A reduction in the median price... but not as you know it.

First of all let me apologise for not posting over the last couple of months. For the same reasons purchasers have been taking longer when buying property, the team at Nyko Property has been working harder than ever to qualify and assess the right type of property for this market.

Over the last 12 months, some economists in the main stream media where saying there would be a 20% reduction in the median price in Melbourne. I actually don't disagree with that notion entirely. I think some locations needed a correction as they did not have the fundamentals to support the growth in prices. Since last year we have seen a reduction in the median price in Melbourne of about 6%. A far cry from the 20% quoted.... or is it.

If you take into account the 'average' capital growth per annum of 7%, which has not occurred over the last 2 years (14% in total), along with that 6% reduction in the median price, well there we have it... a REAL correction of approx 20% in the median price. I think that is as far as it will go, but unlike the all knowing economists, I realise that is just my opinion and the market is a wild animal that cannot be predicted. Rates went down today and although it should not be the reason purchasers re-enter the market, the activity around our office shows they already have been and will now start coming back into the market a little faster.

Now you will see that I use the word median and average above quite a lot, that's because even in the worst market conditions that have occurred in the last 10 years, there were areas and properties that showed substantial growth. In July 2010 Nyko Property sold a project name Ascot Cup, a boutique 31 apartment development in Ascot Vale. It was a great project, priced correctly (at valuation of course), with large internal areas and low body corporates. It was also in a part of Ascot Vale that neighbours Moonee Ponds, where prices are 10%+ higher.

Ascot Cup is coming up to settlement and the banks have had the valuers through to value the apartments. The median price has reduced 6% across Victoria in that time and valuers are currently being very conservative. Does this mean that the valuations came in low? The quick answer is no. Most were valued at contract price, which was a win in itself, while a handful of others were valued in at $20-35k over purchaser price! These investors have just had a 5-7% increase in their property value and they haven't even settled yet.

The average and the median prices you read about are just that, a culmination of all prices in a certain area, of all property types, all clumped together. Not an accurate way to assess a property or an area.

If you have any questions or would like to find out more about our service, call Nyko Property on 1300 720 315, email us at info@nykoproperty.com.au or check out our website www.nykoproperty.com.au

Bill Nikolouzakis - Nyko Property

What makes a good property investment in this market?

As markets change, so does the type of property that gives you the best opportunity for growth.

Today's market is extremely contradictory, some properties are selling at record prices with fantastic competition, while others are being passed in at levels that would have been good value a year ago.

What we are seeing is properties with a distinct point of difference recording the strongest growth. The problem is, these same positives create strong competition. If your in it for the long haul than thats ok, but keeping these properties for at least 10 years to realise the growth becomes a must, not an option. For the well healed it is no problem, but if there is a chance you will have to sell before that 10 year time frame, you may not see the gains you where hoping.

There is another type of location that can see solid growth, yet not demand that premium. Melbourne is still experiencing population growth of over 1500 people per week, suburbs that are absorbing that growth and are still very reasonably priced are another attractive option.

Buyer beware though, there are many of these areas but only a few that have the other non negotiable factors that go into purchasing in this type of area. There are certain suburbs, in fact specific regions within suburbs, that have been earmarked for redevelopment. Be it a renewal of the parklands, new/updated train stations, roads etc.

These suburbs may currently be undervalued and usually have a certain stigma about them, the most obvious examples are places like Footscray, Preston, Ascot Vale etc. The reason why they are undervalued is usually because of a lower socio economic group residing in the area which some people do not relate to or find as desirable.

Why will this change?

Simple, as population and competition increases so do the prices in those areas. This makes it desirable for the residence to cash in and move onto other suburbs, or may make it unaffordable for them to continue to live in that suburb. Over time, the socio economic diversity of the area increases and it becomes more desirable for a larger portion of the population.

Want proof?

Take a look at the people that lived in Port Melbourne, Northcote or Brunswick 15 years ago and look at those suburbs now...

Research is the key to finding out what areas will be the new Northcote's, speaking to councilors and familiarising yourself with the Melbourne 2030 Plan are a start but seeking advise from professionals in the field is a must before investing in this type of real estate.

To find out more call Nyko Property and speak to our experience Key Account Managers.

Bill Nikolouzakis - Nyko Property