Auction: An auction is one of the two main methods of sale and in Melbourne they account for around 30 per cent of all property sales. At an auction the property sells to the highest bidder as long as the vendor accepts the price.
An auction is regarded as is the most effective way of determining the true market value of a home and are popular in areas of Melbourne where there is a reasonable level of competition.
There are a range of other rules that apply to the conduct of an auction including rules covering the conduct of the auction, responsibilities for the vendor, agent and purchaser.
Buyers should be aware that unlike private sales, a cooling off period does not exist for when a property is purchased at an auction.
Private sale: Private sales account for around 70 per cent of all property sales and are more common the further from the CBD the property is located. Unlike an auction the property is advertised for sale and the sale price is negotiated between the vendor and the prospective purchasers.
Purchasers of properties at private sale generally have a cooling off period of three business days.
Vendor bid: A vendor bid occurs when an auctioneer or the vendor bids on the property during the course of an auction. It must be clearly announced and is normally a sign by the vendor or auctioneer that a higher amount needs to be offered to secure the property.
Capital growth: It’s often used in real estate to describe the increase in the price or value of a property. For instance, the median price of a house in Coburg in this year’s March quarter was $509,250 and a year ago it was $407,500. Therefore the capital growth is the difference between the two, $101,750, divided by the earlier figure, $407,500, which equates to 25% over a year. Capital growth is also known as capital appreciation.
Investment return: From a real estate perspective, an investment return is very similar to the capital growth figure. It is the percentage of change in value of the investment over a given period of time.
Gross rental yield: This is frequently used to compare the investment return on a property investment. To calculate the amount, you divide the yearly rental income by the purchase price of the property. For instance, the yearly rental income on a three-bedroom house in Coburg is $18,200 and the median house price is $509,250 resulting in a gross rental yield of 3.57%.
Clearance rate is used as an indicator of market sentiment. It is the total of the properties sold before the auction, at the auction or the day after the auction divided by the number of auctions scheduled that day. For instance, if a property is sold before the auction, six sold at auction and one the day after the auction and 10 properties were listed, the clearance rate is 80%. The REIV publishes clearance rates and the actual number sold before, after, passed in and passed in on vendor bid, which provides transparency to market analysts and casual observers.
Owners Corporation is a new term in Victoria and replaces the term “body corporate”. An owners corporation commonly exists in units, apartments and medium-density housing when there is shared property, such as a driveway, stairs or car park. It can have as few as two members and there are rules governing how owners corporations operate and their roles. If you are considering buying a property, the vendor needs to declare that it’s an owners corporation member and provide details on its workings.
The median value is the middle price in a series of sales where half the sales are of lower value and half are of a higher value. For example, if 15 sales are recorded in a suburb and arranged in order from lowest to highest value, the eighth-placed is the median price. Medians are used rather than average prices because they are unaffected by a few unusually high or low prices, making them a more accurate indicator of true market activity.
The vacancy rate: The REIV surveys member agencies to build a register of the percentage of private rental homes that are vacant. The vacancy rate is simply the number of vacant rental properties that an agency has on its books divided by the number of rental properties they have. For instance, if an agency has 100 rental homes on its books and five are vacant then the vacancy rate is 5%. The vacancy rate is a general measure and it may be the case that the vacancy rate is higher in one suburb than another. It may also differ depending on the type of property.
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