Analysis of the REIV June quarterly median prices shows that the Melbourne property market is strongest in the inner and middle suburbs.

The REIV classifies the inner city as those suburbs within 10km of the CBD and the middle those between 10km and 20km from the CBD.

Comparing the number of sales in the inner, middle and outer suburbs between the March and June quarters shows that the largest increase in homes sold was in the inner suburbs. In the June quarter there were 5,374 homes sold, a 21 per cent increase on the 4,456 sold in the March quarter.

The middle suburbs recorded a more moderate increase in sales with an increase of 11 per cent from 4,481 to 4,989.

A clear sign of the impact of interest rates, broader economic uncertainty, increases in the price of petrol and groceries can be seen in the fact that the number of sales dropped in the outer suburbs, by 9 per cent between the March and June quarters from 3,617 to 3,288.

Over the June quarter there was a subtle change in sales method being used to take property to market. The number of properties sold at auction during the June quarter increased by 17 per cent from the March quarter whilst the number of properties sold via private sale has increased 4 per cent, however this likely to be a statistical anomaly as there are almost no auctions conducted in the metropolitan areas during January. However if the comparison is made with the June quarter of 2007 it shows that the number of homes sold by private sales and auctions dropped by an equal amount of 22 per cent.

This shows that whilst the more moderate market conditions have not changed the method of sale, there has clearly been a substantial dampening of demand in the outer suburb and consolidation of demand for homes in the inner and middle suburbs.

Source: REIV

Source: www.ameinfo.com

Danial Schon, Vice President of Schon Properties, talks to AME Info about the Dubai real estate market, which sectors investors should be looking into for the biggest returns and why he thinks that prices across the city can only keep increasing.

Schon Properties is well established in Dubai’s property market.

The company already has four projects under development.

Its flagship residential projects are the Dubai Lagoon development and Schon Suites and the latest launch, the Signet project in Jebel Ali.

The Signet is a mixed-use development that will allow people to make use of one space for their business and residential needs.

This, Schon believes, will prove popular in the face of ever-increasing commercial rental costs.

‘This project was made keeping small businesses in mind.

‘The biggest problem for these people when they move to Dubai is that, because of the rising costs of rent they can never find a place.’

Recent reports that home owners would not be automatically eligible for residency visas have added further questions for investors from outside the GCC.

‘I think that everybody is still seeking clarification on that,’ says Schon.

‘But I know that the government of Dubai is so pro-business, and the policies are for the benefit of the economy, buyers, end users and so on, that the final decision will work in everybody’s favour. I don’t think that it will be a case of ‘we were promised this but didn’t get it’.

‘But we do tell our buyers that the residency visas will be subject to approvals at that time. We don’t know what they might be, laws change all over the world, so we don’t say that you’re guaranteed a visa.’

Most profitable branch of Dubai’s real estate market

Of the various projects springing up across the city, all are designed to attract investors.

But though prices are spiralling in the residential, commercial and hospitality sectors, Schon believes that, for individuals, the latter will bring the best returns.

‘Serviced hotel apartments are definitely the most profitable, because Dubai is built on tourism. You see the campaigns all around the world.

‘We launched a project called Schon Suites about three months ago. The concept is that all the rent goes into a pool, then an independent auditor distributes the rent equally according to your percentage ownership of the building.

‘It’s for people who can’t build hotels themselves. And it’s a very good return, the projected yields come up to 20% per year - that’s on 10 year historical information from the Department of tourism and Commerce Marketing, the inflation rate and so on. We’ve done extensive research on this and the numbers are phenomenal.’

Dubai property prices to increase

Almost all developments have shown these increases.

Most of the projects in Dubai have posited double-digit growth over a 12-month period.

This growth, driven in part by speculation and supply shortages, will not slow down as more properties come online, Schon believes. The root cause of the price escalation is down to the construction component.

‘I think prices have a long way to go yet,’ he says. ‘Mainly due to the rising cost of construction, which is detrimental to the industry as a whole.’

Global factors, such as China’s decision to increase payments for steel imports by 40% above market rate, are continuing to have a local consequence.

‘Things like that have a huge effect. The minute you’ve purchased your steel it’s already going up 1.5% per month, that’s the rate that we calculate construction inflation at for our contingencies.

‘What this does is that it drives prices up, because it controls supply but the demand is still high. So, prices have a long way to go. People ask me why property is so expensive - the most important thing in development is not hype, it’s not marketing or sales, it’s delivery. If developers don’t price at the risk of tomorrow’s costs, then they will lose money. And, if that happens, the quality suffers.’

Increased regulation helps property market

‘The creation of Rera [Real Estate Regulatory Authority] will ensure that it never gets to the point where the credibility of Dubai is affected, because they will step in,’ Schon notes.

Rera is a prime example of how Dubai’s property landscape has changed, partly in response to concerns over the lack of transparency in the market. Government legislation has enforced a set standard of regulation among the city’s developers and agents.

‘Every transaction is regulated, everything is transparent. You have to set up an escrow account before anything is sold now,’ he agrees. ‘We also have green building guidelines to follow.’

Thanks to initiatives like these, Schon is convinced that the upward trend is certain to continue, and that investors should take advantage of the opportunities on offer.

‘We were offered plots in 2002 that we didn’t go for, because analysts were saying ‘the bubble’s about to burst’. These are the same reports that are still going around now. Anyone who says that is not looking at the whole picture.

‘Dubai is the centre of the region for property, there are also investors from Iran, Pakistan, India. Even Chinese groups have started investing here. Everybody wants to be involved.’

It is amazing what you read in the newspapers from academics who have a “solution” to the so-called housing crisis.

 One such “expert” wrote in “The Age” on 6th of May this year that one way to provide more land in the inner suburbs was to sub-divide the “traditional quarter acre block” into two and this will release lots more land for development.

 Now lets see, “quarter acres”.  An acre is 43,560 square feet or near enough to 4,000 square metres.  One quarter of that is 1,000 square metres.  If you can actually find a 1,000 square metre block within an 8 kilometre radius of the city that can be sub-divided, Planning Regulations at most inner city councils demand a minimum size allotment to be 500 square metres.

 So if you are lucky enough to find a block big enough with a house located to allow for a side driveway, fine.  But chances are the house is sited in such a way that a side drive way is impossible.  Therefore you may have to demolish a house in perfectly good order to achieve this academic’s goal. 

 Impractical and uneconomic.

 In most cases the inner suburbs owners are happy with their lot and will not sub-divide.

 Further, how many 1,000 square metre blocks are available in Footscray, Richmond, South Yarra, Elwood, Northcote, etc., etc?  Not many.

 So the academics view is terrific, sounds good, but like so many commentators opinions, not backed up with research.  How about some specifics?

 The phrase “Quarter Acre Block” for the Aussie dream home actually means a block which measures between 560 and 700 square metres.  A bit hard to sub-divide them when Planners have a say!!

REIV reports on 11 May 2008, data shows that despite the recent reduction in the median price of a home in Melbourne the last twelve months were the strongest in 10 years.

In the twelve months to the march quarter the median price of a home increased by 14 per cent or $54,500 from $378,000 to $432,500. This period of rapid escalation in demand surpassed, in 12 months, the gains over four years between March 2003 to March 2007 when the median increased by 10 per cent or $33,000 from $345,000 to $378,000.

Analysis of the historical data also shows that the median price of a home in 1998 was $186,000.

The underlying strength of the local housing market is underscored by the Australian Bureau of Statistics which in its March index of capital city prices showed that the weighted average of a house in Melbourne increased by 25.9 per cent, the highest of any capital city. Second was Adelaide at 21.6 per cent and third was Brisbane at 20.8 per cent.

The primary driver behind this growth has been population growth.

This is good news for most homeowners and investors as in the majority of cases an investment in bricks and mortar is a longer term one. Homeowners will monitor changes in value over the short term but the true comparison is between what they first paid, what the value is when they sell and importantly, the price of the home that they subsequently purchase.

(Source: REIV  11-May-2008, News Section, Web)

The busy person or overseas resident who has little or no time to look, select or organise the purchase.

A couple living overseas are hopeful of moving to Melbourne in two years time and need to buy now.  Buyers agents perform all things necessary (the three steps) and acquire the property.  Buyers agents then arrange for the property to be properly managed until possession is required.

In the case of busy local executives the job for them is easier.  At least they can inspect one or two final choices after our search and select process has been completed.

TIME POOR PEOPLE BENEFIT FROM BUYERS ADVOCATES

A typical problem is where a purchaser pays too much for a property.

Husband and wife find a house that they absolutely love.  Emotion takes over and they pay too much because they have not carried out research on sales in the area, nor have they checked any Planning matters (zoning, overlays, etc.) and as a consequence have paid the Vendors asking price – usually in excess of what the Vendor would be happy to take.

SKILLED NEGOTIATION WOULD HAVE PREVENTED THIS SITUATION OCCURRING.