oc | Tuesday 18th December
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The Market is not all about the Auction

17 Albany Road, Toorak (Gerald Delany) Under Hammer, $6,250,000, 4 bidders.

17 Albany Road, Toorak (Gerald Delany) Under Hammer, $6,250,000, 4 bidders.

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Its 6.00pm Saturday and the James Clearance rate for $M+ Inner Melbourne was 74% on the 23 Auctions we covered today – solid.

James Bidderman, that is bidders per auction, was 2.3 bidders per auction – also a solid number.

Interesting to note the spread across the board, at the Top End, was fairly even between ducks/lone rangers, norms and volcanoes.

The whole talk in this market is about stock – see our agent comments below. Thank you to David, Andrew(s), Nick and Tim for real comments, not agent hype.

95 Cochrane Street, Brighton (Andrew Boyce) After Auction, $3,295,888, 1 bidder.

95 Cochrane Street, (Andrew Boyce) After Auction, $3,295,888, 1 bidder.

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“What is the market doing in Spring 2016?” Easily the most common question we get asked, and we hear it a number of times every day.

The follow up question is – “Where is the market headed in the future?”

And the finishing question is  – “Why should I hire you, anybody can put their hand up at auction?”

The Big 3.

Can we suggest to any future home buyers that you ask the same questions, but in a manner that will seek out answers that actually help you – answers giving you real knowledge, rather than useless information.

Question One – What is the market actually doing in 2016?

Have you noticed a lot less stock on the auction market?

Below are the first hundred sales in 2016, over $4,000,000 in Toorak, Hawthorn and Brighton from Government, ours and REIV data sources.

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Only 18 of the first 100 sales in 2016, above $4,000,000, were “under the hammer” auction sales. The reds above are the auction sales. We blurred them because private and off-market sales don’t ask to be public, in the way auction people and auction sales do.

Did you register that figure? 18% (less than one in five) of homes bought and sold over $4,000,000 were bought and sold under auction conditions – that means 82%  (more than four in five) were not.

82% of deals were private, off market or outside auction condition sales in the Big 3 suburbs.

So there is a very high chance you will not be buying or selling your home under auction conditions at the Top End.

That is what is happening in the market in 2016.

Sure the figures are not like this at $1 million, but we at James mostly work in the higher end and this market is a very different one, to what you read about in the papers.

There is a revolution going on? (sort of) – the $1m homes of 15 years ago and $2m homes of seven years ago; that are now $4 million are not being marketed as they once were.

Why?

The dollar gap between a good deal and bad deal can be $1,000,000 on a buy/sell at this price level – and more and more smart buyers and sellers recognise this.

That’s right, you do the trades well and its an extra $1,000,000 tax free dollars in your pocket. You do them poorly and it’s an extra $1,000,000 non deductible slug on your mortgage. Its not inconceivable, that the difference in extreme circumstances, could be $2,000,000 with the good decisions or the bad decisions that you make. Wow!

Within the last four weeks we completed a difficult buy/sell; that without intervention; would have given a net negative difference of $750,000 to our client – these are tax-free dollars or taxable mortgages.

So in the 2016 market at the Top End, is a four-week auction campaign the best way to achieve what you want?

Sellers are becoming more savvy – they realise that auctions are not always the best way – despite the agent hype.

Many sellers and obviously more buyers are recognising there are alternatives to hands up at an auction after three weeks of marketing.

So why is all the talk still about auctions?

1. Because it does produce some stellar results – that are easy to publicise – no privacy laws on a public auction.

2. Because auctions are a lot easier for agents to manage. Routine, get the assistants to do the work within a structure, produce a result at the end. Agents don’t make their money on your individual result, they make their money on turnover of many results (hey, so does Coles).

3. Media – because auctions are a lot easier to talk about in the mainstream media – that is all you hear. Last decade, we and Morrell and Koren were the only ones reporting things like bidders and colour and the auction market etc. About 4 years ago mainstream media and then recently Facebook posts started to flood the airways with auction news, auction reports, latest auction results, auctions before dinner on Saturday, auction videos and so on.  Everywhere you go its auctions.

But at the Top End in 2016, auctions is only 18% of the market.

You may or may not have noticed, that our auction coverage has begun to diminish these last two years, as Saturday auctions cease to become the only game in town.

We now produce more and more reports (for clients only) on what is really happening behind the “mainstream auction market noise” at the Top End. We cannot provide colour in a public forum, like James Marketnews, about deals that went on behind closed doors.

82% non auctions (behind closed doors), is what is really going on in today’s 2016 Top End market.

Follow Up question – so how does the 82% of homes not sold under the hammer work?

Firstly, good agents are not just presenting the big marketing spends with auction-only campaigns – they are showing sellers there are other ways to sell, over longer periods of time.

As buyers, once we recognise that it’s not all about hands up at an auction, we can then work through strategies to deal with this. Well we can if we want to be looking where 82% of the homes are being sold over $4 million.

By the way, you will not read about this in The Age or see it featured on www.realestate.com.au – as 18 out of a 100 without the $40,000 spend (laughable, isn’t it) isn’t good for their advertising businesses. However they in a large part have cooked their own gooses, with their totally unjustifiable advertising charges – the advertising spends are only driven by an inexperienced seller’s fear – you don’t need them – you need a good selling agent.

If I was selling (and we are helping a number of our buying clients who bought 5, 10 and 15 years ago with agent selection); then I would be making sure I got the right selling agent on my home, rather than just outlaying $30,000 or $50,000 on advertising and a public campaign, thinking who cares who sells it. Put that $50,000 into hiring a second agency who can database well or fly an agent to China or offer to reimburse buyers for pest and building reports – think left field…………………

Alternatively if I was a buyer, I would be engaging an experienced buyer agent/advocate who made sure you were actually accessing and assessing all the market – rather than only what was on page one of the internet. Although if you did find it on the internet, you still have to deal with agents, other buyers etc behind closed doors. But hey ……… (Ok, fair call – a bit of Mal spin, but the basic elements are true – if you don’t want to do it yourself, consider an advocate).

The above 82% non auctions/18% auctions table over $4,000,000 is not marketing spin – it is fact.

This is what is really happening in the Top End market in 2016.

Source: REIV, Valuer General, James Buyer Advocate Home records January 2016 onwards for Toorak, Brighton, Hawthorn over $4m – selected totally in date order – method of sale stated as auction (accepted as under the hammer) or otherwise (not under the hammer) in each individual record examined – no exclusions were made by us in the analysis.

Question Two – What will the market be doing in the future?

We’ve got no idea about growth rates, when and by how much – except that the good homes (not the bad homes) will go up substantially over the long haul. Why?

  1. Shelter ()
  2. Less on offer within infrastructure ()
  3. More wealthy immigration (Demand)
  4. Government via banks basically print more and more money – the money supply is not attached to anything, but the whim of a few economists (Demand)
  5. Perceptions and herd mentality (Demand)

Simple and Concise.

Question Three – Why should we engage you Mal, because anybody can put their hand up at auction?

Exactly, anybody can put their hand up at auction and if you think like that, in this current market, then nothing I say will change your mind.

We missed today on Palermo Street, South Yarra (Mark McKenzie, Robyn Feigen and Gerald Delany) one of 12 negotiations we are currently involved in. We said walk away……

From a financial point of view, does it make sense to go toe-to-toe with somebody who really wants it and it’s on the market at $1.8m and the next bid we didn’t make was $2.3m. That’s $500,000 on one other person’s opinion.

Now please, for the winner it made sense – however for us, our clients had a financial component in their desired outcome (eg investment) and while it could be argued the next one will be more expensive – it could also be argued the next one may well be $500,000 cheaper without the extra bidder.

Please, it would be hypocritical if I did not highlight, that at times we at James really, really push on certain properties – but, my point, every deal has a red zone, and some are lower than others. You need to know, when not to go into your red zone (and its different for everybody). Refer above to the $1million buy/sell example.

In selling a home – as you go further up the food chain dollar wise, does a four week wham, bam auction campaign make sense? The air is thinner for bidders and maybe patience and a good asking price over a 3 – 6 month off market or private campaign produces a better result, than a short auction campaign and a $40,000 advertising spend.

As buyers you/we have to deal with these thoughts from the sellers on some of the properties we are trying to buy.

So my point – most of our work is not actually under the hammer at auction, and yes, anybody can put their hand up at auction.

We also keep hearing that this off-market stuff is a load of garbage, why wouldn’t everybody go to auction as you get ridiculous prices.

You do get some very big prices at auction, but do you always achieve the best price at auction?

Alternatively do you still think every off-market is as good as the next one?

There are many homes sold privately. They are sold that way because they are unlikely to shine at auction. Just because it’s for sale off market, doesn’t guarantee that it is a bargain.

We still buy homes at auction – just nothing like the amount we used to four years ago. And when we do go to auction, its not just a matter of putting your hand up – its a lot, lot more than that.

So the stats above – Only 18% of homes over $4,000,000 were bought under the hammer at auction (with somebody’s hand up) and this is almost identical to the stats we showed you last James Market News, about how we at James have been changing the way we do business.

Less than 20% of the homes we buy are under the hammer – 4 years ago it was over 80%.

We’ve been adapting – as buyers have you?

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49 Weybridge Street, Surrey Hills (James Bateman) After Auction, undisclosed above $2,035,000, 1 bidder.

49 Weybridge Street, Surrey Hills (James Bateman) After Auction, undisclosed above $2,035,000, 1 bidder.

Selling Agent Question on Stock: How much are we down on stock this year compared to last year? Which type of property is the most affected, e.g. land or renovators or WOW family homes?

David Hart (Buxton, Brighton)
Across the board in Brighton and Brighton East numbers are down around 20%.

I genuinely believe all kinds of properties are down in pretty equal proportions. The flood gates won’t open this year, but the traditional rise in stock levels will occur post school holidays.

Andrew McCann (, )
Our figures would suggest we are about 20% down on volume for total sales transactions for spring as a whole which is reflective of the volume we saw in the market in 2014/15. That said, we do think the momentum is building gradually for late October and November so that figure may be more like 10-20% by year’s end.

There is certainly no one segment of the market that is over supplied when it comes to family homes, renovators or pure land options and there is buyer depth in all categories; but as we see it the demand for WOW family homes is most extreme and the supply for that product seems to be the tightest. Period family homes and modern new builds offering high level finishes and design are well up in terms of vs a year ago and we don’t see that changing.

(, Brighton)
We have had a funny year. We were a bit slower to start and then had a really strong winter, September looks great but thinning out a bit towards the end of the year. We are very bullish about the market with low interest rates and the continued propaganda on our growing population, we see no reason for a slowdown – after all, we are so lucky to live in the best place in the world, the property market should be crazy!

Tim Picken (Kay & Burton, Hawthorn)
Currently we are about 15-20% down in volume compared to last year entering into spring. This has been the case for most of 2016 mainly because of the long election lead up, school holiday interruptions and clients concerned about trying to upgrade given the very strong growth over the last 12-24 months.

The biggest shortage is in the wow homes. Those in AAA locations with quality renovations and finish. When they have come onto the market they are selling extremely well, 20% – 30% over expectations.

Andrew James (, Armadale)
A quiet winter has resulted in a slow start to spring as buyers outnumber listings on the market. Low interest rates and hot competition among banks for mortgage customers are also fueling keen buyers, leaving family home stock in particular in short supply. For instance, in the month to date, Hocking Stuart has had 296 weekend auctions, somewhat lower than last year’s 371 auctions over the same month.

However, a decrease in property listings is not too concerning given that last year was a particularly buoyant year.

4 Kooyongkoot Road (Justin Long, Marshall White). Under Hammer $4,030,000, 3 bidders.

4 Kooyongkoot Road (Justin Long). Under Hammer $4,030,000, 3 bidders.

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Toorak, 17 Albany Road (Gerald Delany) – Under Hammer, $6,250,000, 4 bidders

South Yarra, 33 Hawksburn Road (Gerald Delany) – Under Hammer, $5,400,000, 4 bidders

Kew, 67 Sackville Street (Steven Abbott) – After Auction, $5,200,000, 2 bidders

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Port Melbourne, 146 Dow Street (David Wood) – Under Hammer, $2,385,000, 4 bidders

Kew, 33 Argyle Road (Patrick Dennis) – Under Hammer, $2,286,000, 4 bidders

Albert Park, 70 Barrett Street (Greg Hocking) – Under Hammer, $2,575,000, 5 bidders

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Toorak, 23 Canberra Road – Passed In, $4,500,000, 1 bidder

Malvern, 85 Stanhope Street – Passed In, $2,820,000, 1 bidder

Brighton East, 25 Camperdown Street – Passed In, $2,550,000, 0 bidders

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In our last Market Insight we introduced you to the first of our new video series that feature our clients. Be sure to jump over to our Facebook page to watch Anna and Adam’s video. Anna and Adam, along with their family and some friends have been long time clients with us.

Check it out here: https://www.facebook.com/jamesbuyeradvocates

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