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A Market of Differing Opinions

And I wonder, who'll stop the rain: Paul Caine (Caine Real Estate) sells 110 Vale St, East Melbourne, under the hammer, $3,025,000, 3 bidders and a big crowd of around 100

At 6.00pm Saturday, the James Clearance Rate for Melbourne’s $M+ was 70% on the 26 auctions we covered. The Bidderman, our bidders per auction measurement, was at 1.8.

Overall Summary of Melbourne’s Million Dollar Plus Auctions:

  • Ducks ($M+ auctions with no bidders) 26%
  • Lone Rangers ($M+ auctions with one bidder) 13%
  • Norms ($M+ auctions with 2 or 3 bidders) 44%
  • Volcanoes ($M+ auctions with 4 or more bidders at auction) 17%

The rain won't keep us away: Toby Parker () sells 36 Nott Street, Balwyn, under hammer, $3,140,000, 2 bidders and a big crowd of almost 100 people

Subtle Market Change Indicators

So, has the market gone pear-shaped? That may be what some of you are thinking.

Others will be thinking what the hell are you talking about?  The market is fine – it’s rocking along – check out the results this weekend!

For us the market has changed – especially at the Top End. But it’s subtle – more in terms of what’s happening behind the scenes, as well as a dip in buyer enthusiasm and bidder depth on the weaker homes.

Numbers through Open for Inspections (mainly mid-week) appear down on what they were before Easter. But not on all homes. Bidder depth also appears to be easing on some types of homes – in part due to the large amount of stock and in part due to an increasing number of under-bidders who appear to have decided to move from the April furnace to the May sidelines.

Last week we said May was traditionally a month of change and May 2014 is proving to be no different. It’s intriguing.

Mid week, chatting with agent Philippe Batters, I described the market to him as “having the handbrake being gently pulled on”, and he responded with “it feels more like it’s slipped out of gear and into neutral since Easter”

Why?

Nobody knows for sure but here are the three strongest possibilities

  1. It’s May and the pre-Easter Market has soaked up the “urgent” buyers and sellers. With more stock and less urgency, some buyers can often have a pause. So this is just a normal May market.
  2. Budget talk – it has been quite worrying for some and may have put the market into an “election mode”. At election time, many buyers and sellers at the Top End adopt a wait-and-see approach.
  3. This is nothing but a break in the traffic (i.e., it’s temporary), and may well be no more than another platform (a leveling time) in the rising price staircase that we have been experiencing since October 2012. After all, we thought the market was turning a bit in March. But then Bang! April was a near record month.

So what does this all mean?

For us it’s still business as usual – just a different tone. A market is always changing.

However for some buyers, no matter what is said, it means an “excuse” to do nothing. They become “maybe buyers” and “maybe sellers”.

If you’re a “maybe buyer” you will keep looking, but you won’t buy. You’ll bid but not quite enough to buy. You’ll go to opens, but you won’t find the right home.

If you’re a “maybe seller” you will put off making that call to the agent for an appraisal. If you’ve already done the appraisal, you’ll decide to wait and not go to market till Spring, or maybe you will put it quietly on the off-market but you won’t sell. If you are a seller currently on the market and you want an above-average high price (e.g. pre-Easter) then you will be at an increased risk of pass-in (unless you’re selling an A grader).

But what if you can’t afford to sit on the fence and do nothing? What if you realise your children aren’t going to stop growing and you really need a bigger home.

Best Advice

  1. Understand we are not seeing the market in a hole. We are seeing the beginnings of a patchy market, which is often a precursor to a market change – but we also saw that in March and the market bounced back in April.
  2. Don’t panic – understand that markets go up and down. Even in the GFC the really good properties had only minor haircuts, and any “lost money” was well and truly recovered within a couple of years (on the good ones, anyway). So stick to your longer term plans and understand what quality is.
  3. Realise that on A-graders you will still have to compete against locals who want quality, as well as Chinese buyers from overseas. By this we mean that even if demand has halved, the good properties that pre-Easter had 6 bidders will still have 3 bidders, and the market will still produce a strong result.
  4. Realise that the subtle changes to the market are more apparent and more relevant at the Top End i.e., $3m+ more so than the $1m+ homes. Because there are generally fewer bidders at the Top End, a decline in demand has more impact -in that, while there may have been 3 bidders pre-Easter, there may now be just one or two – and that’s when price differentials occur.
  5. Understand that B- and C-graders will have less bidders, and in some cases no other bidders. Which means you may end up paying more than if you had adopted a bold bidding strategy only.
  6. Understand that when markets drop, stock tends to dry up. When you combine that with the coming winter lull, you may want to think about adopting a wait-and-see short term strategy. However, that inaction may mean you will have no choice until late in the year or even early next year. Therefore you will have accidentally created a long term wait-and-see strategy. Can you wait?
  7. Adopting a wait and see approach usually leads to one of three things:
  • You lose your patience and end up buying something out of desperation rather than based on logic.
  • You miss this cycle and buy in the next up cycle instead – possibly paying more than now.
  • You miss the opportunity forever to trade up.

When markets go off, the Top End comes back to pack and trading up becomes a lot more sensible. So a leveling or easing market is a plus for growing families.

Our recommendation is business as usual. Which means:

  1. Acknowledge your confidence level change and manage it rather than react to it.
  2. Ask a few more questions rather than just assume it’s going to fly out of the blocks;
  3. Don’t be quite as quick to jump in with a big bold knockout bid;
  4. But above all try and remember the longer term outcomes you are trying to achieve. If it’s a “goodie” we would still be recommending to put your hand up, as life is short.

So are you about finding a good long term family home while there is still a lot of choice but a bit of uncertainty? Or are you are about trying to deal with your uncertainty and not much else?

Selling rain, hail or shine: Jeremy Fox () sells 20 Hawksburn Road, South Yarra, under the hammer, $4,195,000, 4 bidders

Biggest Auctions:

  • South Yarra, 20 Hawksburn Road, Jeremy Fox (RT Edgar), under hammer, $4,195,000, 4 bidders
    Despite the drizzling rain, the auction of this grand old Victorian drew a big crowd of around 75 people, who donned coats and scarves…(See More in Auction Reports)
  • Balwyn, 36 Nott Street, Toby Parker (Hocking Stuart), under hammer, $3,140,000, 2 bidders
    The threat of a downpour did not deter punters this morning.  A crowd of 96 huddled under umbrellas to listen to auctioneer Toby Parker…(See More in Auction Reports)
  • East Melbourne, 110 Vale Street, Paul Caine (Caine Real Estate), under hammer, $3,025,000, 3 bidders
    Auctioneer Paul Caine appeared unfazed by the rain pattering down on our heads along Vale Street this morning…(See More in Auction Reports)

Bidderbuzz:

  • Glen Iris, 9 Bellavista Road, John Bongiorno (), under hammer, $1,900,000, 4 bidders
    A crowd of 50 huddled into the garage of 9 Bellavista to see John Bongiorno auction this home…(See More in Auction Reports)
  • East, 51 Bourneville Avenue, David Hart (Buxton), under hammer, $1,545,000, 4 bidders
    Many a park-goer must have pondered the potential of this two-bedroom, one-bathroom “retro style” home and indeed, auctioneer David Hart…(See More in Auction Reports)
  • Malvern, 63 Claremont Avenue, Phil de Fegely (Lazogas Real Estate), passed in, $1,120,000, 4 bidders
    Huddled under umbrellas, the crowd of around 35 people encircled auctioneer Phil de Fegely as he went through the usual auction…(See More in Auction Reports)

Biggest Pass Ins:

  • Balwyn, 36 Terry Street, passed in, $2,500,000, no bidders
    With coffee in hand the crowd of 65 was settled in to hear our auctioneer introduce 36 Terry Street…(See More in Auction Reports)
  • Toorak, 7 Millicent Avenue, passed in, $2,500,000, no bidders
    In what must have been one of the shortest auctions of the year to date, auctioneer…(See More in Auction Reports)
  • Camberwell, 15 Range Street, passed in, $2,170,000, 2 bidders
    About 50 people gather in the rear open plan living area, escaping from the rain for this auction….(See More in Auction Reports)

Agent Survey: How have you found things since Easter?

Peter Kennett (Hocking Stuart, Brighton): I get the strong feeling that the market is taking a bit of a deep breath!! There definitely feels like a shortage of stock over May, which is usually a high volume month for real estate sales. This is most likely a reflection of the larger than normal volume through Feb/March. That volume could not be sustained!! Buyers seem to be a little more reserved, especially above $2- $3 million, unless it is very special and well located. In summary

  • Up to $2 million – a bush fire, sometimes uncontrollable.
  • $2 million – $4 million – slow moving grass fire, which gets a bit scary when the wind blows!!
  • $4 million plus – controlled burn off.

Bill Stavrakis (Biggin & Scott, Elsternwick): “Since Easter we have found the market to be selective but, in a word, strong. The premium properties seem to be attracting all the interest, though the B and C listers are feeling the pinch. It will be an interesting month, May, as the increase in stock levels will be a real test as to the depth of this current market.”

Glen Coutinho (RT Edgar , ): “The market after Easter has opened up strongly. Easter and Anzac day slowed things down and people forgot about real estate for a few days. However, now it is back on the agenda with a rush of vendors wanting to get on the market before winter and we are still seeing multiple bidders at auctions. So it should be a positive lead into the spring market.”

(Marshall White, ): “It seems quite traditional after any extended or disrupted break in the Melbourne market, such as we’ve just experienced. I am finding it takes buyers longer to move in to the right frame of mind with their purchasing decision than it does for our vendor clients whom have been preparing for some time. Inspections have been well attended, inquiry is strong and it feels like a very balanced environment. We expect this to continue in our market for some time to come.”

Torsten Kasper (Chisholm & Gamon, ): “Post Easter has seen the $1 – $1.5 million market retain its strength and full steam ahead for the $2 million plus market. The old adage still applies; A good still sells well at any given point in time.”

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