{"id":25180,"date":"2015-02-06T12:00:05","date_gmt":"2015-02-06T01:00:05","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=3376"},"modified":"2015-02-06T12:00:05","modified_gmt":"2015-02-06T01:00:05","slug":"advice-for-first-time-home-buyers-buying-at-auction-the-market-in-2015-2","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/advice-for-first-time-home-buyers-buying-at-auction-the-market-in-2015-2\/","title":{"rendered":"Advice for first time home buyers | Buying at auction | The market in 2015 | Property development: Before you start"},"content":{"rendered":"

 <\/p>\n

Our legal eagle Rob Balanda<\/a> has some good advice for first time buyers and Michael Yardney<\/a> draws on his years of experience at buying property at auction. He has 9 pearls of wisdom for you.<\/p>\n

A question asked of me during the week about developing a property prompted me to consult with Nhan Nguyen<\/strong> and he talks about the steps to take to access an opportunity and what you should be aware of before starting.<\/p>\n

Market researcher Louis Christopher<\/a> joins us to look back at how we ended 2014 and what he thinks is ahead for this year.<\/p>\n

We answer a question from Kylie about the step from one investment property to a second.<\/p>\n

Co-host of Location, Location, Location Australia and partner at Empower Wealth, Bryce Holdaway<\/strong>, says there are some clear signals about how buoyant the market will be this year and he tells us about some markets that he believes will show good growth this year.<\/p>\n

 <\/p>\n

Transcripts<\/h4>\n

 <\/p>\n

Kevin<\/b>:\u00a0 This time every year, we always like to take a look ahead. It\u2019s easier to look back, but what\u2019s coming up into 2015? I\u2019m talking to Bryce Holdaway now who is the co- host of Location, Location, Location Australia<\/i> \u2013 a great show on LifeStyle television \u2013 and also a partner and director at Empower Wealth along with Ben Kingsley.<\/p>\n

Good day, Bryce. How are you doing?<\/p>\n

Bryce:<\/b>\u00a0 I\u2019m good, Kevin. How about you?<\/p>\n

Kevin<\/b>:\u00a0 Good mate. I was just watching your video that\u2019s on the website there, too, where you and Ben did your overview of 2015 or your look ahead. I thought we might just spend little bit of time and talk about that. Where do you see the market heading this year?<\/p>\n

Bryce:<\/b>\u00a0 It\u2019s an interesting question when someone says, \u201cWhere do you see the market heading?\u201d I think the thing is that anyone who has been investing long enough knows that Australia is not one big market. It\u2019s made of hundreds and hundreds of sub-markets.<\/p>\n

I guess probably the major story of 2015 is that there are a few cycles that are probably at the top end, there are a few that have probably had a pretty good run of late, and there are a couple that are looking really good in terms of the upside.<\/p>\n

Kevin<\/b>:\u00a0 We\u2019ll talk about a few of those. But it was certainly demonstrated in 2014, wasn\u2019t it, just that variety in markets around Australia?<\/p>\n

Bryce:<\/b>\u00a0 Yes. As you know, I travel around the country, and it\u2019s quite a contrast. It\u2019s interesting. Even the Reserve Bank is trying to do a little bit of jawboning and to try and put a lid on maybe the problem children of Melbourne and Sydney. But they\u2019re having a really tough time because any measure that they do \u2013 whether it\u2019s interest rates, macro-prudential tools, whatever they do \u2013 it will probably have an impact on Melbourne and Sydney, but unfortunately, it will really negatively impact the markets that need the help the most. It\u2019s a bit of a challenge.<\/p>\n

Kevin<\/b>:\u00a0 There was even talk this morning about taking another look at a negative gearing, and I think that\u2019s a pretty dangerous path to go down. It\u2019s easy to say investors are pumping up the market, but I tell you what, take them out of the market, and what it\u2019s going to do to rents?<\/p>\n

Bryce:<\/b>\u00a0 That\u2019s the other challenge, isn\u2019t it? They tried in 1983. It was a little bit of a disaster. They had to bring it back in 1985 and give you some sort of depreciation benefits to entice the investors back. If the government actually takes it away, it creates a huge burden for them to provide the rental accommodation.<\/p>\n

But let\u2019s be honest and get to the crux of it. Probably most politicians have got some form of property investment themselves, so they\u2019re unlikely to cut off their nose to spite their face.<\/p>\n

Kevin<\/b>:\u00a0 Are you suggesting self-interest here, Bryce?<\/p>\n

Bryce:<\/b>\u00a0 I wouldn\u2019t suggest that at all!<\/p>\n

Kevin<\/b>:\u00a0 In your video with Ben, let\u2019s have a look at what are some of the good markets to be looking at around Australia, and where will you be talking to your people through Empower Wealth?<\/p>\n

Bryce:<\/b>\u00a0 Look, we are suggesting that the opportunity moving forward is that you really want to try and get some yield play, where a part of the cycle is getting some upside. We\u2019ve seen that Brisbane has an opportunity to buy there and get good yields at the moment, because they have been flat for a little while as a combination of probably post-GFC, a little bit of natural disaster, and a little bit of negative sentiment. The upside of the cycle looks pretty good in terms of growth. But right now, we are buying stuff there that\u2019s getting 5%, 5.5%, and in some cases 6% yield. The opportunity is looking good.<\/p>\n

Kevin<\/b>:\u00a0 What about other areas? You did touch on briefly there Sydney and Melbourne and how hot they are. But what\u2019s your view on the future there?<\/p>\n

Bryce:<\/b>\u00a0 I think that you\u2019re re always going to find good opportunities in those two big metropolises in this country. I say all the time that they\u2019re in the top 100 cities in the world as measured by population, so it\u2019s never a bad idea to have good real estate in those cities. But given that they\u2019ve had such a strong run, probably selection is more critical than ever.<\/p>\n

There\u2019s always going to be a bit of an owner-occupier contingent in any city, and that\u2019s what you really want to be focusing on, because I think the investor sentiment is largely looking outside Melbourne and Sydney in 2015.<\/p>\n

I even think that there are opportunities to run the ruler over places like Adelaide or Hobart, because they have got such low entry points. They have got really good yields, and if you can buy in the very few unique and specific suburbs in those two cities, there could be some upside there.<\/p>\n

But for the safety of having a larger population base, a bigger economic base, you would probably stick to Brisbane.<\/p>\n

Kevin<\/b>:\u00a0 What about some of the stronger regional markets, like Townsville, Cairns? I know they\u2019re based primarily on tourism, but also Newcastle, New South Wales, some of those strong regional areas, Bryce?<\/p>\n

Bryce:<\/b>\u00a0 Yes, I think that Newcastle in particular will get a ripple effect of Sydney being so strong. You can still get the lifestyle. You still have the access to the capital city job market there. I think that particular market is good.<\/p>\n

I even think if you are looking at places like the Gold Coast, or you talked about Cairns, they\u2019ve been depressed markets for so long that if you do run the ruler over, you might see some opportunities.<\/p>\n

Now I\u2019m certainly not suggesting that you\u2019re investing in those markets, because there is a little bit of speculation to it. But given that the price point you\u2019d suggest is at the bottom, so the downside risk would be low, given that there\u2019s some yield, there might be some upside that gets some ripple effect of the fact that people have had some good results in Melbourne and in Sydney and they\u2019re looking for other opportunities, particularly to help them retire and get some yield<\/p>\n

Kevin<\/b>:\u00a0 Always great talking to you, Bryce Holdaway. Thank you very much. Bryce, of course, is the co-host of Location, Location, Location Australia<\/i> and with Ben Kingsley at Empower Wealth. Check out their videos, too. There\u2019s a huge number of them on their website at EmpowerWealth.com.au<\/a>.<\/p>\n

Bryce, always welcome anytime, mate, and great talking to you.<\/p>\n

Bryce:<\/b>\u00a0 Likewise. Thanks, Kevin.<\/p>\n

 <\/p>\n

Michael Yardney<\/h4>\n

Kevin:\u00a0 <\/b>Here we are in February already, and the auctions are cranking up for 2015. Joining me once again to talk about auction strategy, if you find yourself at auction, is Michael Yardney from Metropole Properties, who does this quite often, not only for himself but for clients, as well.<\/p>\n

Good day, Michael.<\/p>\n

Michael<\/b>:\u00a0 Hello, Kevin.<\/p>\n

Kevin:\u00a0 <\/b>Let\u2019s have a look at your tips for buying at auction.<\/p>\n

Michael<\/b>:\u00a0 First of all, we have to assume that all the other homework has been done about choosing the right location, choosing the right property in the location, so I\u2019ll just concentrate on what happens just before and when you get to the auction. Is that okay?<\/p>\n

Kevin:\u00a0 <\/b>Yes, please. Thank you.<\/p>\n

Michael<\/b>:\u00a0 I guess the first thing you have to realize, of course, is that an auction is an unconditional sale. You\u2019re stuck with it, so you have to do your homework first. First of all, I guess that means you have to have your finance pre-approved. Make sure that you have the ability to buy unconditionally, not subject to evaluation. You know where you stand.<\/p>\n

The second thing is you have to do all your homework, your due diligence prior to the auction. This may include a strata report, maybe building and pest inspections, checking zonings, council ratings, etc.<\/p>\n

Then understand what the value of the property is again by doing your homework, by looking at comparable sales, and giving yourself a fair limit to give yourself a good chance. But never do your limits on a round figure. Do you know how many people finish on $500,000 or $550,000? Always give yourself one or two bids above that. That may just get you that property.<\/p>\n

Kevin:\u00a0 <\/b>Just on that point, Michael, when you are doing a strategy before you go to an auction, would you have a couple of figures in your mind, like the figure I\u2019d really like to buy it at and the figure I\u2019m prepared to go to?<\/p>\n

Michael<\/b>:\u00a0 Yes, and they\u2019re very different, aren\u2019t they? I\u2019d like to buy cheaply, too, but I\u2019m also realistic, knowing that if it\u2019s a good property, there\u2019s likely to be other good competition. If I was the only one bidding on them, I\u2019d be a bit concerned have I actually chosen a dud somehow or another, not seeing something everyone else has?<\/p>\n

Kevin:\u00a0 <\/b>That\u2019s a good point.<\/p>\n

Michael<\/b>:\u00a0 I\u2019d also get my solicitor to check my contract beforehand, make sure I understand my legal obligations if I\u2019m a successful bidder. You\u2019re allowed to ask for changes, you\u2019re allowed to ask for commitments. That doesn\u2019t mean that they\u2019re going to accept them, but if I do ask for changes and they do accept them, you often have an indication of how many other potential bidders there are. In other words, if they\u2019re very standoffish and not prepared to countenance any options or changes, maybe there\u2019s other strong competition. On the other hand, if they\u2019re prepared to look at it, maybe there won\u2019t be as many people.<\/p>\n

Kevin:\u00a0 <\/b>Maybe.<\/p>\n

Michael<\/b>:\u00a0 Also, understand the rules of an auction. Go and see as many auctions as you can, but with the particular auctioneer, not the company, because each auctioneer has their own set of words, they have their own way of doing things. So when the property comes on the market, you\u2019ll know the words they say when they\u2019re going to sell. You research auctions, the agency selling it, and this auctioneer, as well.<\/p>\n

On the day, I\u2019d turn up early. If it\u2019s at the property, not in rooms, I\u2019d actually be looking at the surroundings. I\u2019d be seeing who the attendees are. Of course, don\u2019t forget to bring your checkbook.<\/p>\n

When I go there, I actually hang around where the contract is, which is often on the kitchen table or somewhere, just to see who else is looking. Interested parties will look at the contract, while neighbors who are just sticky-beaking probably won\u2019t look at the paperwork.<\/p>\n

Kevin:\u00a0 <\/b>When it comes to the time of the auction, where do you position yourself with the auctioneer?<\/p>\n

Michael<\/b>:\u00a0 I actually do something that\u2019s a bit cheeky. I actually stand as close to the auctioneer, facing the crowd, as I can. I\u2019m usually there in a suit, and they wonder, \u201cWho\u2019s this guy?\u201d He\u2019s another estate agent? He\u2019s part of the team? All of a sudden, he\u2019s bidding.<\/p>\n

Kevin, what I actually do is I speak to the auctioneer by name. I will usually start the bidding in this market, which is a hot market compared to previous years when it was flat. I\u2019ll say, \u201cJohn, I\u2019m going to start by bidding $450,000.\u201d<\/p>\n

What do you think? Hey, he knows him by name. He\u2019s standing there as part of it. I\u2019m confusing them. It\u2019s all legal. It\u2019s all correct. I\u2019m confusing them a little bit. I call him by name, that\u2019s where he\u2019s starting.<\/p>\n

I often start close to where I think the reserve is going to be, and it stops the momentum. Then I bid strongly, and my last bid is as strong as my first. Without hesitation, I go right up to the limit I\u2019m given by my clients, and if I do it that way, people have no idea where my limits are. It\u2019s basically psyching them out a bit.<\/p>\n

Kevin:\u00a0 <\/b>Yes. There is a skill in bidding at auction. There is no doubt of that whatsoever. That\u2019s why anyone who\u2019s inexperienced with that should consider getting a buyer\u2019s agent to do it for them, which is what you do, I guess?<\/p>\n

Michael<\/b>:\u00a0 I guess, that\u2019s exactly what we do. There\u2019s also a skill that happens if the property gets passed in. When the property gets passed in, a lot of people think you have to go inside and you\u2019ve actually got to talk with them and you have to negotiate on their turf. I actually don\u2019t do that. I say, \u201cThat\u2019s okay. I do want to speak with you, but if you don\u2019t mind, I\u2019m going to stay out here.\u201d<\/p>\n

There\u2019s a reason why. It\u2019s again partly playing the game, but I\u2019ve found that when you go inside, they say \u201cOh look, the under-bidder is hanging around outside, and he\u2019s moseying around.\u201d I want to make sure that he is there or he isn\u2019t there. I play it on my turf and I play it my way again. It\u2019s a little bit like chess. It\u2019s a little bit like knowing where you want to end up and having a plan and then implementing that plan.<\/p>\n

Kevin:\u00a0 <\/b>There you go. That\u2019s the plan for auction from Michael Yardney at Metropole Properties. Thanks for your time, mate.<\/p>\n

Michael<\/b>:\u00a0 My pleasure, Kevin.<\/p>\n

 <\/p>\n

Louis Christopher<\/h4>\n

Kevin:<\/b>\u00a0 One of the things that\u2019s of most interest to most investors is what\u2019s happening with vacancies, how many tenants are going to be on the move. Traditionally, we see at the end of the year that a lot of people are on the move. That\u2019s certainly been reflected in the figures, the vacancy rates that have been published by SQM research.<\/p>\n

The man from that organization, Louis Christopher, joins me on the line. Hi Louis?<\/p>\n

Louis:\u00a0 <\/b>Good day there, Kevin.<\/p>\n

Kevin:<\/b>\u00a0 The December figures for vacancy rates, what do we see?<\/p>\n

Louis:\u00a0 <\/b>We saw nationally a rise in vacancies. Our vacancy right now stands at 2.6% nationally, which approximately translates to about 57,000 properties being vacant on the market nationally for the month of December.<\/p>\n

Kevin:<\/b>\u00a0 That\u2019s firmly in the middle of that 2% to 3% band, which is an area I think you closely watch, isn\u2019t it?<\/p>\n

Louis:\u00a0 <\/b>That is so. Generally speaking, we believe that that\u2019s a market that\u2019s in equilibrium, where it\u2019s neither tenants nor landlords controlling the market and putting a downward or upward influence up on the market. But I can\u2019t stress enough that each city is really telling its own story, so we\u2019re seeing some cities where we\u2019re getting big rise in vacancies right now, both month-on-month and year-on-year, which is a concern.<\/p>\n

Kevin:<\/b>\u00a0 Whereabouts are they, Louis?<\/p>\n

Louis:\u00a0 <\/b>Surprise, surprise, Kevin. They\u2019re in the mining- or commodities-related towns. We\u2019re pretty concerned about Darwin at this point in time. We\u2019ve been seeing basically about seven to eight consecutive months now of rises. We have a vacancy rise in Darwin of 3.4%, and there was a massive increase on the November result. That\u2019s already putting downward pressure on rents on our measurement. We\u2019re seeing fuller rents in Darwin now over 8% year on year, so we\u2019re very concerned about Darwin.<\/p>\n

Perth is also another weaker city. We have a vacancy rate\u2013 it doesn\u2019t sound that high \u2013 of 2.8%.<\/p>\n

Kevin:<\/b>\u00a0 It\u2019s a struggling market, Perth, isn\u2019t it right now?<\/p>\n

Louis:\u00a0 <\/b>Yes. It\u2019s relative. Back in the beginning of 2013, we had a vacancy rise in Darwin of under 1%. It\u2019s that relative movement, going from under 1% all the way up to 2.8%, which is putting a lot of stress on landlords, because it\u2019s definitely clearly turned into a tenant\u2019s market, and hence the reason why we are seeing falls in rents in Perth, as well.<\/p>\n

Kevin:<\/b>\u00a0 What about some of the other markets? Let\u2019s say Brisbane. What\u2019s happening there?<\/p>\n

Louis:\u00a0 <\/b>In Brisbane, things have been rather steady. We haven\u2019t really seen a big move either way. We have a vacancy rate in Brisbane for December of 2.7%. Now, there\u2019s a bit of seasonality there. We tend to get higher vacancies in each December. That\u2019s not just in Brisbane. We do see that in other capital cities. This time last year, Brisbane we had a vacancy rate of about 2.6%.<\/p>\n

Kevin:<\/b>\u00a0 I see. It\u2019s not a big movement up, and it\u2019s consistent with what\u2019s happening nationally, isn\u2019t it?<\/p>\n

Louis:\u00a0 <\/b>Yes, that\u2019s right. One thing we are seeing in Brisbane \u2013 and you might recall I raised this about 12 months ago \u2013 is we\u2019re definitely seeing on going elevated vacancies in the CBD itself. Right in the heart of the city saw quite a lot of vacancies.<\/p>\n

Kevin:<\/b>\u00a0 We\u2019re going to see that continue I would think, with the amount of stock that\u2019s coming on, as well. Just looking around at the number of cranes on the horizon, it always tells a bit of a story.<\/p>\n

Louis:\u00a0 <\/b>That\u2019s correct. I think for Brisbane, for the CBD, vacancy rates are likely to go higher from here rather than lower over the course of 2015. I have to say, though, on the east side of Brisbane \u2013 like Wynnum \u2013 we\u2019re seeing tighter vacancy rates there. We\u2019re seeing vacancy rates actually back below 2%.<\/p>\n

We like the east side of Brisbane, and we don\u2019t mind the west side. We think that\u2019s slightly favoring landlords there. It\u2019s the CBD itself that really seems as though it\u2019s favoring tenants right now.<\/p>\n

Kevin:<\/b>\u00a0 Yes, which is a bit surprising. You look on the west side of Brisbane over around the Toowong area, which carries a lot of students, as well. I know one of the reasons why the vacancies seem to spike at the end of the year is because of students vacating.<\/p>\n

Louis:\u00a0 <\/b>Yes, that\u2019s right. It\u2019s not just students. Lots and lots of people decide to make a change before Christmas or just after Christmas for the New Year. So you do see a lot of movement around the country, not just city by city but in the regions, as well. That\u2019s the reason why you see the seasonality in December, where we tend to get higher vacancy rates in December.<\/p>\n

Kevin:<\/b>\u00a0 We\u2019ll talk to you again real soon. Louis Christopher from SQM Research. Thanks for your time, Louis.<\/p>\n

Louis:\u00a0 <\/b>Thank you, Kevin<\/p>\n

 <\/p>\n

George Raptis<\/h4>\n

Kevin:<\/b>\u00a0 If you have a question for any of our experts, you can free call anytime on 1-800-300-206, and we\u2019ll get it answered for you. Carly called recently, and here is her question.<\/p>\n

Carly:<\/b>\u00a0 I currently own one investment property. How do I go about purchasing my second one sooner?<\/p>\n

Kevin:<\/b> \u00a0\u00a0Thanks for that, Carly. To answer your question, I\u2019ve got George Raptis on the line from Metropole Property Strategists in Sydney. George, what would you say to Carly?<\/p>\n

George:<\/b>\u00a0 There would be a number of things that I think you should take on board. First of all, you have to make sure you buy the right property so that you get growth and equity and it allows you the ability to borrow your next deposit. In a lot of cases, it\u2019s just too hard to save it.<\/p>\n

Another thing I\u2019d like to suggest is make sure you are attractive to the lenders. In other words, have a good income, a good credit record, have all your accounts in order, no large credit card debts or any huge personal loans, and make sure you\u2019ve got all your tax returns up to date.<\/p>\n

Another thing is make sure you are achieving the right rental return for your property. A few extra dollars from your rent can determine the amount that you can borrow next.<\/p>\n

Lastly, spend less than you earn. Save the difference and invest it.<\/p>\n

Kevin:<\/b>\u00a0 The\u00a0 first point you mentioned there about how hard it is to save for the next deposit, tell me a little bit more about what you mean by that, and how long does it take\u00a0 to build the\u00a0 equity to get the next deposit?<\/p>\n

George:<\/b>\u00a0 Obviously, a few things determine that \u2013 what happens as far as real estate prices are concerned. But also with regards to finance, I\u2019ve spoken to a number of people where they would like to save a 20% deposit because they want to not have mortgage lenders insurance coming into effect. But I\u2019ve found that in some cases, if they\u2019ve saved the 10% deposit, they can take on the mortgage lenders insurance. In other words, they can add that on to their loan. In other words, it gets them into the market sooner rather than later. It\u2019s just too hard to save another 10% deposit in a lot of cases.<\/p>\n

Kevin:<\/b>\u00a0 Yes. Take on that insurance is what you are saying, and don\u2019t fret over it?<\/p>\n

George:<\/b>\u00a0 No. I call it cost of doing business.<\/p>\n

Kevin:<\/b> \u00a0The other point you made there, too, was about making yourself more attractive to the banks, and you gave a couple of hints there \u2013 about making sure that your credit cards are under control and so on. Is it that simple or is it about having a relationship with your bank manager?<\/p>\n

George:<\/b>\u00a0 Having a relationship with a bank manager is good, but at the end of the day, various lenders all have different rules. I know for a fact that some banks will look at, let\u2019s say, rental income for example. Some banks look at 100% of the rental income when it comes in to factoring in what sort of loan they\u2019ll give you or how much they\u2019ll give you. Some banks will factor in 90%, or some will even go as low as 80%. It\u2019s very important to do your homework, shop around, and see what the various lenders have got to offer.<\/p>\n

Kevin:<\/b>\u00a0 You are a buyer\u2019s agent, so you\u2019re dealing with buyers all the time. How are you finding them in terms of their relationship with the banks, and what sort of preparation should they be going through? Should they be talking to you first, or should they be talking to their financier first?<\/p>\n

George:<\/b>\u00a0 Obviously, for me, it\u2019s very important. It\u2019s good to have the good relationship with the financier \u2013 don\u2019t get me wrong \u2013 but in other words, if you don\u2019t a property strategy in play when you\u2019re going to have this conversation with a financier, it\u2019s really irrelevant. I believe that\u2019s putting the cart before the horse.<\/p>\n

Kevin:<\/b>\u00a0 A buyer\u2019s agent\u2019s role in all of this is to actually help Carly find the best property?<\/p>\n

George:<\/b>\u00a0 It\u2019s about:<\/p>\n