Hampton 48 Mills: Stephen Tickell straining everything to get that last drop of cash from the auction. 3 bidders. Bought for $1,560,000.

At 6pm on Saturday the James Million-Dollar-Plus clearance rate was 49% for the 37 auctions we attended. By 8pm it was 62% (seemingly a balanced result between buyer and seller).

Bidderman, our Demand Indicator, was at 1.6 – a level we feel continues to be a good representation of current demand: borderline – a  market that may be in balance but is on an edge.

Issues
This weekend was the first solid and uninterrupted auction market test since we all stopped for school holidays at the end of June. At that time we were seeing prices falling on big stock numbers. Since then the market has mopped up more than we expected. However the last few weeks have been very quiet. Saturday was no different – quiet – despite the largest auction offering for a month. With good stock tightening and an election interruption coming, it is looking more and more likely that the market will continue to flounder and gyrate until Spring.

A fortnight ago we thought prices had more chance of falling than rising, however to be completely frank it’s not as clear to us any more. The opposite is also possible. And next week we may have a different opinion.

Yes, good stock is selling, but good stock sells even during a depression. Most homes around a million dollars are selling. For the rest of the $M+market, there seems to be no clear direction at present. We are in balance but it does not appear a stable balance.

Highlights

• Everything sold in Stonnington - 12 from 12. Prahran was particularly impressive, with 6 bought out of 6
• There were two 5 bidder auctions – both by Tom McCarthy and Philip Moore of Biggin and Scott -  14 Green Prahran – $1,653,000 and 13 Hornby Street - $1,476,000.
• Prahran was hot – it had the second highest sale at 41 Closeburn, Prahran with Andrew Macmillan of Benmac – $2,586,000
• The top sale we witnessed this weekend was with Mark Wridgway and Michael Ebeling of RT Edgar at 58 Washington St Toorak – $3,350,000 post auction (for land buyers in the area that added up to $3900 per square metre).
• Flinders Caravan Park was reported as sold during the week for around $6 million. Stay tuned for subdivision plans and possibly a rare Flinders township land release.
• In Port Melbourne/Albert Park there were five single fronteds for sale in various different guises. One sold, four passed in, but three have since sold after. There were 7 bidders in total.
• There were a couple of $3,000,000 pass-ins in Bayside – possibly reflecting the large stock overhang at this level in the area.

Activity Levels – just look at the graph below to confirm what we are saying about large drops in activity levels for $M+ sales. It shows sales for the week ending June 26th v the week ending July 30th. The reasons for the drop in sales are partly seasonal, but also partly unusual – and it’s worth remembering that a number of those May/June 2010 buyers will have to become Spring 2010 sellers sometime.

Agent Comments - This week we asked if the election was affecting the market. The market wraps contain some very boring answers. (The agents aren’t boring – the election is.)

Mark Wridgway from RT Edgar: “The Election is having no effect in Top End Melbourne which is mostly pro conservative. People figure from the property angle that Labour should win so the choices are: as is (which is regarded as OK) if Labour wins or slightly better if the Libs win. As opposed to  2007  when incumbent Liberal Government looked like they were on the way out and therefore conservative sellers held off as 2007 Labour was an unknown. Fewer people act in times of unknowns.”

Family Homes – Not all family homes go up

7 Ardrie Road Malvern East

This home was bought in 2000 for $410,000 and resold again in 2007 for $1,995,000 by James Redfern of Marshall White. It was a great result at the time. For whatever reason the new owners decided to move after two and a half years and it was sold by Abercromby’s Robert Vickers Willis earlier this year in the mid $1.9 millions or slightly less than the 2007 price. The market was strong in February but unfortunately come May the deal had fallen through. We reported the re-auction last weekend.

James Auction Report: With the weather taking a turn for the worse, auctioneer Tim Derham opened the auction with a vendor bid of $1,650,000. With the umbrellas opening in the crowd and the atmosphere souring, no bids were made for the Malvern East property. Derham did all he could to extract a bid from the reluctant crowd before returning to discuss the situation with the vendor. Upon his return, he suffered an equal amount of bad luck. There were no bids made for the property and it was eventually passed in. The property has since been sold by Robert for a tad over $1,700,000.

What to learn from this? – and please no smarty pants here – I lost money on my first marital home 25 years ago. What we can learn is:

• Good properties do perform well over a longer period
• Properties that have to be sold over a shorter period of time have an added risk of being subject to short term market fluctuations
• Properties that are above the median price for the precinct are particularly susceptible to market movements
• Agents can get very strong prices from buyers – e.g. both James Redfern and Robert Vickers Willis got above-market prices which came back to the buyer at resale time.
• The market moves down as well as up in home buying.

What could be done to reduce the risk when buying a good home? After all, this home had a very good James Home Rating of 792/1000

1. Consider land to value ratios – the lower they are, the more susceptible you are to a reduced growth result.
2. Be clear as to why you are buying – Clarity. Then buy for the long term.
3. Buying homes well above the normal precinct price attract greater risk, especially when this is combined with point 1 – lower land to value ratios.

Apartments
Good insight from Gerry Gordon of Hocking Stuart (Peter you need to buy Gerry a new tie): “Sweet spot in apartments is when size matches price point. Many apartment buyers are attracted to a price. Price point people are being attracted to Bayside. Healthy apartment market below a million. Getting 5% return.”

Stock Levels
This week we trawled through old stock lists, off markets, stales and unsolds. The stock we trawled through was mainly unfinished or rubbish apart from the Top of the Top End – where there are good quality unsolds. We thought a few weeks ago (as we came back from holidays) that there was more good stock around than there actually was. What happened? More good stock got mopped up in the flurry pre school holiday break than we first thought (examine our Buyer Activity graphs in the Market Wraps). Around the traps, the word is that Spring seems to be shaping up OK for both buyers and sellers. Up until then you can see the reduced new stock levels  (graph below). Prices are holding at present.

Wormie - the chart below represents our best guess on what $M+ prices are doing right now.

James Buyer Opinion: This week we have reprinted our opinion article that was published in Business Age last week. We update our opinion piece every Wednesday and next week is we will start a 9 week series on Negotiation. Our first article is: “How to ask the “On the Market?” question – without being a smart aleck”.

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Mal

Balwyn 80 City Road: A good crowd turned up to see not much happen - a common occurrence across Million Dollar Melbourne today.