Our first auction where we were actually bidding. Some guy started the bidding at $700k and then it went up in increments of $25k. It stalled around $825k. Then I bid $830k. The next bid was $835k. But even $830k was above our predetermined limit. I only bid it because I knew the price was still below the reserve and if bidding really had dried up I wanted to be the top bidder to negotiate. But that seemed to unstick things and eventually the house sold for $877,500. Looks like the reserve was $875k. I was surprised that it actually sold at auction as the two previous houses that sold for $870k in that neighborhood would have standard valuations that would be higher. I guess the atmosphere on that block feels more like you are out in the bush and maybe that is what people wanted to pay for. It's what attracted us.
One of the agents would go around talking to bidders during the auction trying to get them to up their bids. When he asked me at around $875k I said: "That's the most we could possibly afford and it's way over the valuation we got, so no". He said: "They were wrong". I think it is highly likely that official land values for tax purposes will go up steeply in this neighborhood after these recent sales. But at the end of the auction, the agent shook my hand and said: "Congratulations". That was weird. Did he really think it wasn't worth $877.5k or did he know something else? A neighbor standing behind us then made some cryptic comments about the other neighbors. Snork Maiden thinks he was saying they were bad. I just couldn't understand what he was talking about.
Our attention now turns to a house in a neighborhood nearer us. It's land is valued $200k more than this one. It has a great view of the city and hills. The house is smaller and not in as good condition. Maybe a better chance to get a deal. There are lots of blocks in this value range that I really think are not worth paying for. This one maybe is.
A couple of colleagues came along to the auction. They hadn't been to a house auction before. One said: "These are like Santa Barbara prices". That's almost right.
7 comments:
we were in Santa Barbara last year and what I haven realized how cold is the ocean there all year around!
I am not quite sure why anybody wants to move in at those weather conditions and prices!
As the writer pointed out - it is exactly this - severe building restrictions lead to scarcity of supply. There is no any other reason.
It is all artificial and temporary.
Hotels are actually very cheap in Santa Barbara. There is simply nothing to see and to do there ;-)
I love Santa Barbara. I doubt today's prices there are temporary... they are a long way down from the Bubble peak. About the same as Sydney currently. Australian prices of course look high because the Australian Dollar is overvalued.
You are right.
I think I have to re-phrase myself - as long as self imposed building restrictions are in place the inflated overvalue housing prices are there to stay.
Are you planing to remain in Australia during your retirement as well? For me it is a mind boggling to bid on house which will cost almost a million after paying all the taxes and fees ;-)
Like with a good book looking at the references I went through the list of your financial blogs.
Sadly some of the do not exist:
http://abnormalreturns.com/
http://bostongalsopenwallet.blogspot.co.uk/
http://www.chezcliff.com/
http://www.mapgirl.net/mfc/
http://www.frontlinethoughts.com/gateway.htm
http://traderfeed.blogspot.co.uk/ - hasn't posted anything since 2010
http://investmiddleway.blogspot.co.uk/ - hasn't posted anything since 2008
http://sittingprettyfinancially.blogspot.co.uk/ - hasn't posted anything since 2008
We're not planning on going to any other country. It won't be over a million including taxes and fees. The tax for purchase is just under 4% and the lawyer only costs $1000.
Yeah, the links are mostly pretty old now. Can't be bothered to fix them - I guess I could delete all of them easily.
Not sure how good a guide to actual market value of properties the land valuations used for land tax are - at least here in Sydney the land tax value is a) lagging actual prices by 3-5 years due to the valuation cycle, b) a bit on the conservative side compared to actual 'vacant block' land prices (probably because although the state government wants the revenue from land tax to be maximised, the valuers dept seems loath to ever have to reduce land value estimates - they'd rather always be playing 'catch up' when there has been a rapid rise), c) actual market values tend to reflect the replacement value of the dwelling on the property, so even a run-down property tends to go for the price of the land plus current construction cost of a similar dwelling (probably because building costs tend to be increasing faster than cpi, and even a run-down property can get a decent rent return).
I tend to look at average sales prices over the past 12-months for a particular suburb, adjust a bit for size and age of the property. If the property has previously been sold you can look up the price of the previous sales and compare it to the average sales price for the suburb at thoses times to get an average multiple for the sales price of that property to the average sales price... If the suburb is undergoing a lot of knock-down-rebuild or renovation activity, you might also see the sales price of a particular property dropping slowly compared to the suburb's average sales price if it is an older property and getting run-down over time. (like ours)
Opinion in Canberra is that the official land values are fairly accurate in general. The valuers valued the block at $450k vs. the unimproved value of $438k. So they assumed it was fairly accurate. They valued the structure at $350k and the insurance/replacement value at $430k. This formula would give reasonable estimates in neighbouring suburbs but not for the best houses in this particular one apparently. One way to look at it is that the house sold for replacement value.
But here in Canberra market value doesn't usually reflect replacement cost. Houses in good condition like this one go for far more than run-down properties.
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