The hype was in hyper-drive following the annual auction orgy on the Gold Coast last week.
Brisbane’s metropolitan newspaper declared that the property market had turned, based on the evidence from the two-day auction event. The clearance rate was, it said, “impressive”. The Herald-Sun in Melbourne said the tough times in the property market were over.
Fairly big statements, given that little more half the properties sold – and many went at bargain-basement prices.
Ray White’s annual exercise in self-aggrandisement is marketed as The Event. It’s about as valid as Anthony Mundine continuing to call himself The Man. But when hype is your business, the results don’t dilute the spin.
The hysteria was so contagious that it was impossible to distinguish the “news article” in The Courier-Mail and the PR piece on the Ray White website – the level of gush was pretty much the same in both.
That is, of course, an indictment on The Courier-Mail, which bows down before anyone who directs (vendor-paid) auction advertising its way. I’m surprised it didn’t describe savvy investors snapping up luxury apartments in a hot market.
So what really happened? Essentially, mortgagees and other battered vendors liquidated some stock. The bottom-feeders came out, attracted by the stench of desperation, and properties sold for a fraction of their former value. The one thing The Courier-Mail got right was this: “Bargain hunters were out in force.”
At the end of the two days, the clearance rate claimed by the agents was just 58%. Not even the Real Estate Institute of Victoria would parade that as evidence of the good times returning.
The estimated size of the crowd varied from “more than 500” in the newspapers to the “more than 3,000” claimed by the agent.
One mortgagee sale resulted in a property purchased for $2 million in 2002 selling for just $851,000. Terrible result for the former owners and their lenders, but the agent still gets well paid. Another property with a claimed value of $2.5 million sold for $1,255,000.
One newspaper report said: “While all the properties sold well under their peaks, realistic vendors endured that sales were constant and many properties sold above the reserve, according to Andrew Bell, chief executive of Ray White Surfers Paradise.”
Wow, some actually achieved the reserve – remembering that the reserve price is usually regarded as the absolute minimum the vendor will accept – NOT the result the seller is seeking. Evidently, many vendors accepted less than the absolute minimum. Big win for everyone, except the vendors.
So what does it all mean? The Gold Coast, after five years in real estate hell, is still trawling the bottom of the cycle, and the only people out buying are the bargain-hunters.
I continue to urge caution to property investors. Be wary of being enticed by what appear to be attractively low prices. Those prices have dropped for a reason.
The Courier-Mail quoted one buyer as saying that he bought units sight-unseen because the prices appeared “fairly cheap”.
You have to think beyond the bargain price. The key question is: does this market and this product have a strong future?
If you’re satisfied it does, then knock yourself out. But don’t simply be seduced by the hype and the appearance of a bargain.
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