to buy it originally, im certainly glad i did now, it just took a while to grow on me

We paid $2.5k less than asking, this was about 7 years ago now.

We were just so over looking etc and really wanted this place so we didn't really care, even if we paid full price. Mind you I don;t think we could have anyway cause we were over our budget to start with.

Oh well, happy days as it would at least double what we paid back then.

and your area is gold mission, PURE GOLD

i would have killed to be able to afford to live in Annerley where you are mission;

not in the place we were in, coz its falling down, but we just loved that area so much;

You might pay more then asking, if its undervalued and there are more buyers. Sure. Market value is determined by the buyer. If you start paying more then asking price for sentamental/emotional reasons then that's not always a good idea.

But assume you are the only buyer, they are selling a house for 500k, you think its undervalued... you going to offer 480k ? or 520k ? ... and if they stand firm on 500k, you going to pay 520k or 500k ?

Infi, So you'd buy something at a premium (above what they are asking) for what you guess its value to be in the future ?

No of course you don't. You buy it for what its worth today and hope that it will be worth more in the future. You may buy them because you believe they will be worth more (a different statement). And somethings Market value might be affected by potential for growth (eg. share values jumping at the rumours of take overs). But again in that example, if you buy at that inflated price you are gambling that the take over happens.

example.
CBA shares will one day hit $70... today they are worth sub 40.
You going to buy them at 40 or 70 ? ... you buy them at today's market value (Which is what 39 and change).

The value of all assets is determined by how much they will be worth in the future. It's like, how the whole financial system works.

Try getting a 120% loan on a house. See if the financial sector agrees with you. Think they might want you to pay a bunch of insurance (if they bite at it at all, which I doubt). But I do agree with that statement sort of. Its why banks loan money (long term they will make a profit). I also disagree that anyone would pay a premium for an unrealized potential gain, and call it anything but speculating (gambling).

And I get your example of factoring in capital growth. I actually would have said bank shares are even better example. I have bank shares that have lower returns then that same money in the bank but hopefully will have a bigger long term return due growth in the share price (on paper I have taken a bath in the last 12 months, still massively up on my starting position, but that bath is a paper bath it means nothing unless I liquidate it).

Its why negative gearing "works" (I am not a fan). But I'll still argue paying a premium above market value becuase that's what it will be worth in 3months, is speculating that that particular asset is going to grow by more then the market average.


spec·u·late (spky-lt)
v. spec·u·lat·ed, spec·u·lat·ing, spec·u·lates
v.intr.
1. To meditate on a subject; reflect.
2. To engage in a course of reasoning often based on inconclusive evidence. See Synonyms at think.
3. To engage in the buying or selling of a commodity with an element of risk on the chance of profit.
v.tr.
To assume to be true without conclusive evidence

valuations are fictional figures to be used as a guide only.

people (lemmings) feel comforted by the fact that some book or report has told them their asset is worth X. the simple truth is that no asset's value is verified until a sale occurs.

that being the case if there is only one buyer and one seller, the seller is free to bargain down but in a competitive market a willing but not anxious buyer still needs to ask themselves "what do i need to pay to take this out of the market?"

no obes, use a realistic scenario

say you know CBA shares are going to be $70 in the next year or three

and they're currently $39 and change

and A LOT of people know this

what are you gonna do

buy em for $42 now or miss out?

only to come back to try and buy some more in 3 months to find they are $48

yes it is a gamble, sometimes you need to have an educated risk to ensure gains are made.

people (lemmings) feel comforted by the fact that some book or report has told them their asset is worth X. the simple truth is that no asset's value is verified until a sale occurs.

well duh
but until a sale occurs, they're generally a fair indicator

they're generally a fair indicator

but for the fact that valuations are usually used to underpin bank lending, and lenders seek conservative valuations.

for a buyer this is no real guidance because they will need to compete to pay the top dollar.

I'd call that a fair indicator
it stands to reason that a banks valuation is going to be in the banks interest - it doesn't mean the owner can't use a bit of grey matter and take that into consideration, even if a bank valuation is the only valuation they choose to get

Whats the next piece of advice from the forum... you should pay rrp on new cars ?

haha, I love it when people are convinced they got one over a car dealer. Oh but I got a good price, and he even got me cheap rust proofing, sound deadening, windows tinting and paint protection!

we paid $15k less than asking price, could have been more but i was battling wifey

i wasnt really expecting them to seriously accept our offer, my place didnt make want to buy it originally, im certainly glad i did now, it just took a while to grow on me

Agreed! when I bought my place my brother told me to make an extremely low offer to start with. I made an offer $30k under the asking price and thought they'd tell me I was dreaming, but no, they countered, I countered and we ended up about $15k under as well.

We offered $40k less than asking on our place and it was accepted, go figure.

i got a good story about my dad getting a good deal at a dealer..

he was buyng a v8 fairlane - there was 2 in the lot so he took out the one with more k's for a test drive - thrashed it up the highway and all over - when he got back to the yard he said he would take the other one - cause this one had been thrashed - he talked the dealer into a realy cheap price with a bunch of fixes and addons...

day comes to pick up the car and the car yard boss comes out and says sorry the deal is off - my dad had allready signed so he threatened to call the police and the guy showed him how it cost him 5 grand over his cost price to supply the car - my dad said tough s*** etc and eventually after about 30 mins the cops came and my dad got to pick up his car

my dad = pro dealer

that sure is a good story

that story can go straight to the pool room.

i agree

day comes to pick up the car and the car yard boss comes out and says sorry the deal is off - my dad had allready signed so he threatened to call the police and the guy showed him how it cost him 5 grand over his cost price to supply the car - my dad said tough s*** etc and eventually after about 30 mins the cops came and my dad got to pick up his car

Are you sure about that? sounds like a civil matter to me, and outside of police jurisdiction.

Geez this is all depressing :/

depressing? i'd love a V8 fairlane

on gas, of course

isn't it more like, this thing is mine, i have signed for it therefore own it, police, let me take my thing home?

Obes,

Your problem is that you read alot of books and websites, but have never actually bought or sold a property.

I've sold properties for more and less than my listed price and also done the same when purchasing.

I sold my house in December, I listed it at $525k on the advice of the agent, but was never ever going to take less than $550k. I needed $550k minimum to fund the purchase of my new place.

It sold in 2 weeks for $561k.

The place I bought was listed 'high 600's' and I paid $625k. It was 2 blocks away.

Every transaction is influenced by a number of variables - all different and rarely following 'guidelines' listed in a book from Jenman or a website trying to sell ads.

isn't it more like, this thing is mine, i have signed for it therefore own it, police, let me take my thing home?

the 10 day cooling off period works both ways, perhaps?

spidz you are so smart can I be your prodigy

protege

no prodigy

er, it is actually protege:

pro·té·gé /ˈproʊtəˌʒeɪ, ˌproʊtəˈʒeɪ/ Pronunciation Key - Show Spelled Pronunciation[proh-tuh-zhey, proh-tuh-zhey] Pronunciation Key - Show IPA Pronunciation
–noun
a person under the patronage, protection, or care of someone interested in his or her career or welfare.

Maybe he wants to smack his bitch up?

change his pitch up?

I sold my house in December, I listed it at $525k on the advice of the agent, but was never ever going to take less than $550k. I needed $550k minimum to fund the purchase of my new place.

It sold in 2 weeks for $561k.

The place I bought was listed 'high 600's' and I paid $625k. It was 2 blocks away.

Man that kind of stuff should so be illegal :(

Fair enough if you want to get as much as you can for a property, but that's what auctions are for.

Regular sales should only be allowed to sell for the advertised asking price.

All this system of listing low and selling high is really bad for the general community/population :/

They are nothing more than guide prices. You shouldn't even worry about what the price is listed on a website or the real estate window as it is often unrealistic and based on what the seller bought the house for and them expecting to make money off a bad purchase. Do your research on the area and what other houses have been going for. Use this information and apply it to the property at hand taking into account what it will cost to get it up to your desired standard and offer what price you think is fair. If you get turned away then you have lost nothing. Always remember that the buyer is the one with the money so has the upper hand. In most circumstances the seller is in a more anxious/desparate position than the buyer.

Man that kind of stuff should so be illegal :(

what? two consenting parties should be able to negotiate whatever the hell kind of contract they want.

listed prices for properties are usually only guides...

Raven anywhere else it would be illegal, but in housing the bait and switch is legal (if an agent is taking you to see a property, take your own car). But I agree it should be a law that you have to accept a no conditions contract of the asking price. Sometimes undervaluing is not intentional, other times going over asking price is done while other nastiness happens (eg. breaking a contract to accept a higher offer, happened to my folks on a place in Shorncliffe in the early 90s). Or like spidz it can be a marketing tactic. It only works as a tactic because buyers let it, buyers have to be prepared to walk away.

Spidz so you honestly believe paying above asking is a normal practice ? (by normal I mean lets say 20% of sales).

And you're right I haven't bought one... but I have spent longer researching the market then most people (cold feet ... not confident I'd be able to service a large loan say 60% of a cheap house on 1 income). And with the share prices dipping, I'll be researching a bit longer.

But my olds who have bought and sold more houses then I care to remember, in booms and in flat times (I went to 4 different primary school, my sister I think was 5 or 6). Would have (and have given me, and my sister and brother who both purchased) the advice 5-10% off asking unless it is truely a bargain.

All this system of listing low and selling high is really bad for the general community/population :/

yeah lets pass a law stopping a buyer from paying a price they think is a good price. They need protection!!!

People will pay above asking price when prices are rising quickly and there isn't much quality stock. It is what pushes the boom. Estates use a low asking price to get people through the door. If those people think it is worth paying extra for then they will act on it.

You can't have a set asking price as no one knows what the actual value of a house is. It is what someone will pay for it as cliche as it might sound. By negotiating on a price both the buyer and the seller are happy.

If the contract is broken after it has been signed then it is illegal and it could be taken further. You can't do that in Australia. All offers must be in writing and sited by the vendor. Tell your agent this if they refuse to take your offer to the vendor and ask to see the response.

A vendor won't always take the highest bid either, they are going to take someone who they are confident finance won't fall through and can settle in a time compatible with them.

last edited by Herron at 10:40:54 19/Mar/08

if people want something, they will pay for it;

spidz is happy, im sure the people that bought his house are happy, why cant we all be happy for them?

You can't have a set asking price as no one knows what the actual value of a house is. It is what someone will pay for it as cliche as it might sound. By negotiating on a price both the buyer and the seller are happy.

Which is fine, though more research should be done. There's nothing wrong with selling *below* the listed price, but if it's not an auction, then rejecting *any* offers at (or above) the asking price should be illegal. If you want an auction, then you should be paying the appropriate taxes etc and following the appropriate laws.

As already pointed out, in any other industry it'd be illegal.

last edited by Raven at 12:00:49 19/Mar/08

A vendor can refuse an offer of $100k more than the asking price if they don't think the buyer is appropriate (can't pay it, can't pay it on time, time waster etc). It isn't an auction for this very reason.

isn't it more like, this thing is mine, i have signed for it therefore own it, police, let me take my thing home?

Nope. It's a civil matter, not a criminal. The police can't be expected to know every civil law in the country, not even a QC does.

There are governing bodies and court systems that you would have to take this issue through, the attending officer may have stated an opinion like 'fairs fair mate, if you signed the contract you should give him the car' but they have no power to enforce said opinion.

Which is fine, though more research should be done. There's nothing wrong with selling *below* the listed price, but if it's not an auction, then rejecting *any* offers at (or above) the asking price should be illegal.

why in the f*** should anyone else have a say as to what person X does with their own property other than person X (not withstanding obvious exceptions)?

the listed price is a GUIDE. it gives the buyer some information as to whether there could be a transaction which is agreeable to both parties. it is an indicator or a signal.

and why would that be illegal in any other industry?

i give up! *throws hands in the air*

if people want something, they will pay for it;

Exactly, a house is only worth what someone is willing to pay for it. Say I list my house for $300k and on the first visit someone wants to put a contract on it, I'm going to think that perhaps I've asked way too little, or if there are a few people interested in it then of course I would push them to go higher if the interest is there. If people know they are competing against others to get a place then they'll pay what they need to if they really want it. So receiving more than the original asking price does not at all mean someone is getting ripped off

As a buyer I can't see myself making an offer above the list price, but I can see why (especially in a multi-offer situation) it might happen.

If an agent and the vendor just decided that they were going to blatantly demand more than the list price I would walk immediately. It may not be illegal but I just wouldn't take s*** like that from a real estate agent, a profession I don't have a lot of time for.

why in the f*** should anyone else have a say as to what person X does with their own property other than person X (not withstanding obvious exceptions)?

I think what people are saying is that its a deceptive practice if you advertise something for sale at $x, and you come along and offer $x, and then you decide its not actually for sale at $x, but $x * 2.

eg - if you see an ad in the paper for a cheeseburger for $1, and you rock up and ask for a cheeseburger and they tell you they're now $2 because so many people wanted them, you'd be pissed off, because you want that goddamn cheeseburger for $1. I assume there are all sorts of laws about this for normal retail stuff, surely?

They should advertise Reserve and Instant prices - OCAU Stylze.

eg - if you see an ad in the paper for a cheeseburger for $1, and you rock up and ask for a cheeseburger and they tell you they're now $2 because so many people wanted them,

that would be illegal under the Trade Practices Act and Fair Trading Act, but that is not what is being discussed.

The example being discussed relates to a buyer who chooses to offer more than the asking price. It would not happen very often but at the same time it may happen on occasion in a very tight market.

A very good example is the tender arrangement where buyers must name their best price. Why on Earth should such practices be illegal?

that would be illegal under the Trade Practices Act and Fair Trading Act, but that is not what is being discussed.

Really? I read this from Raven's post:

There's nothing wrong with selling *below* the listed price, but if it's not an auction, then rejecting *any* offers at (or above) the asking price should be illegal.

If we want to get really technical about it, legally speaking advertised prices are called an "invitation to treat". Basically, an advertised price is an invitation for a buyer to come to the vendor and ask to buy AT THAT PRICE. (As opposed to a unilateral offer to the world where the seller intends to be bound by any person who accepts the terms stated.)

The buyer is making an offer to buy. A contract consists of offer AND acceptance. So then the vendor has the option to accept the offer or make a counter-offer.

Furthermore i don't see why a vendor should be held to their listed price if they underestimated the market or a significant adjustment had occurred. A vendor should be able to get the highest price for their asset without being deceptive as to the bargain on offer.

If we want to get really technical about it, legally speaking advertised prices are called an "invitation to treat". Basically, an advertised price is an invitation for a buyer to come to the vendor and ask to buy AT THAT PRICE.

Right - this is why Raven is saying it sucks that when you try to buy AT THAT PRICE the vendor tells you to f*** off and it now costs a lot more (unless I'm misreading what he's saying).

Furthermore i don't see why a vendor should be held to their listed price if they underestimated the market or a significant adjustment had occurred.

Isn't this like saying, "I don't see why I should have to lose a stack of money if I bought a bunch of shares and the value of those shares dropped because of a 'significant adjustment'"?

A vendor should be able to get the highest price for their asset without being deceptive as to the bargain on offer.

Well, I assume that's the argument - what counts as deception in an offer. If McDonalds lure me into going into their store with the promise of $1 cheeseburgers then realise that they underestimated the market for cheap cheeseburgers, or there was a significant adjustment in cheeseburger component pricing - why should that be my problem? Shouldn't that be their problem for failing to understand their market?

it all depends on what is "deceptive", that's what we have courts for i guess. it's a tricky one.

the bottom line is there's no deal until the parties shake hands and a deposit is paid.

This is why we should go back to duelling as a method for settling disputes... see how many people engage in deceptive practices then!

The very reason we have misleading and deceptive conduct laws is to stop consumers being defrauded. In real estate transactions no-one is treated as a consumer, all parties should have equal knowledge.

Well, I assume that's the argument - what counts as deception in an offer. If McDonalds lure me into going into their store with the promise of $1 cheeseburgers then realise that they underestimated the market for cheap cheeseburgers, or there was a significant adjustment in cheeseburger component pricing - why should that be my problem? Shouldn't that be their problem for failing to understand their market?

Yeah but McDonalds have got cost information etc, so they can make an informed decision based on how much it cost them to make the burger as to how much profit they wish to receive.

If you are selling your house, sure it cost you heaps less than what you are selling it for, but to buy a similar house, on similar land in a similar area would cost you more as well. So what if someone advertises their house at a price that is severly understated in the current market, and then try to purchase elsewhere and get jacked?!
There is no hard and fast figures on which to base the decision on! Thus people should be able to ask whatever they want for their house, and if anyone else wishes to oblige them then so be it!

Isn't this like saying, "I don't see why I should have to lose a stack of money if I bought a bunch of shares and the value of those shares dropped because of a 'significant adjustment'"?

no it's like saying that "I shouldn't have to do anything with my own property that I don't consent to, and if I decide to reject an offer for any reason I should be allowed to do so because we have a legal and economic concept called property rights which is the foundation of our entire system of capitalism"

the comparable example to your shares example is: "I refuse to sell my shares for any price less than $X" and it is well within your rights to do that. whether or not you find any buyers is another matter.

you could reject a $100m dollar offer on a $100k house if you were retarded enough to do so - and it is and should be your right to do so.

Well, I assume that's the argument - what counts as deception in an offer. If McDonalds lure me into going into their store with the promise of $1 cheeseburgers then realise that they underestimated the market for cheap cheeseburgers, or there was a significant adjustment in cheeseburger component pricing - why should that be my problem? Shouldn't that be their problem for failing to understand their market?

don't think that's a good analogy. 1 retailer/f***tons of consumers arrangement vs. party A/party B contract arrangement. completely different situations. i'll say it again, listed real estate prices are really only a GUIDE, SIGNAL or INDICATOR. they give the buyer some idea as to whether they could come to an agreeable contract with the seller.

deceptive practices are another matter entirely, and unfortunately they do occur. that's why there are laws against them. sure people get away with deceptive practices and they aren't caught or prosecuted. but if you think that a law like the one raven proposed would stop deceptive practices than you'd be naive in the extreme.

edit: spellinglulz

last edited by taggs at 19:39:38 19/Mar/08

Spidz so you honestly believe paying above asking is a normal practice ? (by normal I mean lets say 20% of sales).

In certain market conditions, yes. Probably more than 50%

Some agents have only one tactic no matter what the market conditions, so 100% of their sales would be more than advertised price. Or they just get sacked and don't sell anything!

I researched pretty heavily before selecting the agent to sell my home. They didn't always use the bait tactic, but felt it was the best practice for my circumstances. Which were hot location (places selling within days of listing) and urgent sale. I think if I held out longer I could have got more, but I accepted the offer because I wanted to be certain and I ended up selling to someone I know, which resulted in a 20% commission kick back for finding the buyer myself :)

so they can make an informed decision based on how much it cost them to make the burger as to how much profit they wish to receive.

So why is property exempt from this?!?!?

This is what I don't get.

My place is on the market, and they are asking WAY more than I think its worth having actually lived there. It is noisy, the build quality on everything is s*** (things break all the time), its small, etc. How come these factors make almost f*** all difference to the price?

don't think that's a good analogy. 1 retailer/f***tons of consumers arrangement vs. party A/party B contract arrangement. completely different situations. i'll say it again, listed real estate prices are really only a GUIDE, SIGNAL or INDICATOR. they give the buyer some idea as to whether they could come to an agreeable contract with the seller.

Shrug, in both cases you have one party making an offer and one party wanting to accept. It's just selling s***.

Property just has magical stuff around it for reasons that I don't understand - and I'm trying to understand them, which is why I'm posting here. I just don't get why its different, other than the vast sums of money involved and the fact that 99.99% of people will never spend that much of money on any one thing ever in their lives.

the comparable example to your shares example is: "I refuse to sell my shares for any price less than $X" and it is well within your rights to do that. whether or not you find any buyers is another matter.

How is this different from advertising a house in the paper for $300,000? Isn't that just saying "I refuse to sell my house for any price less than $300,000"?

The issue isn't people offering LESS, it's people offering the amount that you SAID you'd sell it for. Again, this is Raven's argument, not mine, I'm just trying to figure out why it works like this as well.

The issue isn't people offering LESS, it's people offering the amount that you SAID you'd sell it for.

Look no one is saying it's an honourable thing to do, but in situations where both parties have equal power, quite simply both parties have to be happy with the deal in the end. The seller can change their mind at any time and that is their right.

At law, the "invitation to treat" rules are quite specific, no deal is done until the seller accepts the arrangement.

This is quite separate to the law of "unilateral contracts to the world" e.g. a cereal box competition where the advertiser outlines a set of rules and understands they will be bound to honour those rules with every person who conforms to the conditions.

The situation where a seller may fall foul of the law is where there is significant market imbalance and/or deceptive or misleading conduct e.g. the recent "bait and switch" tactics used by petrol stations over Easter advertising unleaded fuel at a bargain price and then saying they have run out and buyers have to resort to buying premium fuel. This is illegal.

Humm I'm pretty sure these days when property is listed at $x they'd say "Offer over $x". So it's essentially it becomes tendering / auction process. Having said that some people do sell it at their listed price or under (depending on their circumstances), not many now but some do. I think it's not really bait pricing but, it becomes tendering / expression of interest bidding. I can see why people get pissed off though because some agents don't make this clear so it looks like they're baiting people.

For example, my grand ma just lost her husband recently and she was approached and make the offer - which _I_ think it's *substantially* (like by a lot) under market value (their house is in Aspley, large block prob. 800sqm, nice quite street, big yard front and back, park up the road, good sized house, split level with 3 beds, sep bath & toilet, double garage, rumpus room And only up the road from Chermside shopping centre - would be a perfect family home). And she accepts is because she wants to leave. So if you're persistent enough you do find a bargain. This doode whoever he was scored big time he'll probably make x 3 the amount he paid for.

When it comes to this kind of things emotion comes into play, objectivity goes out the window this is preciously WHY so many people are struggling with mortgages. That's why there are people that will make a killing investing in anything because they are looking at these things purely from an investment point of view.


last edited by Opec at 10:20:30 20/Mar/08

Opec, you wouldn't give that away for less than half a mil, would ya?

Opec, you wouldn't give that away for less than half a mil, would ya?

Mr Hardware, I am sad to say that it's actually went for A LOT LESS THAT THAT. IIRC she was offered $350k-400. Imagine that.

a crying shame...

She should have said: "tell him he's DREAMING!"

Not sure on its accuracy but I heard some stat on TV a little while ago saying that in Aus last year the average sale price for realestate was 6.5% below the list price.

She should have said: "tell him he's DREAMING!"

She should have said to me, "you've been a good grandson, I'll sell it to you instead.....". Oh well it's her house she does what she wants with it.

Wow, trog's done a brilliant job of making my own argument for me - thanks trog :) That was the easiest argument I've ever gotten into!

As he said - why should property be any different to any other market? If McDonalds undervalued their cheeseburgers, you wouldn't see them being able to get away with saying "no, actually, we know we can get more". Yeah, they can change the advertised price, but they have to do that first, and go through a process and reasonable period. But they can't reject anyone who offers that asked price.
What I said before was that property resellers should start high, and work down, if they're unsure of what the acceptable price is. Why is it the markets fault a reseller was no good at research in pricing? Why should the property market be exempt from bad sales decisions - which the way it is seems to only hurt buyers, but never sellers (unless you're an investor).

in the context of residential property it's not a retail market, it's largely a private market.
how come you're comparing it to cheeseburgers, or other markets that are strictly retail/commercial and expecting it to be just like them?

Because a mass marketed commodity is exactly like a unique individual product, duh.

don't say 'duh' to me, I don't like it

NY Times The US sub prime problem explained...

Bubbles lead to busts. Busts lead to panics. And panics can lead to long, deep economic downturns

Their housing boom happened 3 or so years before ours ( 98/99 ).
Like OZ property values had never dropped in the US.

in the context of residential property it's not a retail market, it's largely a private market.

well, compare it to ebay, or some other private ad

how come you're comparing it to cheeseburgers, or other markets that are strictly retail/commercial and expecting it to be just like them?

Because I don't understand why its not, which is what I said above

Trog it shouldn't be any different but it is. I guess because the "value" is so subjective, and because a vendor can say no to any offer for any reason. Both vendors and buyers tend to attach emotions to the houses (not sure why there are other houses). They might say no to your offer because of the way you dress, then you offer a heap more and well all of a sudden they don't care how you dress.

But even after the contract is signed housing sales are full of oddities.
eg. In a contract you say its going to settle on a certain date. But for some unknown reason there is a builtin 3 working day grace with no penalties (for both parties). eg. If you were to settle today either the buyer or the vendor could say "nah we're not ready" and it would be delayed until Wednesday next week with no penalties, doesn't matter if you have to rent a unit for a week, doesn't matter if all your gear is in a truck.

Are ebay or private ads different? I can imagine ebay imposing those kinds of limitations on a seller because it's in ebay's interests as an auction site who doesn't charge for listings, but I'd find it hard to believe that if you list something in the trading post and someone calls you and makes an offer, that you're now forced to sell it at the price you advertised instead of changing your mind.

how come you're comparing it to cheeseburgers, or other markets that are strictly retail/commercial and expecting it to be just like them?

Because I don't understand why its not, which is what I said above

House/land, typically (not always, I know) owned by your average joe is substantially different in several ways to a retail product like a cheeseburger or washing machine or even a car. I'm not saying it _shouldn't_ be different or that it couldn't function adequately if it was, but nor would I say it _should_ be like a couple of you are. It is what it is, and I can understand why.

It is what it is, and I can understand why.

I don't understand why! Why!!!

It's Mabo, it's the vibe, it's the constitution.

Also as private sellers you can choose who can and cant buy your property.
Eg.
Someone fronts up with the dope buy price but are unimpressed with he/she sticking four dicks in their mouth, you can of course refuse to sell to them.

If then Stinky rocks up with hardcore facial tickler hair and six dicks in his mouth, you then realise your in the presence of a bonecrushingly manly man, and can as such choose to sell to this ultimate vagina smashing man.

I don't understand why! Why!!!

Because Private Sellers arn't bound by the Fair Trade shizzal or other such Retail associated laws.
You get my Driftizal?

trog, you touched on one or two of the reasons yourself earlier
but OK MAKE ME TYPE STUFF THEN


market is typically private property owned by individuals
within this large slice of the market, the seller is not/not-acting-as a professional or commercial entity
usually, the best part of these individual's lives have been sunk into these properties and the amount of the transactions reflect this
emotion is a huge part of the transaction

these factors are not entirely exclusive to property transactions, but they do go a long way to making them a relatively unique type of transaction - a transaction not necessarily best served by strict trade laws surrounding the advertised price

sure, there's a downside to the arrangement - you can't come along and look at a menu and know that's exactly what you'll end up paying. (wow, so buying a house isn't like shopping for an ipod)

a downside to making such a transaction conform to regular retail trade practices is it adds considerable more expense because all of a sudden every joe selling their life's investment has a boatload more expensive obligations. for what though? so property market virgins can come along and not be disappointed when they learn how it works?

I'd hate for those kinds of restrictions to be placed on any private transaction I was involved in, it'd be just one more step toward a completely litigative, cost-inducing society

I agree for private transactions.

For ones involving professionals ie. agents. And their massive fees and commisions. Why not ?

yeah it's a point I've thought about before. ultimately though, the sale is still between the buyer and the seller. the agent is just a means of bringing the two together and acting as a go-between

"well, compare it to ebay, or some other private ad"

what about an unorganised private sale like a second hand car.

putting up a sign in my cars window is not an obligation to sell.

you can offer me the 14K the sign says I am after but I don't have to sell it to you.

trog: infi and jim have spelled it out quite clearly, if you can't see the difference i don't know what else i can say =/ nats example is pretty clear.

Why not ?

because it is more useless regulation that won't achieve anything. you think it will stop deceptive practices? seriously?

all it will do is raise listed house prices by a s***load, the usual tendering, negotiation and bulls*** will still occur (under the listed price) - the market will just be less transparent.

it won't achieve s*** and will make the market less efficient. retarded.

For ones involving professionals ie. agents. And their massive fees and commisions.

by the way the contract between the agent and the seller is another private contract that NOONE but the two parties involved should have any part in. and neither party would make that contract if it wasn't beneficial to them. seriously i can't believe how quick people jump to short sighted 'solutions' to problems that don't need solving. ones that go against property rights AND the ability to make private contracts - two utterly sacrosanct concepts to our economic, political and legal system. =/

the law of unintended consequences is a powerful thing.

last edited by taggs at 17:41:38 20/Mar/08

trog: infi and jim have spelled it out quite clearly, if you can't see the difference i don't know what else i can say =/ nats example is pretty clear.

I can see the difference, I just don't get why there should be a difference between a cheeseburger and a house. I don't know what else I can say either!

think of it more like a contract not a sale.

Because in a consumer context the retailer or service provider has a clear information advantage. They know what wholesale costs are and are well aware of future stock availability and future price rises (short-term at least). In some cases retailers might well be the *only* seller of a particular product, hence anti-monopoly rules like exist for Telstra. Retailers often have a certain level of consumer-trust which while not quite a "fiduciary" relationship it does put them in a relationship to take advantage of customers.

In a real-estate context the seller really has no such advantage over the buyer. Any joe can now hop online and get a good idea of the market and even before then both sides had the opportunity to engage agents to act in their interests. Guy isn't selling at a decent price, ask his neighbour or any of the other hundred people selling in that suburb.

I can see an argument for scrapping consumer protection laws but not really a good one for extending them to the real-estate market.

last edited by Denny at 18:06:43 20/Mar/08

I should add, I've never even THOUGHT about the thing Raven raised until I read it here. I am just thinking how pissed I'd be if I went down to McDonalds to buy a $1 cheeseburger, only to find out it was actually going to cost me $2 (or worse, I couldn't buy it at all!!!), and extrapolating the same sort of investment (emotional, time, financial, effort, etc, etc) into housing-cost territory.

In a real-estate context the seller really has no such advantage over the buyer.

Really?! I disagree almost completely with this!

My place, for example:

* In summer, it is a f***ing oven. It gets afternoon sun all day on the side of the building. It has zero air flow.
* The verandah looks out over the backside of Indro Shoppingtown. At certain times of the day, the airconditioning is going full bore, and it is very, very noisy (especially in summer).
* During the night, f***head hoons think its fun to race around the carpark, so there is a lot of screeching tire noises.
* Also, cars get broken into semi-regularly - having car alarm noises going off for hours in the middle of the night is not uncommon.
* There are two pubs within walking distance. Drunk asshats walking around the streets screaming late at night is not uncommon.
* The trees off my verandah are almost at the exact level that means crows can sit on them and aim their squawks directly at my head when I'm sleeping (I can't close the door, it gets too hot).
* The build quality of this place sucks balls. I had no hot water for weeks because some stupid thing broke and the landlord took ages to fix it (of course, this happened in winter). Another resident on a different floor returned home to find her entire unit had 2 inches of water (they sucked like 1500L of water out of the carpet or something stupid). The air conditioner can not be operated without opening the door to the little unit its housed in, or else it overheats, making the verandah untidy. etc.

Those are just off the top of my head!

There's no way a prospective buyer could know all that. It just seems like such a gamble for people to buy a place to live in after checking it out for like 30 minutes. I guess savvy house-buying consumers know the traps (and I spose people that think about things critically), but it just seems so crazy to me that these things aren't really factored into the price - its just like some function of Bedrooms + squaremeterage + location + newness = $total

edit: as I was writing this a prospective purchaser started walking through my unit. ALT-F4!

last edited by trog at 18:26:25 20/Mar/08

edit: as I was writing this a prospective purchaser started walking through my unit. ALT-F4!

heh.

but trog, what effect do you think a law like the one raven proposed would have on any of the problems you listed?

information asymmetry (economics speak for people don't all know the same s***) will always be there.

NY Times The US sub prime problem explained...

I find this to be a much better explanation ;)

(launch the slideshow)

Let's put it this way, sellers in the commercial world have an obligation to act in a particular ethical sort of way. They are merchants.

Private sellers have no such obligations. Assume they are all idiots.

Secondly, all McDonalds cheeseburgers are the same. In fact McDonalds is marketing to the world on the basis of that uniformity. All cheeseburgers look and taste the same, and they all cost the same price.

The purchasing process is extremely simple: Hand over the price and get a standard cheeseburger. It is a commodity - here today, gone tomorrow.

In real estate, the exact opposite of all those concepts apply.
* No two properties are the same.
* No one knows what they really want.
* No one truly knows what they are getting even after signing the contract, so there is an element of risk involved.
* A house is generally the most valuable asset a vendor will ever own so they have a right to be 100% happy with their decision to sell.

Why force a seller to sell their house if they don't want to? It takes to two tango. The buyer and seller are equal.

Are you seriously suggesting that if you print an ad off realestate.com.au and come to a seller with the cheque for the listed purchase price then that should be sufficient to go to the Supreme Court and obtain an injunction for completion of the sale. That is whack.

last edited by infi at 18:42:50 20/Mar/08

but trog, what effect do you think a law like the one raven proposed would have on any of the problems you listed?

most of the problems I listed are just me mindlessly ranting

spidz, the end to that had me pissing myself.

Yeah that is a good explanation...

I should add, I've never even THOUGHT about the thing Raven raised until I read it here. I am just thinking how pissed I'd be if I went down to McDonalds to buy a $1 cheeseburger, only to find out it was actually going to cost me $2 (or worse, I couldn't buy it at all!!!), and extrapolating the same sort of investment (emotional, time, financial, effort, etc, etc) into housing-cost territory.

trog: the overall price of a burger from mcdonalds is dominated not by what you pay to mcdonalds but the time you sacrifice going to mcdonalds. when you buying a house the cost of visiting the seller is a very small fraction of the overall price you pay.

but it just seems so crazy to me that these things aren't really factored into the price - its just like some function of Bedrooms + squaremeterage + location + newness = $total

that's pretty much exactly what it is

it s***s me off too, but it can only mean one thing - that the market is catering to those (what I deem to be) unreasonable expectations on the part of sellers. people are paying the dollahz in spite of those kind of drawbacks, so people keep asking for the dollahz in spite of them.

and for what it's worth, anyone who's had even a relatively small exposure to the property market will pick up most of those negatives about your place that you listed, either immediately or in a few minutes of sussing the place out

I am just thinking how pissed I'd be if I went down to McDonalds to buy a $1 cheeseburger, only to find out it was actually going to cost me $2 (or worse, I couldn't buy it at all!!!)

Well i suggest never ever going to Flight Center to try and buy one of their advertised "specials" then.

trog: the overall price of a burger from mcdonalds is dominated not by what you pay to mcdonalds but the time you sacrifice going to mcdonalds. when you buying a house the cost of visiting the seller is a very small fraction of the overall price you pay.

Yeh, that's what I was getting at before when I was talking about the "investment" (emotional, financial, organisational, etc, etc) when you actually decide to buy a place - obviously just _going_ to visit the place is practically nothing, but all those other things I think are a big deal?

and for what it's worth, anyone who's had even a relatively small exposure to the property market will pick up most of those negatives about your place that you listed, either immediately or in a few minutes of sussing the place out

Yeh, I guess I've never thought about it having only rented - its not as big a deal if you're renting and you get a melon

haha, that was gold spidz! and i learnt something;

neato;

Just to continue with this thread instead of a new one....(i'm looking at buying a house)

Housing affordability set to get even worse

last edited by Python at 13:26:49 28/Mar/08

last edited by Python at 13:26:55 28/Mar/08

fixed

I didn't know what ALT-F4 did :( Where did it go?

40% increase in 5 years. i don't think so.

Unless the banks forget what they have learned in the last 12 months and start lending crazy money out again or we all get a 40% pay rise, who is going to be buying these houses for 40% more?

HOUSE prices are expected to rise by as much as 40 per cent across the country during the next five years, according to economic forecaster BIS Shrapnel.

That's not so bad, consider inflation will probably be close to that over 5 years anyway.

Even if inflation is lower than at current rates (ie, if it were 3%), it'll be 16% in 5 years. If it's as high as 6% we're looking at 34%.

More sensationalist journalism.

Can you imagine how s*** it will be future generations? They will have to buy a house at 2 too pay off by the time they turn 120. I think a lot of this could be solved if they would encourage more high density housing. Everyone seems to want a 3-4 bedroom house in the suburbs and that is just not practical anymore.

considering house prices increased 100% in the last 5 years according to ABS statistics, 40% over the next 5 is moderate.

reckon. i think 40% is an extremely realistic scenario. talk of $100k jumps ain't gonna happen, just like talk of 30% downturns aint gonna happen either.

I don't know enough about economics - but won't such unbridled growth of property prices lead directly to massive inflation?

well if prices can rise 100% in the last 5 years and inflation remains at 3% then apparently not.

Well, my unit is 4 years old - I believe it sold originally for around $350k. It went on the market maybe 2 years ago at $415k, and didn't sell. It just went back on the market at $449k a couple weeks ago - and since then, they've now dropped the price to $435k (I assume because of lack of interest; only like 4 people have come through). So my place, at least, hasn't gone up anywhere near 100%.

seems your place isn't indicative of the recent trends in the property market.

the 100% figure is right, though.

Our place would have roughly doubled since we bought it 7 years ago for $180k.

I think we could easily sell it for $360+ even though she is still a bit of a 'renovators delight'. But it's an original Queenslander in a good location so that helps it along.

I bought my place in 2001 for 208k and now it would sell for $450k any day of the week.

I don't know enough about economics - but won't such unbridled growth of property prices lead directly to massive inflation?

inflation is generally a monetary phenomenon. house prices don't have anything to do with the money supply =)

edit: of course measures of inflation that take into account housing prices would be affected by that, yes. but massive inflation, probably not.

last edited by taggs at 19:31:12 28/Mar/08

Here's the thing.

Its advice. It can be wrong, and they certainly won't give you a warranty for anything in their report.

eg. less then 2 weeks ago from News again

if you're getting any kind of economic or financial news/advice/anything from news.com.au then you're doing it wrong.

but won't such unbridled growth of property prices lead directly to massive inflation?

not directly but probably create larger amounts of debt which perpetuates more debt

with regards to inflation, decades of stupid government policy and greedy f***-off lazy bankers are the people who are responsible for destroying the purchasing power of your money. thats the bottom line. blame politicians, the rest is all smoke and mirrors.

that 100% increase ABS figure includes all the places that were bought in the boom at crazy prices, only to be repossessed later.

an example from domain.

First to suffer in Seymour Way was No.48, a four-bedroom, two-bathroom detached property bought for $950,000 in August 2005. It was sold in January 2007 for just $490,000 by First Mortgage Company, which had won a repossession order.

Experts believe that, like the other houses involved, the home was massively overvalued at the time. They say many loans are financed by shonky mortgage brokers who get a commission based on the value of property - so they have a vested interest in ramping up the price.

Second to go was No.42. Again it was bought for $950,000 in September 2005 and sold under order of repossession for $490,000 in March last year - again with the same mortgage company as creditor.

Next door, No.4 was bought in September 2003 for $780,000. Last April it sold for $502,500, with the Perpetual Ltd company as the owner since it had been repossessed.

No.52 became repossession No.4. Bought in September 2003 for $780,000, it was sold last October for $532,000 on the orders of the Rock Building Society.

Shaun Crockford, manager of L.J. Hooker Kellyville, the real-estate agent that oversaw last year's sale of No.42, said: "If we had been the agents [at the time of the 2005 sale] there is no way we would have expected those houses to sell at that price. They were not worth that."