Why median prices aren’t always reliable

Transcript
“Hello and welcome back to daily buying tips, I’m Dean Berman from Berman Buys.

Today we’re going to talk about why median prices aren’t always totally reliable.

I was taught in year 12 maths, that a median is the middle number.

For example.

You have 3 numbers.

1, 5 and 10.

The middle number is 5.

The issue median prices have in many property markets is the limited number of sales.

For example.

If you have a property market with 100 properties in it.

But only 3 sales during the month.

What do you think will happen to the median price?

It will highly fluctuate depending on the number of sales.

For example.

One month may have a sale of $500,000, $800,000 and $1.5m.

The next month may have sales of $800,000, $1.2m and $2m.

Suddenly a massive increase in prices!

Boom times ahead!

But in actuality it doesn’t really mean this.

These median sale figures don’t necessarily take into account how renovated a property is.

For example.

If you suddenly have a re-sales from a fancy new development.

What do you think will happen to prices?

Boom times!!

Be careful of only looking into median prices.

There’s more than meets the eye with them.”

Hurdles buyers face

Transcript
“Hello and welcome back to daily buying tips, I’m Dean Berman from Berman Buys.

Today were going to talk about some of the hardest things you go through when buying property.

Buying a property on the surface seems relatively straightforward.

Find a property you like.

Check it out.

Make an offer.

Presto. You’ve bought a property!

But in actuality there’s more to it than that.

Mainly because of the sheer amount of money a property costs.

Finance is one of the biggest hurdles for buyers.

The initial process can be time consuming with the paperwork.

Getting the pre-approval, is the ideal.

This means you can start making offers straight away as you know much you can afford.

Often times pre-approvals lapse.

Generally around 3 months.

Sometimes there’s simply not enough money to purchase the property you want.

The offer stage is another hurdle.

How much do you offer?

Do you go in low, high, medium?

Are you wasting your time on this particular property?

To make a successful offer the most important tip is to understand what the property is worth.

For residential property this is usually achieved through comparable analysis.

Another hurdle is the pest and building stage.

Particularly if it’s an old house you want to renovate.

Structural issues or termites can be alarming for the non-builder.

I would always highly recommend getting a professional and licensed solicitor or conveyancer to go through the contract for you.

Emotions are also one of the biggest personal challenges you will face.

There are emotions around inspecting, finance, dealing with agents, making an offer, missing out, securing it, exchange, moving out, moving in, settlement.

Buying a property can be an extremely fun process.

Hopefully some of these tips help make the process a little easier.”

Why buyers have historically made money in property

Transcript
“Hello and welcome back to daily buying tips, I’m Dean Berman from Berman Buys.

Today were going to talk about why buyers have historically made money in property.

It’s funny because the reason has nothing to do with property.

It’s all about the finance and what happens because of the finance.

Banks and financial institutions lend money to buyers or borrowers.

Usually 80% of the property’s value is lent.

Whilst the other 20% is from your own savings.

So on a $1m property $800,000 comes from the financial institutions and $200,000 from your savings.

Think about that for a second.

Imagine if you had to fund the entire 100% purchase.

That would make it much much harder to buy.

Lending enables purchases to buy property they don’t have the full amount for now.

In turn you pay interest.

What is happening when prices rise is your getting the 100% benefit on the 20% you physically invest.

A compounding affect takes place over time.

Which is where the equity and wealth is made.

There must be a reason why Einstein said “compound interest is greatest mathematical discovery of all time”.

There’s more than just market movement

Transcript
“Hello and welcome back to daily buying tips, I’m Dean Berman from Berman Buys.

Today were going to discuss what to do when a property market isn’t rising quickly.

Over the last few years markets have been moving upwards.

Sometimes they move downwards.

And sometimes they move sideways.

These are signs of normal property markets.

Some investors have the belief if the market doesn’t go up then they won’t make money.

This is always necessarily the case.

There is another way to make money besides market movement.

Which is ‘sweat equity’.

This is done by improving the property.

Making it a better living standard through a cosmetic or structural renovation.

Other examples include a new build, extension, subdivision, granny flat or small development.

To use a simple analogy.

Sweat equity is like getting a haircut or doing lots of gym.

It will make you feel and likely look better.

Why can’t we give our investment properties a transformation?”

The types of property foreign investors can buy

Transcript
“Hello and welcome back to daily buying tips, I’m Dean Berman from Berman Buys.

Today were going to discuss what types of property foreign investors can purchase in Australia.

You may think why are foreigners allowed to buy property in Australia?

Isn’t it unfair for everyday Australians?

After doing a bit of research on the area I actually think it’s an area where a decent amount of logic prevails.

The reason foreigners can buy property according to the Foreign Investment Review Board or FIRB “is to increase Australia’s housing supply”.

The theory goes that the money from overseas, will help build new properties locally.

Without that money it would be hard to supply as many properties as we need, leading to upward pressure on prices.

The flow on benefits are through the construction process “new jobs will be created which will help support economic growth for everyday Australians”.

Effectively this money is helping companies to employ more people, who in turn can experience better wages and standards of living.

Foreign investment also increases government revenue from “stamp duties” and “other taxes”.

Here are some of the coolest findings on foreign investment:

As foreign investment is used to supply more housing, it makes sense foreigners can’t purchase established residential property in Australia because it’s doing the opposite.

This is why they can generally get an “exemption certificate” when purchasing off the plan property through a developer whose projects has more than 50 properties in a multi-level building, they can’t purchase house and land packages or townhouses.

The only time foreigners can get approval for established property, when it’s for redevelopment and at least 2 dwellings are built for the one demolished, the foreigner has to have approval before entering into an unconditional contract though.

Foreigners can buy vacant land for this same reason as they will be adding a house where there was none before, but need approval, the house needs to be built within 4 years to stop land banking. The approval fees increase with price.

If a foreigner lives in an Australian property for more than 6 months in a year, they will need to pay a vacancy fee which is to encourage greater levels of rental stock in the market.

Commercial property seems to be more relaxed, as foreigners can usually purchase commercial property without needing approval, if the value is generally below $266m.

Large penalties apply for breaching foreign investment rules, ranging from a few thousand dollars to a few hundred thousand dollars

All in all foreign investment policy seems to make sense to me when the rules are followed.”