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The AUCTION MARKET will begin to ramp up over the next few weeks – this week’s James Market Insights are about early indications of the market – which we feel remain strong.

This week in James Insights

  • Stonnington – we report on 3 Top End auctions and give you a value analysis of each.
  • Bayside – we cover 2 Winter sold Top End properties and ask the Price Question.
  • Inner East – is a view worth anything anymore, if it involves a rebuild?
  • Inside James and OFF Markets – In depth coverage of a 50% return in less than 4 years – after all expenses – virtually no risk – $2 million.
  • Homelessness – a problem that has solutions, if you want to help.

Underquoting – We continue to congratulate the agents for a Mindset change. Stonnington which was geographically the worst offender in days gone by, has changed its game. The three auctions below were all quoted fairly, professionally and accurately. This is to the advantage of the buyer and seller alike. Well done guys and well done CAV, Andrews Government and the REIV. Keep it up!!!

Stonnington Purple banner

Big crowd at 2 Netherlee Glen Iris (Daniel Wheeler) to witness 5 bidders fight it out under the hammer to $3,825,000

Big crowd at 2 Netherlee, Glen Iris (Daniel Wheeler) to witness 5 bidders fight it out under the hammer to $3,825,000.

2 Netherlee Street, Glen Iris JAMES AUCTION REPORT (Mal James):

Quoting $3,500,000

Don’t really like this home to be frank – it’s dark, soulless and spec build quality – even though brand new. But it’s big and we are in a low stock and strong demand market for finished products, so somebody from this 100-strong crowd will be buying this today.

Daniel Wheeler is running our auction today – good spirited opening and he calls for bids.

Bidder 1 opens at $3,200,000 pretty quickly. Bidder 2 in and we are in $25,000. $3,250,000 and Bidder 3. We are at $3,400,000 and still moving in $25,000.

Bidder 1 firm at $3,600,000. Bidder 4 in at $3,625,000.

At $3,700,000 and on the market – nobody asked before then

$3,775,000 and we seem to be selling  – but we are not. Two more bids and we are at $3,800,000. Bidder 5 in for $1,000.

$3,825,000 stops it.

JAMES VALUE ANALYSIS (Mal James): With 5 bidders we consider this a foundation auction – meaning one we will use as a reference point for future pricing thoughts. This result confirms multiple things for us – the market remains strong for family homes, for finished products and for good locations. Land in the area we see at $3,500 per sqm with Creswick, Brunel and even Beaver recent sales justifying our thinking. So land we think is $2,600,000. The home is a lower quality build and would not be anymore than $3,000 per sqm in our opinion – we estimate the value of the home at $1,250,000 finished – maybe a bit less and so the result at $3,825,000 for us, is as expected.

9 Avalon Road Armadale (Justing Long) - Bought under the hammer $5,840,000. 2 strong bidders

9 Avalon Road, Armadale (Justin Long) – Bought under the hammer $5,840,000. 2 strong bidders.

9 Avalon Road, Armadale JAMES AUCTION REPORT (Mal James):

Quoting $5,400,000

A really nice north-facing rear classy town residence. Over 3 levels and with a lift. Yes it has the bells and whistles. I like the home and the street is one of Armadale’s best.

As we waited for the action to start, the general feeling for me was it felt an alive auction with a crowd of 80.

Justin Long is our master of ceremonies. And so we begin with his substantial, almost booming voice as he leads us through a strong soliloquy.

Justin calls for interest after he places a $4,800,000 vendor bid with $50,000 increments.

After a short interlude we have a bid of $5,000,000 from Bidder 1. Bidder 2 in at $5,020,000, Bidder 1 back at $5,070,000, Bidder 2 and 1 interchange and we are at $5,210,000.

Constant questions about on the market get Justin’s authoritative “No!” until a $200,000 bid and then we get a ‘Yes we are on the market’  at $5,420,000.

At $5,700,000 there is a stalling between the two professionals who are bidding. After a pause it begins again and we are at $5,840,000.

A shaking of the head from Bidder 2 means we are looking like we have a final figure and after suitable checking, Justin knocks it down at $5,840,000.

Powerfully run auction from Justin – he is one of Toorak’s and indeed Melbourne’s best. This was a strong auction.

JAMES VALUE ANALYSIS (Mal James): With only two bidders you begin to asked yourself does that reflect a market easing, as this was a high quality offering, a move-in finished product and in premium Armadale or was this, due to the nature of the bidding, a very strong auction between two professional bidders, which was above market expectations, therefore keeping out other bidders.

We think the latter and here is why? Land value? Never the easiest in Armadale as there are so few land sales – however, I challenge you to find dirt below $5,000 per sqm – this is north facing, relatively flat and so $3,500,000 as a minimum and $4 something under the pump for the land. The home itself although 10 years+ old and with a dated facade (slightly) has recently been refurbished (with a new lift) and was originally a quality build with underground parking, good flow and quality finishes. For value (say) 450 sqm at $3,500 per sqm or $1,500,000 – but I challenge you to build it new for that price. Anyway for us we saw $5,000,000 as the base and with the quote at a high of $5,400,000, we feel the result at $5,840,000 was a strong one, probably the reason there were no other bidders and reflecting of a market continuing with strength on quality.

32 Balmerino Avenue Toorak (Justin Long), Bought After - 1 bidder - Mid $4.5m

32 Balmerino Avenue, Toorak (Justin Long), Bought After – 1 bidder – Mid $4.5m.

32 Balmerino Road, Toorak – JAMES AUCTION REPORT (Mal James):

Average frontage. Anyway this is all about a per sqm rate. Top of ISP range is $4,730,000 or $7250 per sqm approx.

Crowd of around 60 and Justin Long presiding again – one of us is following the other.

Justin opens with a $4,100,000 vendor bid and a cough.

After a break – a glass of water for Justin and some fancy dancing we still have no bids.

Justin is calling for $50,000 bids. Half-time break is called after zero action. Appears it may have been overcooked a little.

Whoops spoke to soon – Bidder 1 in at $4,125,000.

Looking at a pass-in to Bidder 1. And on another gulp of water for Justin, it is passed in at that lone figure.

SOLD soon after for mid $4.5m or $6,800 per sqm for the 650sqm.

JAMES VALUE ANALYSIS (Mal James): At $6,800 per sqm that would just about be the cheapest land in recent times – so is the market easing? Nope, look at the picture below – while the marketing pics looked like this:

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The actual block at the rear looked like this (below).

32 Balmerino - significant slope at the rear justifying the sub $7,000 per sqm price tag for Toorak land

32 Balmerino – significant slope at the rear justifying the sub $7,000 per sqm price tag for Toorak land.

Whatever you build there will have significant additional build costs or a real lack of connection between the rear internal living spaces and the yard.

This is dollar per sqm rate I would use in a future negotiation – but I would be being cheeky hey!

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Brighton

JAMES VALUE ANALYSIS (Mal James): Two quieter sales occurred during the 2017 Winter break in Brighton and in both cases we think they speak volumes as to why the Top End in Brighton or Toorak or Hawthorn or Middle Park, is not as straightforward places as the marketing and media may have you believe. If you are about to spend $5m or $10m and you think it’s a walk in the park AND it doesn’t matter what price you pay, because capital growth will fix it, then think again. We would be happy to buy these homes – they just need to be at the right price.

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Off Markets are alive and well in Boroondara right now, but this week I thought we could look at pricing in views and the subsequent new builds on slopes.

It’s a subject of interest, of conjecture when we are looking at values on pre-auction and off-market offers.

Views

Two sales over this winter period have been 47 Stevenson Street, Kew (1) and 11 Raheen Drive, Kew (2). Both were average house blocks (750 sqm approx.) and both rebuilds, both in the same precinct, a month apart and both at auction. Both went for approximately $3,000,000. Mmmm, what does this mean? Is the sweeping view premium counteracted by the build new on a big slope discount.

We are starting to believe yes – unless it’s water views, we have for some time now been questioning the existence or non existence of a view premium when the purchase involves a rebuild on a slope.

Why? The additional costs involved in the build – they are significant. If you are looking to buy a block with views  – here are two on Scotch Hill (3) 14 Callantina Road via a public auction and (4) off market on the other side of Glenferrie Road; then prior to purchase we would be encouraging in writing consultation as to additional build costs.

We would also be questioning whether or not in 2017, the market has a view on a premium for a premium on a view.

Inside James
RBA

Look at the date on the headline above, it’s 2013. Look at the headline – it’s negative. You see these all the time, not just in . We as a community are dominated by negative headlines. In today’s paper 10 of the first 11 headlines are negative.

However in reality we see a lot more positive stories than negative ones – a lot more. 

This is the story of Sam.

It’s not a story of luck, a one-off or out of reach homebuyer’s story. It’s a true story – everything below is 100% factual, except Sam’s name change.

Sam lives in Melbourne – he has a family. He is a normal man – a doctor – but things were about to change for Sam in 2013, around the time of the above headline.

Sam found himself needing to buy another home.

He rang and we talked over a coffee.

His brief was a few physical outcomes, one or two emotional ones and one financial one (a good long- term wealth builder).

It took several months of searching – Sam bought an off-market home in the Inner East, in the high $3m’s range.

Sam was happy, worked hard and got on with his life.

By late 2016, Sam’s life had changed again.

He rang and we talked.

Sam began to consider some what-ifs.

Those what-ifs manifested in mid 2017, when Sam sold his home, the one he had bought in 2013 for high $3m’s. He sold it for just over $6.5m.  Sam’s sale was a prudent one – it was mostly off market, it took seven months, rather than a wham bam get it over and done with 3-week campaign.

Sam’s sale was done in a very low, almost no risk way. Sam only decided to press the button, when it met Sam’s new 2016/17 desired outcomes.

So what happened and why?

Act One

As we talked in November 2016 Sam’s thinking began to crystallise into three questions:

  1. What if I am in the financial position now, that I hoped to be in, in say a decade?
  2. I feel emotionally I am in a different position to 3 years ago so what would a different PPP home to better match my new desired outcomes look like?
  3. How best do I find out the what if and what X would look like; in a low stress and low risk manner?

You could see the wisdom of not only what Sam thought, but also how he thought.

Sam was deciding to follow:

a path of response rather than reaction,

a process of rigor rather than ritual.

He was deciding to be disciplined in his decisions and for those decisions to match his new changing goals; NOT decisions to relieve or remove his involvement anytime soon.

Sam also had a sensible, supportive life partner. She helped Sam stay on a good path, not just any path.

Act Two

In November 2016, looking for the what if answers, we interviewed 3 agents to sell Sam’s home. We didn’t think “what if” would come from a 3-week auction campaign despite all 3 agents recommending this. Sam’s thinking solidified when the 3 agents gave their expected prices between $4m (money back) and $5.25 million on a great day, downhill with the wind behind you. Initially it didn’t feel what if – it felt no way.

An agent with whom Sam could really communicate with, not just be told what to do, was selected.

This agent was told the price he suggested was not acceptable and asked if he was still interested in the job. He said yes and together an off-market campaign strategy was nutted out.

Why sell off market?  Because with the agent feedback, the home needed a far wider time frame to reduce the risk of only getting a negative response to Sam’s what if question.

Act Three

The initial off market campaign did not yield interest at a satisfactory level.

The agent was asked to persist – he did. There were regular meetings, regular strategy reviews and even discussions about splitting the property (great suggestion from Sam). 

Sam (and his partner) stayed clear headed, at times got a bit nervous, however did not frighten overall.

We had lunches, coffees, motivational speeches and a few offers – all well below $6m.

At James Buyer Advocates we are into the “old fashioned” way of dealing. Yes the internet is a valuable tool, but it is not a panacea, not a dealmaker, not always the best solution in itself.

Some really good deals – especially when you are pushing the boundaries, occur more often over a coffee or a red, than over a keyboard or an i-phone.

Then came a change in the wind, via the zoning change news from the State government. Add this to Sam’s and the selling agent’s persistence and here was the first real ray of sunshine – a full five months into the “what-if” campaign.

Sam received an offer at $6m.

He rang, we talked.

Sam deliberated on the what if’s? In the end it was difficult, but Sam decided– No Deal.

It did cause some minor angst – but it was more positive than negative.

The agent’s commission was tweaked via an incentive above the latest offer. 

Time went by and a month later, the $6m offer was beginning to seem like a missed opportunity. 

The campaign was tweaked again, a quasi public campaign was launched and a deadline imposed.

Act Four

Then a phone call came “ two parties were showing real interest” said the selling agent and they were above $6m.

With great work from the selling agent, a clear mind from Sam and a gentle push from us; it was agreed D-Day should be brought forward to right now.

24 hours later the “what if” eagle landed for Sam and it was above $6.5 million. Sam’s home was in 2013 condition, as he had only spent $30,000 on a spruce up.

The agent had been sensational, Sam had been “ballsy”, his partner supportive and the 2013 Price Forecasters were “bad information”.

The new buyer got a good PPP property.

It was a happy ending.

Sam had shown  – you do what you do through your choices and your choices come from your interpretations of the events that happen to us all.

In 2013 we all had lots of property information. Sam selected “good” property information as parametric guides for his desired outcome. He then selected a home that matched this “good” information (PPP’s) and finally, he acted rather than froze.

In 2017 with changing circumstances Sam had been disciplined before selling. His initial thoughts were not around action or decision, they were around investigation and assessment. He once again took the same approach as he had taken in buying – clarity and steadiness.

It was around what if ? not – ok, let’s go!

What if ?” (rather than Why me?) can be a positive life strategy, providing it is followed with a sequence of matching requisition, rigor and response.

BUT it was his 2013 decision, his 2013 strategy and ultimately his 2013 PPP purchase that in a large part permitted his 2017 result, even though in 2013 it was not planned as such. We totally believe it is more in the buy, than the sell.

Epilogue

For many buyers and sellers Sam’s story is a message too long – not everybody has the time and gumption to ask the “what ifs” even if they are shown how.

Not everybody has the “time” to get a 50% tax free return in under 4 years through good decision making.

Not everybody can mentally grasp, how with good advice and a good plan you can put, after all expenses and stamp duties, $2 million in your sky rocket – virtually at no risk.

$2 million – how long would that take you to earn, pay tax on and put into super?

Many buyers feel buying a home is only in the lap of the gods, or any path is the right path and that discipline, rigor and professional advice is for business and sport, not home buying.

Many of those buyers will think this guy was lucky, it was a fluke – I still don’t believe you Mal or I can’t make a million dollars, Mal, by simply making good decisions.

Ok, your call.

There is information out there – as we said last week – only some of it is good for you.

There are attitudes out there and you can choose any one of them you like.

There is luck out there and good PPP’s will give you a bigger share of it.

Towers

Homeless Solutions red banner

Natalie’s story

Background

Natalie (51) and her son, Robbie (9), have lived in private rental for a number of years. Over the past two years, they have unfortunately been required to move numerous times from one private rental to another due to owners renovating or moving back into the property. Natalie’s real estate agency has been extremely helpful in assisting her to secure alternative rental properties to date.

Natalie has demonstrated that she is an excellent tenant and has developed strong rapport with the real estate agency. For her most recent move, Natalie was experiencing difficulties in gathering sufficient funds to cover the bond and rent in advance payments, as her sole source of income is Newstart Allowance and Family Tax Benefit payments.

Natalie is currently completing a course in Aged Care, which Natalie anticipates will enable her to access a wider range of stable employment opportunities when she successfully completes the qualification later this year.

Support provided

The Homelessness Prevention Private Rental Support Program was able to provide Natalie the financial assistance to secure the private rental property, whilst she engages in study to enhance her future employment prospects.

Additionally, Natalie was also referred to a Launch Housing Support Worker, who was able to provide assistance with removalist costs and a referral to a financial counsellor to empower her to manage her finances for the future.

Outcome

Launch Housing was able to assist Natalie to successfully secure a new home through the Homelessness Prevention Private Rental Support Program, providing a total of $1,121 for bond and rent in advance payments.

We are pleased to report that Natalie has engaged well in the program, and she continues to engage with her Launch Housing Support Worker as she works towards achieving a stable future. Natalie has settled in well to her new home and is concentrating on stabilising and maintaining her rent.

This early intervention program has enabled Natalie to concentrate on her long term goal of securing ongoing employment in the aged care sector, and ultimately, financial security for her and her son Robbie.

If you wish to help homeless people directly please contact Andy Grant at Launch Housing on 9288 9810 or Andy.Grant@launchhousing.org.au

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