Listen to all the spruikers in the market place. It is as if they are saying… “whatever you buy in the real estate market will make your money, just buy,” the running mantra for every real estate professional selling real estate in Melbourne over the last 5 years.
Truth be known, the fundamental principles of dollar value profit and how to make money out of real estate has been diminished by the two major factors of what not too many people are prepared to talk about
- Global Purchaser
- Generational shift to Gen Y
If you sit down and analyse sales, there is very much a running theme. That the acquisition has been made for not the usual reasons behind a so called “market transaction”. In simple terms, it maybe for providing a safe haven for current or future status, a future holding or development opportunity, a future place of residence., shifting monies from homeland due to PR reasons, shifting money out before the law of the law does not allow it to be taken out.
Even if some of those reasons mentioned are correct or partially correct, the prices paid for real estate do not reflect what a prudent purchaser would buy real estate for locally. In saying this, it does not provide local purchasers and real estate fraternity with confidence of current levels of value. When buying and if so, are they really sustainable in the next part of the current cycle.
How many times have you walked away from a transaction in the current market trying to work out the angle how a global purchaser is going to make it work at that price.
The next point of contention is the real estate industry as a whole and in particular Gen Y.
If you can seriously discuss the fundamentals of real estate with the current generation of real estate agents on a sales and leasing basis, please let me know. Oh, by the way if you are a Gen Y don’t take offense. it is what it is. You are extremely good at what you do. Marketing.
I know because as a valuer half my day is lost trying to find reason talking to Gen Y as to how they are proposing XYZ sale price. It’s hard to interpret and or define levels of value on real estate today with people at the coal face of the market that in real terms do not understand the market nor have real market knowledge other than a sales sheet dialogue.
Coupled with point 1, the myriad of acquisitions and values is a time bomb waiting to go off.
Within the discussion you ask how do you make money in real estate today. The answer is simple, forget fundamentals, go with the majority and hope that the current cycle continues.
It will and thank goodness.
I doubt that any recovery from where we are at currently would be short term or immediate. If the market falls from grace in 2018, the hurt will be long and protracted as it was in the early 1990’s.
Twenty-seven years of upward lift in value has provided global purchasers and a generation of professional Australians with a belief that real state property only goes up. It does not falter and it won’t for any period of time soon.
Simply get on board… That’s how you make money in real estate today.
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