Low stock levels boost clearance rates

In full flight: Danielle Martin (Barleys) at 3/19 Eildon Rd, St Kilda, bought after auction for an undisclosed amount above $1,300,000.

At 6pm on Saturday, the James Clearance Rate for $M+ was 74% on the 23 auctions we attended.

Welcome back after an extended Easter break. As you were probably aware, there has been nothing to report auction wise until this weekend. Even this weekend it hasn’t been much – in terms of numbers anyway.

Overall the market is actually reasonably healthy right now – but this could simply be due to very low new stock levels.

The , our indicator, was up at 1.7 bidders per auction. With such low stock levels we’re not sure how much we can read into this stat. However, March had good numbers of stock and also ended up with a Bidderman rate at this level, so there may be some substance in it. We have not however published individual council clearance rates in the market wraps this week as the samples were simply too low for meaningful data.

Market Summary: The news of the moment really is the unseasonably low levels  of new stock.

We have always considered around 100 auctions in Bayside and Inner East a solid weekend. May is traditionally a big month for solid weekends. In May 2010, for instance, there were over 1000 sales over $1m recorded across all of Melbourne. But this year the cupboard is decidedly bare, with the next two weeks (the first two weeks of May) showing a paltry 70 scheduled $M+ auctions each weekend in the Inner East and Bayside markets (Melbourne’s $M+ Engine Room).

These numbers are actually a bit of a shock to all in the industry.The word around the traps pre Easter had been a lot more upbeat about stock levels than has proven to be the case.

What does this all mean?

  1. Market price has now stabilised on homes that are marketed at market price. It appears that sellers are in a Catch 22 at the moment: if they ask for too much they often don’t get it, but if they don’t ask for too much, they often end up with a good result. Cases in point: while we attended 12 Ferndale Glen Iris (James Redfern see below) and it ran as hotly as we expected, two other auctions had considerably more action than we thought they would at the start of the auction. See reports for 22 Urquhart St Hawthorn (Stuart Evans)  and 29 Mayston Hawthorn East (James Tostevin and Greg Toogood). Vendors were strong but not greedy and we feel they got above their expected result.  Neither of these were great properties – but they weren’t bad either.
  2. For the immediate future, with such low stock levels, the market has almost no choice but to hold firm on price on good properties. So despite a significant reduction in discretionary demand (from investors and from families buying on a whim) we now appear below the low water mark to satisfy minimum market demand – that is, buyers who have to buy to put a roof over their family’s head.
  3. If you are a family home buyer you may need to adjust your strategy in terms of process and price. Your price thoughts may need to remain flexible as the market is still awash with “unloveds” and the number one rule in good buying, good growth and good investment is to not pay more than market price. BUT at the same time a number of auctions are moving beyond the  conservative price thoughts of many buyers. That means that your processes may need to include stales and pass-ins and off markets as more homes are being exchanged via these methods, particularly the latter. Why are off markets happening if the market is OK? The market is OK but it’s not a universal guarantee when sellers market their home fairly that they will sell it; so a number of sellers are looking to exchange their homes via the off market (no advertising) method of sale to reduce the chance of public pain. But let’s not get too carried away with secret sales – this is a common occurrence at the $3m+ level. However in and around $1m it’s still really the exception rather than the rule.

Question: Do you agree that May is looking a little light (although better than April), and do you think this Winter will be quiet in relation to stock?

Peter Perrignon, Hocking Stuart (Richmond): “May is definitely better than April for numbers. Richmond is much stronger than South Yarra and Toorak and we have 20 auctions booked for May in Richmond. There are no signs that June is going to be busy in either of our offices so I suspect that the winter numbers will be down this year over last year.”

Hamish Tostevin, Marshall White (Hawthorn): “May is a lot stronger than April, due to the Easter school holiday period.  We are definitely back on track in relation to auction numbers, however it’s not the Massive May we all thought. There is no doubt the winter period will be a lot quieter in comparison to what we anticipate for early Spring. However, forecasting ahead, it is our view or hopes that there may well be a late rush at the end of June, prior to the next school holidays (all being well)!!

Jack Bongiorno, Marshall White (Brighton): ” Overall we expect numbers to be much lighter for May than this time last year. However a potential cut in interest rates may inject more confidence in the market. (But) things are looking quiet heading towards Spring.”

Glen Iris, 10 Barina Rd, Karl Fitch (Noel Jones), bought after auction for $1,240,000, 3 bidders

$3M+ Summary: Yes it’s been quieter in April but it hasn’t been as quiet as you think, right at the very Top of the Top.

Last year we had three $3m+ activity spikes – one around Easter, one in September and a small one for two weeks in December. Those spikes featured homes in and around $3m to $7m.

March 2012 was definitely a spike in terms of activity and April has continued in that vein – not so much in terms of numbers (due to the holidays) but in terms of substantial deals.

Worth noting are four recent sales at around the $10 million mark (3 over and 1 just under). What that says is that people are acting. We last saw this level of activity in August last year where $55 million worth of property sold across 11 sales. In some ways the 2012 Easter weekend was just as impressive with 3 and possibly a 4th ultra-quiet sale in South Yarra transacting for over $10 million and another one very close to it.

A quick rundown on some of the biggies:

  • Level 39, Royal Domain Tower, 368 St Kilda Road, Melbourne
    Whole floor in excess of 50 squares. Sold by Andrew Baines of Kay and Burton – Over $8,000,000.
  • 26 Albany Road Toorak
    Set on grounds totaling approximately 2,476sqm, a championship-size tennis court and indoor/outdoor pool. Sold by Michael Gibson of Kay and Burton. Over $10,000,000. On the market for over a year and offers back and forth saw this home sell in excess for, we believe, $11,000,000.
  • 1 Millswyn St South Yarra
    On 2,152sqm approx in South Yarra – yes it’s part commercial but it’s a big piece of residential dirt. Sold by Michael Gibson and Matt Davis of Kay and Burton for over $10,000,000 we believe.
  • 21- 23 Kooyoongkoot Road Hawthorn – Sold by Marcus Chiminello of Marshall White. Over $12,000,000
    Tennis court court and pool on 2,788 sqm – just down from another big parcel of land at 33 which sold for around $8,000,000 last month.
  • 49 Irving Road Toorak – it’s been on the market longer than Richmond have been trying to win their latest premiership, but it has finally been put away by Jeremy Fox for $5,000,000 on the knocker.
  • 7 Maple Grove Toorak - slightly dated home with a tricky floor plan. Sold by Michael Armstrong for over $4,500,000
  • 38 Havelock Road Hawthorn East – 1300+ sqm in size, had been on the market for some time with initial quotes in excess of $4 million. Sold by Glen Coutinho of Hocking Stuart for just above the mid $3 millions.
  • And the Balwyn Formula is back in vogue (sort of), that is, small land, big new home and big price – with 3 such homes recently sold in the suburb: 57 Citview (Brett Philipp);  31 Elliott (John Bradbury) and 111 Winmalee (Jin Shang). All sold for between $2,800,000 and $3,200,000 with land sizes between 650 and 750 sq metres. Prices are down but activity is improving.
  • 79 Beaconsfield Parade Albert Park – the sale was managed by Paul Western of Cayzer Real Estate.   On land of 409m2. Passed in at auction on the 3/03/12 and sold on 4/04/12 in the range of $3.2m to $3.5m

Glen Iris, 12 Ferndale Grove, Growling Jack (Marshall White), under the hammer, $1,625,000, 5 bidders

Biggest Auctions:

Hawthorn East, 29 Mayston St, James Tostevin (Marshall White), under the hammer, $1,965,000, 3 bidders
Edwardian timber home – north facing rear on good land at 600sqm plus…(See More in Auction Reports)

Glen Iris, 12 Ferndale Rd, John Bongiorno, (Marshall White), under the hammer, $1,625,000, 5 bidders
A beautiful summer’s day greets the crowd, around 90, who have rocked up to see how this market litmus test – a lovely renovated, single level, timber period home – will go…(See More in Auction Reports)

Top Bidderman Auctions:

Windsor, 50 Lewisham Rd, Elliot Gill (BenMac), under the hammer, $987,500, 5 bidders
The assembled crowd of 35 stood quietly enjoying the autumn sunshine…(See More in Auction Reports)

Sandringham, 54 Vincent St, Mark Earle (Buxton), under the hammer, $1,253,000, 4 bidders
This was one of the most entertaining auctions I had been to for a while…(See More in Auction Reports)

Top Pass Ins

Middle Park, 328 Danks St, passed in, $3,700,000, no bidders
Perfect autumn day and a perfect house. What more could auctioneer Greg Hocking want…(See More in Auction Reports)

South Melbourne, 153 Nelson Rd, passed in, $2,400,000, no bidders
Auctioneer Andrew Stuart is always passionate about the homes he sells and it came as no surprise when he said “this street out-performs most in the area and in Melbourne…(See More in Auction Reports)

Acknowledgement for Peter Perrignon’s photo from news.com.au (Andrew Henshaw)

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