Jonathan Chancellor's 11 tips to avoid becoming auction pushover buyers

(Extract from an original article on posted on 'Property Observer' 17 September 2013)

By Jonathan Chancellor
Tuesday, 17 September 2013

My 11 tips for wise auction bidding include:

1. Never sit in the front row or with your back to the crowd. Take a corner position so you can survey all your competition.
2. Prepare with extensive research and due diligence starting by checking all the recent sales results in the suburb so you gain an accurate market value estimation of your desired property.
3. It’s wise to research the prior sales history of the house or unit, along with its recent on-the-market history. It helps to know if it’s been previously marketed or passed in at unsuccessful 2012 or 2013 auction.
4. It’s a good idea to find out what you can about the vendor's circumstances as this could be useful in your approach before or after the auction.
5. Given its most likely been some years since your last, its best you get an idea of how auctions work by attending a few.
6. Getting your finance ready with lender pre-approval before attending the auction is wise as if you are the successful bidder it will be an unconditional sale with no cooling off.
7. Setting a price limit is wise based not just on calculating what you can afford, but also common sense. Having a slight buffer is also worth considering, but not going in over your head and paying too much in the intensity of the auction.
8. By the time the auction comes around, you should have the contract checked by your conveyancer or solicitor, along with pest and building inspections.
9. One tactic is not bidding until the reserve is revealed by the auctioneer when the auction is well underway, although its not necessarily going to yield the prize. Bidding after what you sense as being the final vendor bid makes sense as it allows you to be in the box seat to negotiate with the agent. But don't rush into the negotiating room, hover to actually see who else was interested in the offering as they exit.
10. Never let the listing agent know what is your upper spending limit, so keep your cards close to your chest.
11. Confident bidding can work, but not bidding bullying. Quick reply bids can keep put pressure on other bidders, but slow bidding can equally yield the result too. It really depends on the specific circumstances of each auction and the bidding tone.

And to try to avoid the pressure; smart pre-auction offers can work by avoiding the looming competition and the owners might just been motivated to sell quickly as they have bought elsewhere and may just well agree to an offer beforehand to minimise their own stress.

Auction clearance rates in Sydney, Melbourne based on incomplete data

Source: ABC News 15 December 2013

For home-buyers pinning their dreams on the auctioneer's hammer, auction clearance rates are an important measure of the market's volatility and price.

But should published auction clearance rates be taken as an accurate guide? Financial analyst Mark Bayley says not always.

"Auction clearance rates should be transparent, real and representative of what happens at the auctions on any given Saturday; at the moment, auction clearance rates are anything but," Mr Bayley wrote in a Financial Review opinion piece on November 18. Mr Bayley said Sydney's auction clearance rates were "inherently flawed and biased" and that the reported rate was nowhere near the real rate at which houses were being auctioned off.

Mr Bayley told ABC Fact Check his opinion piece was based on auction clearance rates published by Australian Property Monitors, a company owned by Fairfax Media. Its real estate reports are published regularly in The Sydney Morning Herald and The Age newspapers.

How auction results are published

Australian Property Monitors senior economist Dr Andrew Wilson writes weekly columns in Fairfax newspapers, generally published on Thursdays or Fridays. Auction previews are also published on the APM website. These routinely include the number of houses listed for auction that week. At some time between Saturday and Tuesday the following week, APM publishes on its website the results of the auctions.

Fact Check has compared the numbers in these two sources. Every week from September 7 to December 7, the number of auctions APM reported in its Sunday results publication was lower, sometimes significantly lower, than the number it published in its Friday column.

APM's figures

Looking at the figures for the first week of December, Dr Wilson wrote on the Friday that 851 properties were going under the hammer that week. When APM published its results the following Sunday, it recorded the outcomes for 579 properties. It said 453 were sold, 87 failed to sell and 39 were withdrawn.

The number sold was 78 per cent of the 579 properties. APM published this as the clearance rate.

There was no mention of the other 272 properties that had been included in Dr Wilson's Thursday report. This was 32 per cent of the properties APM had said were up for auction that week.

In the last week of November, 43 per cent of the originally listed auctions for Sydney were not included in APM's weekly result. Over the three months to December 7, unreported auctions in Sydney amounted to 31 per cent of listed auctions.

 This phenomenon isn't confined to Sydney. For the first week of December in Melbourne, over a quarter of foreshadowed auctions were unaccounted for in the weekly results publication. For the last week of November, Dr Wilson said there would be 1,340 auctions in Melbourne. APM's results at the end of the week, reported as a clearance rate of 75 per cent, were for 750 properties. There was no mention of the other 590 properties, 44 per cent of the foreshadowed auctions.

Dr Wilson told Fact Check when APM compiles the number of properties to be auctioned for Sydney and Melbourne, it searches all relevant listings and agent databases.

When it comes to compiling the results of auctions, APM follows a different procedure. If an agent doesn't report a result, APM will generally call the agent for auction results but in many cases no response is received.

Dr Wilson says APM's results are revised from time to time as more sales and non-sales are reported by agents, which usually decreases reported auction sales by 2 to 3 per cent over the course of the following week.

He says APM's clearance calculations are sound. "Because there is no way of knowing whether unreported auctions were successful or unsuccessful then why should you include them in the clearance rates?" he said.

RP Data's approach

RP Data, owned by CoreLogic, a company listed on the New York Stock Exchange, also publishes auction clearance rates. Unlike APM, it does not publish a report of expected auctions followed by a report of auction results. Its single weekly reports include the number of auctions listed. However, it does not use this number when calculating clearance rates. It reports the number of auctions for which it knows the outcome, and publishes a clearance rate based on that lower number.

For the last week of November, RP Data reported that 1,333 auctions were listed in Sydney. It had outcomes for 975, of which 728 were successful sales, which it described as a clearance rate of 75 per cent. The 358 auctions with no known outcome were 27 per cent of the total listed.

RP Data's clearance rate for Melbourne for the last week of November was 69 per cent of 1,385 outcomes. A total of 1,602 auctions were listed. Fourteen per cent of the listed auctions were not reported.

RP Data senior analyst Cameron Kusher also defends the decision not to include unreported auctions in clearance rate calculations. "It would be less a true representation of auction clearances because there's no way of knowing how many auctions were successful and how many were unsuccessful," Mr Kusher told Fact Check.

Interpreting the figures

In an interview on ABC's The Business program, Mr Bayley said it was likely a high number of the "missing" auctions were for houses that didn't sell at auction. "My understanding is that agents obviously have an incentive to report those property auctions that are successful - that were either sold prior or sold under the hammer - and are less inclined to report those sales that were passed in on a vendor bid or withdrawn from sale because obviously that impacts the figures they are presenting to potential clients," Mr Bayley said.

Professor Richard Reed, chair of property and real estate at Deakin University's School of Management, says auction clearance rates shouldn't be touted as more than a vague indicator of the market. He told Fact Check that auction clearance rates mean different things to different stakeholders in the real estate market. Houses can be sold within days on either side of the auction, negotiated on the side, and still be listed as "sold at auction" he said. "It is surprising from a research perspective that a single measure such as this percentage assumes such a surprisingly high profile and important role in the market. At the very least a high percentage of the total listings should be taken into account, to look at the market in any meaningful way," Professor Reed said.

Louis Christopher from SQM Research, which provides property analysis to financial institutions, property developers and investors, raises a similar issue. "An overwhelming majority of unreported auctions are going to be houses that didn't sell at auction," he said.

Mr Christopher, a former head researcher at APM, says "this means the real clearance rate is going to be much lower than the reported one".

He says real estate agents have long been more inclined to report successful auctions.

Clearance rates reflecting trends

Dr Wilson says APM acknowledges that methodologies differ and its auction results have lower numbers than its original listings. However, he says auction clearance rates still reflect trends in the market. "As long as the way rates are measured is consistent, this will reflect the trend," he said. "There's no doubt auction clearances are higher now than they were this time last year. This reflects a trend towards a stronger property market."

Mr Bayley says a better method would be for property analysts to report only known successful auctions as a percentage of the total auctions listed. He says under such a system "real estate agents have no incentive not to report unsold properties, as any unreported result will still be used to calculate the auction clearance rate".

The verdict

Mr Bayley says auction clearance rates aren't transparent, real or representative of what happens at auctions on any given day. APM does not include a significant number of auctions in its calculation of clearance rates, nor does it include this number in its results reports, although it publishes the number of total listings the previous week. RP Data includes the number of total listings in its reports but does not use it when it calculates its clearance rates.

Mr Bayley's claim checks out.

Sources

•Australian Financial Review, 'Misleading property auction figures 'put buyers at risk', November 14, 2013

•Mark Bayley, Australian Financial Review, 'Lies, damned lies and auction clearance rates', November 18, 2013

•Mark Bayley, Australian Financial Review, '1438 auctions missing: Sydney's Impossible Property Search', December 2, 2013

•Roger Montgomery, ABC's The Business, November 26, 2013

•ABC's The Business, 'The real numbers behind auction clearance rates', December 2, 2013

•Andrew Wilson, Domain, 'Sydney auctions set for another super Saturday', December 6, 2013

•Australian Property Monitors, Sydney Auction Results, December 7, 2013

Australian dollar less of a factor in commercial property investment

 

By Larry Schlesinger
Friday, 24 May 2013

The Australian dollar appears to be less of a factor than some believe in encouraging offshore investors to buy Australia’s commercial property, research by Jones Lang LaSalle suggests.
The graph below shows that funds poured into Australian commercial real estate when the Australian dollar was well above parity against the US dollar in 2012, rather than discourage investors.
It suggest that the opposite could happen if the Australian dollar falls – or perhaps that the Australian currency is less of a factor in commercial real estate as it may be in residential investment.
 
Source: Jones Lang LaSalle Research

As Australian Financial Review property editor Robert Harley highlights, listed property trusts like the Goodman Group hedge 86% of their offshore income, so changes in the exchange rate have much less of an impact.
Savvy offshore investors would be able to do something similar to counter the exchange rate impact, while also attracted to Australian real estate due to its sound property market fundamentals - transparency, rising capital values, a strong economy and its proximity to Asia.
Certainly Asian investors are showing no signs of slowing down their appetite for Australian commercial property purchases, with a South Korean pension fund paying close to $400 million for 50% of the Erina Fair Shopping Centre on the Central Coast this month.
Harley also points out that the lower Australian dollar – which will support industries like manufacturing and tourism – may also flow through to benefit rural property and tourism property.
And a stronger Australian dollar is attractive to company’s like Westfield Group, which has nearly half of its income-earning assets in the US.
The Australian dollar peaked at $1.11 against the greenback in July 2011 and remained mainly above parity until the recent fall in early May sparked by the cash rate falling to a 53-year-low of 2.75%.
In 2007, the rising Australia dollar was also not an impediment to funds flowing into commercial real estate, with investors most likely seeing Australia as a safe investment haven.
In other periods – such as the late 1980s and mid-1990s – a rising dollar was also accompanies by an increase in funds flowing into commercial property.

The 11 things you need to know to secure the $35,240 saving under the October NSW first-home owners' grant scheme

By Property Observer
Tuesday, 12 June 2012

1. What is the First Home Owner Grant (New Home) scheme?

The First Home Owner Grant (New Home) Scheme provides a grant of $15,000 to help eligible first home buyers to purchase or build a new home.

It will replace the current $7000 First Home Owner Grant from 1 October 2012.

2. When does it apply?

The grant of $15,000 applies to eligible transactions entered into on or after 1 October 2012 and before 1 January 2014.

The grant will then be reduced to $10,000 from 1 January 2014 with no end date set.

3. What is an eligible transaction?

An eligible transaction is:

(a) a contract made on or after 1 October 2012 for the purchase of a new home in New South Wales, or

(b) a comprehensive home building contract made on or after 1 October 2012 by the owner of the land in New South Wales or a person who will on completion of the contract be the owner of land in New South Wales, to have a home built on it, or the building of a home in New South Wales by the owner builder if the building work commences on or after 1 October 2012.

4. What is a new home?

A new home is a home that has not been previously occupied or sold as a place of residence, and includes a home that is a substantially renovated home and a home built to replace demolished premises.

5. What is a substantially renovated home?

A substantially renovated home is a renovated home:

(a) that is new residential premises within the meaning of section 40-75(1)(b) of the A New Tax System (Goods and Services Tax) Act 1999 of the Commonwealth, and

(b) that, as renovated, has not been previously occupied or sold as a place of residence.

Under that legislation, `substantial renovations’ of a building are defined as renovations in which all, or substantially all, of a building is removed or replaced. The renovations may, but need not, involve the removal or replacement of foundations, external walls, interior supporting walls, floors, roof or staircases.

6. What is a home built to replace demolished premises?

A home is a home built to replace demolished premises if:

(a) the home is a new residential premises within the meaning of section 40-75(1)(b) of the A New Tax System (Goods and Services Tax) Act 1999 of the Commonwealth, and

(b) the home, as built to replace the demolished premises, has not been previously occupied or sold as a place of residence, and

(c) the owner of the home did not occupy the demolished premises as a place of residence before they were demolished.

7. Does the price of the home need to be under a limit to receive the First Home Owner Grant (New 

Home)?

Yes, effective from 1 October 2012 the First Home Owner Grant (New Home) Scheme is capped to $650,000. The grant will only be available for properties with a total value not exceeding that amount.

8. How is the Total Value of the home calculated?

For a contract of sale of a home, the total value is based on the greater of the following:

• the consideration for the eligible transaction
• the unencumbered value, as at the commencement date of the eligible transaction.

For a comprehensive home building contract, the total value is calculated by adding together:

• the consideration for the eligible transaction, and
• the value, at the commencement date, of the relevant interest of the land on which the home is to be built.

For a building of a home by an owner builder, the total value is calculated by adding together:

• the unencumbered value of the home, at the date the transaction is completed and the value, at the date the transaction is completed, of the relevant interest in the land on which the home is built.
• The value of the relevant interest in the land on which the home is to be built is the greater of the following:

1. the consideration paid or payable for the interest
2. the unencumbered value of the interest.

9. From October 2012 do I get a grant if I buy an existing home?

No, from 1 October 2012, the First Home Owner Grant will only be payable on the purchase of new homes.

The $7000 First Home owner Grant is still available for purchases of existing homes entered into before 1 October 2012.

10. Does the First Home Owner Grant ( New Home) apply to replacement contracts entered into on or after 1 October 2012?

A contract for the sale or transfer is not eligible if:

(a) it replaces an agreement made before 1 October 2012, and

(b) the replaced contract is for the sale or transfer of substantially the same property.

11. Can I get the First Home Owner Grant and the $5000 New Home Grant?

If you receive the First Home Owner Grant, you cannot receive the $5 000 New Home Grant for the same property.

Source: NSW Office of State Revenue

State by State Wrap Up of First Home Buyer Concessions

Victorian government offers bigger carrot to first-home buyers: Government housing incentives in 2013

By Larry Schlesinger 

Thursday, 10 January 2013

www.propertyobserver.com.au

Greater financial incentives are being offered to first-home buyers in Victoria following the raising of the stamp duty discount for homes priced under $600,000 from 20% to 30%.

The higher discount kicked in on January 1, 2013, and applies to both existing homes and new homes, delivering first-home buyers additional savings starting from $600 to a maximum of just over $3,000 on a house price at $600,000.

Maximum stamp duty savings are now over $9,000. Combined with the existing first-home owners' grant of $7,000 there is nearly $16,000 in savings for those first-home buyers who are willing to venture into the property market in 2013.

The stamp duty discount will rise to 40% on January 1, 2014, and to 50% on September 1, 2014.

To qualify for the stamp duty discount, first-home buyers must also qualify for the $7,000 first-home owners’ grant.

All added up it means Victorian first-home buyers purchasing an existing home receive the highest amount of financial support from their state government.

South Australia, NSW and Queensland all offer higher total incentives and savings, but these are restricted to buying or building a new home.

This is what the other states are offering first-home buyers in 2013:

NSW

A first-home buyer who purchases a $550,000 new home will get $35,240 in assistance.

This includes a $15,000 grant for first-home owners who purchase or build a new home valued at up to $650,000. The grant is available until December 31, 2013, reducing to $10,000 from January 1, 2014.

Non-first-home buyers who buy a new home are eligible for $5,000 whether the new home is off the plan or newly built with a value up to $650,000, The $5,000 grant is also available to buyers of vacant land that is intended to be the site of a new home valued up to $450,000.

First-home owners are also eligible for a maximum stamp duty saving of $20,240 for homes up to a value of $550,000, with duty concessions for new homes valued between $550,000 and $650,000. The transfer duty exemption cap on vacant land is $350,000, with duty concessions for vacant land valued between $350,000 and $450,000.

Queensland

A $15,000 first-home owner construction grant (FHOCG) is available. The FHOCG applies to new property bought or built at a value under $750,000.

First-home buyers also pay no duty on purchases up to $500,000, with a phasing-out rebate applicable for values up to $600,000.

For non-first-home buyers, the Queensland government offers a concessional stamp duty rate of 1% up to a value of $350,000, with stamp duty charged at normal rates for the remaining value of the home purchase. The buyer must occupy the home for a period of 12 months – an applicant may lose the concession if he sells or leases part or all of the home before moving in or within a year of moving in.

South Australia

South Australian first-home buyers have the chance to secure $23,500 from the state government, provided they build a new home.

The $23,500 handout comprises a doubled first-home owner grant of $15,000 for contracts entered into on or after October 15 and up to a value of $575,000, plus a further $8,500 housing construction grant (HCG). The housing construction grant replaces the $8,000 first-home bonus grant.

The HCG is available to all builders of new homes for properties valued up to $400,000, phasing out for properties valued up to $450,000 where contracts are entered into between October 15, 2012, and June 30, 2013, inclusive.

Concessions could rise to $39,830 if first-tome buyers buy an apartment off the plan in the Adelaide CBD under $400,000, where a stamp duty concession of $16,330 applies.

This part of a new stamp duty concession scheme available on the transfer of a new CBD apartment or a "substantially refurbished apartment" for a contract entered into from May 31, 2012, to June 30, 2014, capped at stamp duty payable on a $500,000 apartment of $21,330.

An example where a $39,830 saving would be available to a first-home buyer is Aria on Gouger Street being developed by Brock Urban Projects, where two-bedroom apartments are priced from $335,750.

South Australian first-home buyers of established homes will continue to be entitled to a $7,000 first-home owners’ grant until amending legislation comes into force.

From the date the amending legislation comes into force until June 30, 2014, purchasers of established homes will be entitled to a reduced $5,000 grant. From July 1, 2014, no grant will be available to purchasers of established homes. 

WA

A $7,000 first-home owner grant remains in place for a newly constructed or established home. It does not apply to vacant land purchased to build a new home. The total value of the home must not exceed $750,000 if the property is located south of the 26^th parallel of South Latitude, or $1 million if located north of the 26^th parallel of South Latitude. First-home buyers eligible for the $7,000 grant pay no stamp duty on homes valued up to $500,000 and up to $300,000 for vacant land.

ACT

A $7,000 first-home owner grant remains in place for both existing and new homes where the price of the property or construction of the home does not exceed $750,000.

Tasmania

A $7,000 first-home owner grant remains in place for both existing and new homes, with no cap on the value.

Tasmanian first-home buyers buying or  building a new home (including off-the-plan) are eligible for an additional $8,000 under the First Home Builder Boost Scheme, which applies from January 1 2013 to June 30 2014 if the qualify for the first-home owner grant.

Northern Territory

A $7,000 first-home owner grant remains in place for both existing and new homes where the price of the property or construction of the home does not exceed $750,000.

The NT government also offers first-home owners stamp duty concession of up to $26,730 (the duty owed on the first $540,000 value of a property).

US median single dwelling prices/gold

Interesting chart of the day (from www.chartoftheday.com) showing US median single dwelling house prices as a ratio of an ounce of gold (also in US dollars). It takes only 105 ounces to buy the median dwelling today compared to 601ounces at the peak in 2001. The chart is highlighting a turn following a dramatic 7 year down cycle. Are US houses undervalued or gold overvalued? www.chartoftheday.com

The ultimate cynic: Lucy Macken published a lovely tongue in cheek article in Monday's  (17/12) Sydney Morning Herald describing the process of selling her house at Christmas time as akin to a military campaign where all normal rules of family existence are suspended.  She also describes the process of appointing an agent (buying a listing) and the inevitable conditioning of vendors to meet the market, follow the link to read it while it's available: http://smh.domain.com.au/mission-accomplished-on-the-home-front-20121217-2bj2l.html