by. Property Line
Foreign Currency Direct, the leading UK currency broker, has launched a new overseas property portal for UK buyers looking overseas. The portal is at www.Propertyline.co.uk and is part of the Eataz Network, with traffic of over 300,000 users per month and 17,000 properties around the world already online.
Unlike most property portals on the web today, Propertyline also has the unique attraction of combining private sellers, agents and developers from multiple countries, and connecting them with buyers across the world. There is also a Property Hunt facility - simply fill in details of your ideal purchase abroad and we can put you in touch with sellers directly according to your preferences.
If you're buying in France, Spain, Portugal, Italy, Cyprus, Bulgaria, Dubai, the USA or almost anywhere in the world, we'll help you find your ideal property today.
In addition, property agents can take advantage of free advertising across the network, by vitrue of a partnership with FCD for currency referrals for their clients. This has already proved successful with many agents reporting a good volume of quality enquiries, at no incremental cost to them and with no commission to pay on sales.
Robin Haynes, FCD Director responsible for the Propertyline project, said: "Foreign Currency Direct is the only UK currency broker committed to adding value to agents' businesses by providing genuine property enquiries to enhance the sales process. The resulting property portal site is in turn a useful tool for UK citizens looking at overseas purchases - meaning we can help them find their dream home and then save them money with the currency transfers too."
Notes for Editors
Contact Details:
Foreign Currency Direct ((www.currencies.co.uk) and Propertyline ((www.propertyline.co.uk ) can be contacted on 0845 177 1001 (or +44 1494 787478 from abroad). Email info@currencies.co.uk or info@propertyline.co.uk.
Foreign Currency Direct plc has provided currency exchange services for the overseas property market since 2000. It charges no fees or commissions on its services and was top of recent surveys by the Sunday Times and Money Observer for best exchange rates and currency deals.
Propertyline.co.uk was launched in 2006 in partnership with the Eataz Network which has been offering online property marketing websites since 2004.
Thursday, July 3, 2008
Property Title Insurance in the Offing
By. Property
Bajaj Allianz, ICICI Lombard in talks with American company to launch the product.
Property transactions in India will soon have an insurance cover to fall back in case something goes wrong in the deal. The country’s two large private sector insurers, ICICI Lombard General Insurance and Bajaj Allianz General, are planning to launch title insurance covers this year.
Title insurance is a cover that protects a potential owner of a property against loss from defects in title. The policy is a retrospective one, where the insured is protected against losses arising from the events that occurred prior to the date of issuing the policy. Globally, the policy is bought by investors, occupiers and financiers.
At present, none of the property transactions, be it large acquisitions or a simple sale of a land or a flat, is covered through an insurance policy by an Indian insurer.
The reason is that Indian insurance companies do not have the underwriting expertise to offer title insurance products. Indian insurers require reinsurance support to be able to offer the product.
Both Bajaj Allianz and ICICI Lombard are in talks with First American Title Insurance Company (FATIC), which will be offering reinsurance support for Indian insurers to offer the product.
FATIC is the largest title insurer globally, with a revenue of $8.4 billion in 2006.
Says Swaraj Krishnan, CEO, Bajaj Allianz General Insurance, “We have had a preliminary discussion with First American Title Insurance. We have asked them to give us the product details. We will be doing a market study, verifying the titles and will file the product with the regulator in the coming months.”
The value of the title insurance cover will be equal to the price of land that has to be acquired. The premium rates will be a function of the value of property, the nature of transaction, which means the size of the purchase, the past history of the real estate property, costs relating to title search and the legalities involved in the title search.
Howden Insurance Brokers is also in talks with real estate developers, financial institutions, law firms, insurance companies and reinsurers to culminate into the next few insurance policies being sold.
Says Anoop Mathur, vice-president of Howden Insurance Brokers, “The value at risk has grown proportionally as the land cost has increased for the real estate developers. Title insurance makes a project bankable and saleable to customers.”
According to Akshaya Kumar, chairman, Park Lane Property Advisors, consultants during due diligence discover 20-30 per cent cases have title defects in them.
Property consultants believe that the availability of title insurance products will boost private equity investment in Indian real estate since most of the institutions are very particular about clear titles.
According to accounting and business consultancy firm Grant Thornton India, private equity firms have invested nearly Rs 25,000 crore in Indian real estate and infrastructure in 2007and, according to industry estimates, the investments are set to grow in the coming year.
“Institutions do not buy even if they have the slightest doubt about the titles. More private equity funds will flow in the Indian real estate if title insurance products are available in the country,” says Anuj Puri, chairman, Jones Lang LaSalle Meghraj, an international property consultant.
Adds Anshuman Magazine, managing director, CB Richard Ellis, South Asia: “Title insurance products give a lot of comfort to international investors to invest their funds in the property markets of developing markets such as India. Since these investors do not invest directly and do joint ventures with Indian developers, the local partners will take care of title issues. But we have also seen foreign investors demanding these products before signing the agreements to develop properties.”
According to Mathur of Howden Insurance Brokers, the two Bills — Land Acquisition Amendment Bill, which has been introduced last month in the Lok Sabha, and the Resettlement and Rehabilitation Bill – will make corporates acquiring land for SEZ or other reasons buy title insurance covers.
Explains Mathur, “After the amendement of the Land Acquisition Act, 1984, the government will not be able to acquire land and make it available for companies. As a result, corporates will have to acquire the land directly from land owners at a higher price. In such a scenario, title insurance would protect project developers from any financial loss arising from any defects in title to real property.”
There are two types of title insurance policies: the owners’ policy and the lenders’ policy. Owners’ title insurance is bought by a buyer of the property. It protects the buyer from all loss or defects in a title.
On the other hand, the lenders’ title insurance is bought by lenders such as banks and financial institutions. Experience in other global markets is that all institutional lenders require title insurance to protect their interests in the collateral of loans secured in real estate.
The policy amount decreases each year in proportion to the loan paid off each year. The policy has a provision for defence cost if a title to the real property is challenged in a court of law up to the actual amount of indemnity provided under the policy.
Land records in the country are not computerised and are not easily accessible.
The deeds registration system is not guaranteed by the state government and is inconclusive; typically leaving buyers with 30 years of title deeds to assess. Besides, the level of fraud in Indian real estate transactions is very significant; and the legal process is slow.
According to insurance officials, four to five foreign title insurance companies are keen to do business in India on this product. They may set up a dedicated company in India or could provide reinsurance support to Indian insurers to offer the policy for this line of business.
Bajaj Allianz, ICICI Lombard in talks with American company to launch the product.
Property transactions in India will soon have an insurance cover to fall back in case something goes wrong in the deal. The country’s two large private sector insurers, ICICI Lombard General Insurance and Bajaj Allianz General, are planning to launch title insurance covers this year.
Title insurance is a cover that protects a potential owner of a property against loss from defects in title. The policy is a retrospective one, where the insured is protected against losses arising from the events that occurred prior to the date of issuing the policy. Globally, the policy is bought by investors, occupiers and financiers.
At present, none of the property transactions, be it large acquisitions or a simple sale of a land or a flat, is covered through an insurance policy by an Indian insurer.
The reason is that Indian insurance companies do not have the underwriting expertise to offer title insurance products. Indian insurers require reinsurance support to be able to offer the product.
Both Bajaj Allianz and ICICI Lombard are in talks with First American Title Insurance Company (FATIC), which will be offering reinsurance support for Indian insurers to offer the product.
FATIC is the largest title insurer globally, with a revenue of $8.4 billion in 2006.
Says Swaraj Krishnan, CEO, Bajaj Allianz General Insurance, “We have had a preliminary discussion with First American Title Insurance. We have asked them to give us the product details. We will be doing a market study, verifying the titles and will file the product with the regulator in the coming months.”
The value of the title insurance cover will be equal to the price of land that has to be acquired. The premium rates will be a function of the value of property, the nature of transaction, which means the size of the purchase, the past history of the real estate property, costs relating to title search and the legalities involved in the title search.
Howden Insurance Brokers is also in talks with real estate developers, financial institutions, law firms, insurance companies and reinsurers to culminate into the next few insurance policies being sold.
Says Anoop Mathur, vice-president of Howden Insurance Brokers, “The value at risk has grown proportionally as the land cost has increased for the real estate developers. Title insurance makes a project bankable and saleable to customers.”
According to Akshaya Kumar, chairman, Park Lane Property Advisors, consultants during due diligence discover 20-30 per cent cases have title defects in them.
Property consultants believe that the availability of title insurance products will boost private equity investment in Indian real estate since most of the institutions are very particular about clear titles.
According to accounting and business consultancy firm Grant Thornton India, private equity firms have invested nearly Rs 25,000 crore in Indian real estate and infrastructure in 2007and, according to industry estimates, the investments are set to grow in the coming year.
“Institutions do not buy even if they have the slightest doubt about the titles. More private equity funds will flow in the Indian real estate if title insurance products are available in the country,” says Anuj Puri, chairman, Jones Lang LaSalle Meghraj, an international property consultant.
Adds Anshuman Magazine, managing director, CB Richard Ellis, South Asia: “Title insurance products give a lot of comfort to international investors to invest their funds in the property markets of developing markets such as India. Since these investors do not invest directly and do joint ventures with Indian developers, the local partners will take care of title issues. But we have also seen foreign investors demanding these products before signing the agreements to develop properties.”
According to Mathur of Howden Insurance Brokers, the two Bills — Land Acquisition Amendment Bill, which has been introduced last month in the Lok Sabha, and the Resettlement and Rehabilitation Bill – will make corporates acquiring land for SEZ or other reasons buy title insurance covers.
Explains Mathur, “After the amendement of the Land Acquisition Act, 1984, the government will not be able to acquire land and make it available for companies. As a result, corporates will have to acquire the land directly from land owners at a higher price. In such a scenario, title insurance would protect project developers from any financial loss arising from any defects in title to real property.”
There are two types of title insurance policies: the owners’ policy and the lenders’ policy. Owners’ title insurance is bought by a buyer of the property. It protects the buyer from all loss or defects in a title.
On the other hand, the lenders’ title insurance is bought by lenders such as banks and financial institutions. Experience in other global markets is that all institutional lenders require title insurance to protect their interests in the collateral of loans secured in real estate.
The policy amount decreases each year in proportion to the loan paid off each year. The policy has a provision for defence cost if a title to the real property is challenged in a court of law up to the actual amount of indemnity provided under the policy.
Land records in the country are not computerised and are not easily accessible.
The deeds registration system is not guaranteed by the state government and is inconclusive; typically leaving buyers with 30 years of title deeds to assess. Besides, the level of fraud in Indian real estate transactions is very significant; and the legal process is slow.
According to insurance officials, four to five foreign title insurance companies are keen to do business in India on this product. They may set up a dedicated company in India or could provide reinsurance support to Indian insurers to offer the policy for this line of business.
Monday, June 30, 2008
Asian Investors Pump Aed 9 Billion Into UAE Property Market in 2007
By. Property
Asian investors have shelled out approximately AED 9 billion in real estate investments into the UAE from March 2007 to the early months of 2008, according to recent market studies. Driven by the huge potential of marketing its developments to Asian-based investors, Bonyan International Investment Group has participated at the recently concluded Cityscape Asia 2008, where it showcased its AED 3.5 billion project portfolio.
As one of the five real estate companies that represented the UAE at the event, Bonyan’s participation was aimed at increasing its penetration in the Asian market to further reinforce its presence in the international real estate arena.
With industry experts projecting further growth in investment opportunities within the UAE real estate market, investors from India, Pakistan and Iran continue to patronise commercial, residential and mixed use spaces within the country’s most sought-after developments. Backed by a strong portfolio of high value real estate offerings and an array of value added services, Bonyan’s strategy is to develop more unique projects that can deliver outstanding investment returns.
In addition to favourable economic and geographical conditions, the involvement of governments through several landmark legislations being enacted across the seven emirates has further positioned the UAE as regulated and investor-friendly market.
“Our aim is to gain a worldwide repute as a developer of high value single development and large-scale community projects and build a project portfolio worth AED 10 billion in the next three years. Being able to penetrate and thrive within the highly competitive regional real estate market is truly overwhelming, and the next step for us is to venture out and seek a broader market for our high value offerings.
For us to be able to realise this vision, we are continuously exerting much effort to bring foreign investors to the country by underlining the outstanding business prospects in the country through events such as this,” said Eng. Abdullah Atatreh, Chairman, Bonyan International Investment Group.
Visitors and participants at the three-day exhibition gained a clearer overall perspective of the booming real estate landscape of the UAE and the Middle East region, and the outstanding investment opportunities being offered by Bonyan through its current development projects such as Dubai Gate 1 and 2, Sharjah Gate and ABBCO Tower.
The developer also showcased its full suite of integrated and research-based services, which include project management and value engineering, sales and marketing, and investment and feasibility, which are being offered across all Bonyan offices in Dubai, Abu Dhabi, Muscat, Qatar and Amman.
“As one of the five developers from the UAE that took part in this event, we were very excited to showcase our portfolio of commercial, residential and mixed use projects, which accurately represents the amazing progress of the real estate market in the country.
Participation in international events of this magnitude undoubtedly presents numerous advantages, not only in driving sales but also in expanding our networks and gaining valuable partnerships with other global players, and this year, we are confident that the results of our presence will exceed the outstanding opportunities that events of this kind have previously opened up for us,” concluded Atatreh.
About Bonyan International Investment Group, L.L.C.
Bonyan International Investment Group, L.L.C. started its activities in 2002 and is now being considered as one of the leading real estate groups in the Middle East. The Group’s main activity is the development of real estate projects through ownership, partnership, or as development consultants. Offering a full suite of integrated and research-based services, the Group leverages several partnerships and strategic alliances with key regional and international business partners.
Its wide array of value-added services include real estate project development, project management and value engineering, sales and marketing, as well as investment and feasibility studies, which are being offered to individual, corporate and institutional clients and partners. With offices in Dubai, Abu Dhabi, Muscat, Qatar and Amman, the company is playing an integral part in the development of the real-estate market in the region.
Asian investors have shelled out approximately AED 9 billion in real estate investments into the UAE from March 2007 to the early months of 2008, according to recent market studies. Driven by the huge potential of marketing its developments to Asian-based investors, Bonyan International Investment Group has participated at the recently concluded Cityscape Asia 2008, where it showcased its AED 3.5 billion project portfolio.
As one of the five real estate companies that represented the UAE at the event, Bonyan’s participation was aimed at increasing its penetration in the Asian market to further reinforce its presence in the international real estate arena.
With industry experts projecting further growth in investment opportunities within the UAE real estate market, investors from India, Pakistan and Iran continue to patronise commercial, residential and mixed use spaces within the country’s most sought-after developments. Backed by a strong portfolio of high value real estate offerings and an array of value added services, Bonyan’s strategy is to develop more unique projects that can deliver outstanding investment returns.
In addition to favourable economic and geographical conditions, the involvement of governments through several landmark legislations being enacted across the seven emirates has further positioned the UAE as regulated and investor-friendly market.
“Our aim is to gain a worldwide repute as a developer of high value single development and large-scale community projects and build a project portfolio worth AED 10 billion in the next three years. Being able to penetrate and thrive within the highly competitive regional real estate market is truly overwhelming, and the next step for us is to venture out and seek a broader market for our high value offerings.
For us to be able to realise this vision, we are continuously exerting much effort to bring foreign investors to the country by underlining the outstanding business prospects in the country through events such as this,” said Eng. Abdullah Atatreh, Chairman, Bonyan International Investment Group.
Visitors and participants at the three-day exhibition gained a clearer overall perspective of the booming real estate landscape of the UAE and the Middle East region, and the outstanding investment opportunities being offered by Bonyan through its current development projects such as Dubai Gate 1 and 2, Sharjah Gate and ABBCO Tower.
The developer also showcased its full suite of integrated and research-based services, which include project management and value engineering, sales and marketing, and investment and feasibility, which are being offered across all Bonyan offices in Dubai, Abu Dhabi, Muscat, Qatar and Amman.
“As one of the five developers from the UAE that took part in this event, we were very excited to showcase our portfolio of commercial, residential and mixed use projects, which accurately represents the amazing progress of the real estate market in the country.
Participation in international events of this magnitude undoubtedly presents numerous advantages, not only in driving sales but also in expanding our networks and gaining valuable partnerships with other global players, and this year, we are confident that the results of our presence will exceed the outstanding opportunities that events of this kind have previously opened up for us,” concluded Atatreh.
About Bonyan International Investment Group, L.L.C.
Bonyan International Investment Group, L.L.C. started its activities in 2002 and is now being considered as one of the leading real estate groups in the Middle East. The Group’s main activity is the development of real estate projects through ownership, partnership, or as development consultants. Offering a full suite of integrated and research-based services, the Group leverages several partnerships and strategic alliances with key regional and international business partners.
Its wide array of value-added services include real estate project development, project management and value engineering, sales and marketing, as well as investment and feasibility studies, which are being offered to individual, corporate and institutional clients and partners. With offices in Dubai, Abu Dhabi, Muscat, Qatar and Amman, the company is playing an integral part in the development of the real-estate market in the region.
Sunday, June 29, 2008
The Stages of Dubai Property Market
By. Property Reporter
The real estate along with the property market was almost zilch a few years back. Amongst negligible revenue on the earned income and no tax on the living wage, Dubai captivated marketers and investors from all over the planet.
With the verification of foreign ownership the prospects augmented further and investors became extensively interested in the property of Dubai.
Due to the low-lying outlay, trade house and investors found it money spinning and profit yielding. But they were dubious about the globalization and evolution of Dubai for the reason that it had little productivity, lesser rate of literacy, low standards of living and consisted of people who earned merely to sustain a living.
But Dubai estimably located itself on the ladder of topmost commercial cities. It made a breakthrough via trade and globalization. Hence the immigrants started bucketing in. With this dawn of industrial encroachment and the delirium of the investors into the assets; the population of Dubai embarked on to augment.
The demand started to increase with a tempo that by no means satisfied the supply. The rates of property amplified significantly and are still growing. But in a brandishing city like Dubai, people find it cost-effective to buy estate even at hiked prices.
This headway had to slow down a little. Now the property tariffs are escalating at a lower rate as compared to few years back. This is all because of the demand and supply chart. The estate market has become a little stable than earlier.
Now the constructors do not let out the property for sale as candidly as they used to. Earlier the main concept was to acquire and to resell. This used to prolong in order to gain maximum proceeds. But now the constructors have become business minded. They do not agree to let out property prices sooner than the groundbreaking of the construction land. They even wait for the development of entire city in order to discern the accurate worth of the property and to attain maximum turnover.
Due to such marketing prototypes, the estate market is believed to have matured but this does not entail that it is in decline phase. Rather the market has dispensed with the conjecture fragment and has grown to be secure in all stipulations. This maturity in the market will lead to the enduring growth of the market and will direct it into a strong position.
Although the profit margins have condensed for new investors, there is still a demand due to low taxes and all the perquisites and amenities that Dubai proffers.
Also the demand protracts and will prolong in the potential times. Investment in property currently could harvest massive profits in terms of renting it to the tourists and then reselling it when market matures for their property
The real estate along with the property market was almost zilch a few years back. Amongst negligible revenue on the earned income and no tax on the living wage, Dubai captivated marketers and investors from all over the planet.
With the verification of foreign ownership the prospects augmented further and investors became extensively interested in the property of Dubai.
Due to the low-lying outlay, trade house and investors found it money spinning and profit yielding. But they were dubious about the globalization and evolution of Dubai for the reason that it had little productivity, lesser rate of literacy, low standards of living and consisted of people who earned merely to sustain a living.
But Dubai estimably located itself on the ladder of topmost commercial cities. It made a breakthrough via trade and globalization. Hence the immigrants started bucketing in. With this dawn of industrial encroachment and the delirium of the investors into the assets; the population of Dubai embarked on to augment.
The demand started to increase with a tempo that by no means satisfied the supply. The rates of property amplified significantly and are still growing. But in a brandishing city like Dubai, people find it cost-effective to buy estate even at hiked prices.
This headway had to slow down a little. Now the property tariffs are escalating at a lower rate as compared to few years back. This is all because of the demand and supply chart. The estate market has become a little stable than earlier.
Now the constructors do not let out the property for sale as candidly as they used to. Earlier the main concept was to acquire and to resell. This used to prolong in order to gain maximum proceeds. But now the constructors have become business minded. They do not agree to let out property prices sooner than the groundbreaking of the construction land. They even wait for the development of entire city in order to discern the accurate worth of the property and to attain maximum turnover.
Due to such marketing prototypes, the estate market is believed to have matured but this does not entail that it is in decline phase. Rather the market has dispensed with the conjecture fragment and has grown to be secure in all stipulations. This maturity in the market will lead to the enduring growth of the market and will direct it into a strong position.
Although the profit margins have condensed for new investors, there is still a demand due to low taxes and all the perquisites and amenities that Dubai proffers.
Also the demand protracts and will prolong in the potential times. Investment in property currently could harvest massive profits in terms of renting it to the tourists and then reselling it when market matures for their property
Tuesday, June 17, 2008
A spring rethink
By. Mark Armstrong and David Johnston
Spring is not necessarily the best time to sell - buyers are too busy socialising.
The conventional wisdom that spring is the best time to sell property ignores the basic laws of economics.
With topsy-turvy weather, daylight savings and wall-to-wall racing fixtures, spring in Melbourne is in full flight.
So, too, is the property market, as vendors spruce up their gardens and shell out for expensive advertising campaigns before taking their properties to auction.
The number of auctions in Melbourne virtually doubles during spring because vendors believe that displaying their properties at their best will bring more buyers out of the woodwork.
This flurry of activity means that there are usually 700 to 900 sellers competing for the hearts and wallets of buyers each weekend, compared with 300 to 400 during winter.
As vendors trim their roses and wait in nervous anticipation, however, their would-be buyers are marching to the beat of a different drum.
In spring, social activity gears up after the long winter hibernation. Melbourne buyers tend to be preoccupied with the spring racing carnival, end-of-year parties and plans for the Christmas holidays.
They may begin to think about buying, but most defer the actual search process until they're back at work and in the swing of things in late January or February (the time-honoured "I'll leave it till next year" approach).
As a consequence, buyer activity only increases by 20 to 30 per cent during spring, creating a major misalignment between the expectations of vendors and the reality of buyers' behaviour.
The auction system relies on competition. When there are fewer buyers than properties in a given area, there's insufficient competition to encourage strong bidding and drive up the eventual purchase price.
At the same time, supply and demand in nearby areas may be more evenly matched, purely because there happen to be fewer vendors or more buyers.
The net result is a patchy market in which the effectiveness of auctions as a method of sale varies considerably from one area to another.
This can happen occasionally even in "blue ribbon" inner suburbs such as Hawthorn, Prahran and Carlton, which traditionally experience strong demand from homebuyers and investors across a range of price brackets.
In one street, there may only be two buyers for a particular property. If one drops out of the running, the remaining buyer is in the box seat to negotiate a competitive price.
Meanwhile, at another property just a few streets away, several buyers could be battling it out for first prize in the bidding war.
What it all boils down to is that the laws of economics are more powerful than the laws of nature. There's little point having a showpiece garden if there are no buyers to be enticed by it.
If there are more properties on the market than there are buyers, or if there aren't enough buyers for a particular property to create a competitive environment, all the pretty flowers and neat hedgerows in the world won't change the final result.
Selling agents are understandably keen to recommend that vendors take their properties to auction - it's a good piece of street theatre and the culmination of a four- to five-week advertising campaign that provides intensive exposure for the agency.
However, vendors in a patchy market should think carefully before accepting such a recommendation at face value. Even if the property is in a blue ribbon area, a private sale may be more effective than an auction in some cases, particularly if the property is compromised in some way.
For example, it may be on a main road, have major structural defects, or be one of dozens of apartments in a large complex in which several similar properties are being sold at the same time. Alternatively, it could simply be a case of bad timing, where a number of properties have been sold recently in the immediate area.
In a patchy market, the most successful sellers and buyers will be those who understand how the effects of supply and demand work on a particular property and location, and who plan their strategy accordingly.
Mark Armstrong and David Johnston are directors of Property Planning Australia, which advises on property and finance strategies. www.propertyplanning.com.au
Keep in mind
- Auctions in Melbourne virtually double during spring.
- Buyer activity increases by only 20 to 30 per cent.
- Auctions rely on strong competition to drive up the sale price.
- If competition is weak or the property is compromised, a private sale may be more appropriate.
Spring is not necessarily the best time to sell - buyers are too busy socialising.
The conventional wisdom that spring is the best time to sell property ignores the basic laws of economics.
With topsy-turvy weather, daylight savings and wall-to-wall racing fixtures, spring in Melbourne is in full flight.
So, too, is the property market, as vendors spruce up their gardens and shell out for expensive advertising campaigns before taking their properties to auction.
The number of auctions in Melbourne virtually doubles during spring because vendors believe that displaying their properties at their best will bring more buyers out of the woodwork.
This flurry of activity means that there are usually 700 to 900 sellers competing for the hearts and wallets of buyers each weekend, compared with 300 to 400 during winter.
As vendors trim their roses and wait in nervous anticipation, however, their would-be buyers are marching to the beat of a different drum.
In spring, social activity gears up after the long winter hibernation. Melbourne buyers tend to be preoccupied with the spring racing carnival, end-of-year parties and plans for the Christmas holidays.
They may begin to think about buying, but most defer the actual search process until they're back at work and in the swing of things in late January or February (the time-honoured "I'll leave it till next year" approach).
As a consequence, buyer activity only increases by 20 to 30 per cent during spring, creating a major misalignment between the expectations of vendors and the reality of buyers' behaviour.
The auction system relies on competition. When there are fewer buyers than properties in a given area, there's insufficient competition to encourage strong bidding and drive up the eventual purchase price.
At the same time, supply and demand in nearby areas may be more evenly matched, purely because there happen to be fewer vendors or more buyers.
The net result is a patchy market in which the effectiveness of auctions as a method of sale varies considerably from one area to another.
This can happen occasionally even in "blue ribbon" inner suburbs such as Hawthorn, Prahran and Carlton, which traditionally experience strong demand from homebuyers and investors across a range of price brackets.
In one street, there may only be two buyers for a particular property. If one drops out of the running, the remaining buyer is in the box seat to negotiate a competitive price.
Meanwhile, at another property just a few streets away, several buyers could be battling it out for first prize in the bidding war.
What it all boils down to is that the laws of economics are more powerful than the laws of nature. There's little point having a showpiece garden if there are no buyers to be enticed by it.
If there are more properties on the market than there are buyers, or if there aren't enough buyers for a particular property to create a competitive environment, all the pretty flowers and neat hedgerows in the world won't change the final result.
Selling agents are understandably keen to recommend that vendors take their properties to auction - it's a good piece of street theatre and the culmination of a four- to five-week advertising campaign that provides intensive exposure for the agency.
However, vendors in a patchy market should think carefully before accepting such a recommendation at face value. Even if the property is in a blue ribbon area, a private sale may be more effective than an auction in some cases, particularly if the property is compromised in some way.
For example, it may be on a main road, have major structural defects, or be one of dozens of apartments in a large complex in which several similar properties are being sold at the same time. Alternatively, it could simply be a case of bad timing, where a number of properties have been sold recently in the immediate area.
In a patchy market, the most successful sellers and buyers will be those who understand how the effects of supply and demand work on a particular property and location, and who plan their strategy accordingly.
Mark Armstrong and David Johnston are directors of Property Planning Australia, which advises on property and finance strategies. www.propertyplanning.com.au
Keep in mind
- Auctions in Melbourne virtually double during spring.
- Buyer activity increases by only 20 to 30 per cent.
- Auctions rely on strong competition to drive up the sale price.
- If competition is weak or the property is compromised, a private sale may be more appropriate.
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