The quirks of buying in Melbourne

This article forms part one of a two-part feature on investing in property where we have collaborated with the team over at Yield Financial Planning to display our passion for property and the intricacies of how it fits into a well-crafted financial plan.

One of Melbourne’s best-known quirks is sale by auction. Melbourne is the nations ‘auction capital’, and for good reason. Aside from the fact that Melbourne experiences the highest proportion of properties selling under the hammer, the auction reputation harks back to the original settlement of our city. In 1836, Governor Bourke authorised the first sale of Crown land in Melbourne in our city grid as we know it today. Subsequent parcels of the city were sold in that same year and in this short period of just a few months, sale prices grew rapidly. Our city, at this time was so young that it could barely even be called a town, let alone a city, so the decision was made to conduct further property auctions for Melbourne land in Sydney.

Melbourne real estate sales, particularly in the city centre, inner-ring and middle-ring suburb have proven to favour a sale by auction method, and unlike any other cities in the world, a very large proportion of Melbourne real estate agents also train to be auctioneers.

Interstate and overseas buyers are still largely petrified at the idea of buying at auction, and their reservations usually stem from one or more of the following fears:

• The thought of buying unconditionally
• Awkwardness or shyness in the face of a very public sale
• Apprehension about investing in the due diligence for something that they may not secure (ie. legal reviews, building/pest inspections)
• Devastation and/or humiliation in a public space

We assist buyers every single week at auction, and it’s fair to say that I’ve partaken in over two thousand auctions as a Buyer’s Advocate. Auctions aren’t for the feint-hearted, but sound financial advice, careful comparable sales research and a belly full of courage can help the best of bidders.

Another quirk of Melbourne real estate relates to Melburnian’s love of sport, above all else. The only seemingly quiet days in real estate are Christmas Day, Boxing Day, Grand Final Day and Melbourne Cup Day. In an industry that never stops, a sporting holiday will stop real estate transactions. Not only do agents like to put their feet up for a sporting holiday, but sales campaigns are often engineered around a sporting holiday. Vendors and agents dislike a public holiday long weekend hampering their campaigns, and it is for this reason that a large portion of campaign starts are immediately after these sporting holidays, and also why “Super-Saturdays” often occur in the week preceding the holiday. A Super-Saturday is denoted by 1000 or more auctions on one Saturday, and late September and late October are regular Super-Saturday periods.

For those brave agents who do schedule public auctions on Grand Final Day, vendors are no stranger to early-morning auctions so that their agent can enjoy the first bounce. And for any purchasers tackling a purchase in an AFL suburb during a finals season, the city comes alive with colour themes for any the teams battling it out for the premiership. Melbourne and all of its quirks during footy season makes it a particularly fun city during the spring selling season. 

Aside from Melburnian’s love of sport and culture, there are other unusual quirks in the state of Victoria when it comes to real estate transactions and rules.

One relates to cooling off periods. Unless the purchaser is buying a commercial, industrial or farming property, is a licensed real estate agent, or has previously signed a contract for the same property, a three-day cooling off period applies to the purchase. Unless of course the purchase is within three business days either side of a scheduled auction. This latter rule is one that buyers should remember, because a purchaser who signs a contract on the Wednesday before or after the scheduled auction will not be eligible for a cooling off period. At Cate Bakos Property, we often explain the auction conditions and the impact on cooling off periods to our clients.

What does ‘purchasing under auction conditions’ mean for a buyer? 

The onus is on the buyer to have conducted all their pre-purchase evaluations and due diligence, including building and pest inspections, finance pre-approval, council checks and any other relevant homework they deemed important when making a decision to purchase a particular property.

Another interesting real estate quirk is that of nomination.

A purchaser in Victoria can elect to nominate another person or entity to take on the purchase (or join them as a co-owner) by simply utilising a nomination clause. Where this option comes in handy is when one party can’t be present at the auction or signing, or when an entity is not yet determined, i.e. an accountant or financial planner is still yet to set up a company or trust. Nominations can also be handy for those who find themselves scrambling to sell a property that hasn’t yet settled, (often an unfortunate off the plan sale with a long sunset date is resolved with this clause).  For those buyers who can ‘find’ another buyer to accept their nomination, this particular type of on-sell can alleviate losses and save wasted stamp duty payments. Noting that Victoria currently applies the heftiest duties when it comes to land stamp duty.

For a better understanding of stamp duty and some of the taxes and other tax-related implications associated with purchasing, our friends at Yield Financial Planning have penned a fantastic article on Taxes on Investment Properties.

“Whether it is your holiday home, rental property, development plan or principal place of residence, each has its own tax considerations that should be navigated considerate of what is important to you in life.”

Yield Financial Planning

For all the first homeowners out there, our state government does have some special offerings for those getting their foot on the property ladder for the first time. Our stamp duty concessions apply on a sliding scale, ranging from purchases up to $750,000, and being completely waived for purchases sub-$600,000.

Our State Government also has first home owner grants in place for;

• New builds in metro locations: $10,000 for eligible applicants,
• New builds in regional locations: $20,000 for eligible applicants.

And aside from the Federal government’s newly introduced shared equity scheme, our State’s offering for the Homes Vic shared equity scheme has been in place for some years now, enabling eligible Victorians an option to purchase with government investment of up to 25% of the purchase price.

Ours state and capital city offers a lot of opportunity for buyers, but rigour does need to be exercised when it comes to navigating some of these quirks.

I have assisted almost two thousand clients on their property journey over the years, and every opportunity is a privilege. At Cate Bakos Property we pride ourselves on our ability to guide our clients on their respective property journeys.

We love meeting new clients! The first step to make contact is to drop us an email at cate@catebakos.com.au to arrange an online meeting. We’ll take the time to understand what it is our new clients are aiming to achieve, and we will happily steer them in the right direction if they require financial advice or other support.

We’d like to thank James and the team at Yield Financial planning for inviting us to participate in this collaboration.