All the signs point to a solid opening season

Out there today taking the market temperature and looking at more on and off markets. Now is young gun Ollie Booth, here at 53 St Georges Road Toorak, asking me to leave or showing me a new dance step. The real auction fun and games, begin in earnest next week

Now is young gun Ollie Booth, here at 53 St Georges Road, Toorak, asking us to leave or showing us a new dance step?

Round

There seems little doubt the market has started a lot better than it finished last year.

However, all is still conjecture until the market has spoken over our 3 week James 100 Auction Market Test which will be conducted on Feb 24, March 3, skip long weekend and then March 17th.

Pre Christmas, the market was as flat as a pancake and in fact our closing 2017 report had a James Bidderman of 1 – that is, 1 bidder per auction. That sounded like a GFC stat – which was the last time we saw a consistent Bidderman of 1.

Our best guess is despite the stock market turmoil, the Inner Melbourne $2m+ Auction Market will begin 2018 (next week) with the usual February Pep.

We bought our third home mid week (Russ Enticott from Nick Johnstone) pre auction and basically we have solid books of auction bidding and off-market negotiations over the next two weeks.

For now, the signs are pointing to a solid opening season.

Value Price

Last week we looked at why value is a feeling and price is a fact – we also looked at why utilise a price range and not a single price (click here).

Last week’s Pricing Recap

Below are photographs out of our notebooks on current land values as we see them, in three key precincts, within suburbs , East and . Last week we outlined the same in Toorak, Hawthorn and Brighton.

The algorithm we use for land is a simple multiplication – size by $ per sqm.

This week Building Pricing

Working through building values on apartments is very different from family homes and is a lot like land: there is a size and a per square metre rate ie, an example for high-end apartments is 200 sqm in size x $16,000 per sqm = $3,200,000 plus or minus the emotion factor.

However, pricing family home buildings is a lot less algorithmic, like land and apartments and a lot more like an individual craft.

For example: In recent times, local Melburnians have placed less value on buildings than some other cultures – that was particularly evident with the rise of the overseas Chinese buyer after the FIRB changes in 2008. I remember for a few months watching Kew auctions run well past my calculations, on blocks with fairly average houses. The large majority of these were bought by overseas Chinese buyers. It wasn’t until I had a number of Chinese clients that I learnt they, at the time, were  “valuing” homes more so on size, on number of bedrooms; than on style and condition.

This was another new valuing paradigm, from another culture – neither right or wrong – just different. As the Chinese community were/are significant buyers, we had to factor it into our current pricing workings.

In 2018, those valuation differences in buildings have largely evaporated as the market has morphed from overseas buyers v local buyers, to a more consistent market of just “top buyers”, be they local or not – all having roughly the same increased view on land values and therefore, by default, a reduced value on buildings.

The latest building valuation or pricing paradigm is:

Overlays: Heritage v non Heritage

At the top end of town in Toorak if you can bulldoze it – then even if the home seems a grander one with merit and valued at say $2 million –some buyers place little value on the home and we need to factor that into our range. In Hawthorn, we price homes differently, simply because our experiences are different.

Where there are Heritage controls, the pricing of the building gets a different treatment to no Heritage controls and the way we deal with this is in the Land and Emotion figures.

Practical Pricing of a Building (family home)

There are many different family home building types – however, we price all under three main categories.

  1. Single Fronteds
  2. Double Fronteds
  3. Big Homes

While it’s tempting to add another category for unusual homes, we maintain a discipline that they must fit into one of these.

Let’s choose one; single fronted homes. Pricing single fronted homes is one of the easier pricing jobs to get an approximate range right. There are usually a number of similar size, condition and quality homes in the area and turnover is common.

Our definition of a single fronted building is:

One corridor – rooms to side on that one corridor. Single or double storey. Width generally 5-6 metres – but can be as wide at 10 metres. Includes timber or brick (we price the same in single fronted homes) – older period or modern townhouse.

Illustration One: Condition

Illustration One: Condition

When looking over a single-fronted home we want to price, we have three categories and three sub categories within each category.

Condition

Shell: Exactly that – front facade and not much else – no modern flow – wet areas in wrong places.

Reno: Floor plan roughly modern, but needs a reno.

Finished: Recently completely renovated, to what most would think is an acceptable standard.

Illustration 2: Size

Illustration Two: Size

Size

Shell: As above.

Double Storey: Could be terrace, could be double storey, single fronted and this is a price number that we find, has a far degree of mental elasticity. Plenty of times we still use $400,000 for a double shell (especially if narrow). Speaking of width, an extra metre on a traditional 5 metre single fronted pushes value up – yet a single metre between 10 metre and 11 metre often goes unnoticed.

Modern Finished: Again mental elasticity, even if it’s finished – a tight three bedroom single fronted, over two storeys can still be below $1,000,000 on our price books and yet we have priced at $1,500,000 (very occasionally) on absolute double-storey gems.

Illustration Three: Quality

Illustration Three: Quality

Quality

After condition and size – we are looking at the WOW factor.

Un-reno: Shell as above – can still have wow – good bones as they say and we have priced a few at $400,000.

Older Reno: Usually most things are in the right place, but dated.

Modern Reno: Depending on quality it could be $800,000 for single level, through to double that for two storey and brilliant.

Interaction

Using the above guidelines, we price with a combination of facts, algorithmic rules AND intuition/experience – for family home pricing the interaction is mostly joining the paths of condition, size and quality.

Pricing

Some unkind people, may call some of what we do with building pricings, “pin the tail on the donkey”.

Occasionally we agree with them, when it comes to the weird and wonderful – however we have a fall back that picks up our pricing “errors” – its called Emotion.

We will cover that next week.

Examples of pricing for single fronted homes:

Let’s say we are pricing an Albert Park Single Fronter (Danks St) versus a Canterbury Single Fronter (Maling Road).

Albert Park was more than a shell, but still needed a reno.

Canterbury was slightly bigger and had been renoed.

Albert Park was on 200 sqm and Maling Road was on double the land size 400 sqm

Albert Park: Land (200 sqm x $10,000 per sqm) + Building ($400,000) + Emotion = $2,400,000 +- Emotion

Canterbury: Land (400 sqm x $3,500 per sqm) + Building (between $600,000 and $800,000 – say $700,000) + Emotion = $2,100,000 +- Emotion

Last week’s pricing paradox

Our pricing system is a combination of algorithm and mind craft (science and art) and when we arrive at the final “expert” price range – one of the key and immediate next steps we have found in effective negotiations, is to potentially distrust our own assumptions and begin the game with an open mind.

This week’s pricing paradox

Look at all the “FREE” pricing advice you receive from the banks, from internet sites, from certain agents quotes – most follow certain algorithms or scientific processes – but if they are wrong more often than not, then irrespective of the market logic behind them, the numbers they provide are useless as negotiation foundations, as there is no trust.

Pricing is a numbers game and numbers are scientific.

However often the best “pricers” follow, in part at least, a seemingly ever-paradigm-changing non scientific way to come to a “building number”.

Good pricing is always about the result, more so than just blindly following some secret algorithmic process - which follows on that good pricing includes algorithms AND experience, not just algorithms, which follows on that who is pricing and their proven accuracy, is more important than how the pricing is done and their unproven marketing.

Still with me/us? Well done.

Next week Emotion Pricing – which allows a range instead of a single price.

Stonnington

Taking the market temperature at 23 Westgath Malvern East

Taking the market temperature at 23 Westgath, . 1 Bidder – Sold After with James Tomlinson.

James Auction Report: 23 Westgarth Street, Malvern East

Auctioneer: James Tomlinson

Crowd: 50

Opening: $1,400,000 vendor bid

Passed-In: $1,420,000

Sold After: In excess of $1,600,000

Bidders: 1

A removal van close by was being readied for some in the street to move out. The crowd milling around auctioneer James Tomlinson did not display an equal commitment to ‘move in’ to number 23, as a call for bids saw nobody willing to open up. A vendor bid of $1,400,000 opened instead and then some waiting and then a half-time break. At the reboot a man by the van made a raise to $1,420,000 and the property soon passed in on his single bid.

After the auction a potential bidder approached the agents only to be told ‘sorry, we are dealing with someone’.

23_Westgarth_4

James $ per square metre prices we are using for Malvern East land Dec 2017 to Feb 2018. Full tables available for James Buy/Sell clients.

James $ per square metre prices we are using for Malvern East land Dec 2017 to Feb 2018. Full tables available for James Buy/Sell clients.

A significant Toorak land value sale. Click on picture for James Buyer Rating.

A significant Toorak land value sale. Click on picture for James Home Rating.

Bayside

36 Berwick Street Brighton. Nick Johnstone. Sold before todays auction - in a boardroom on Wednesday - over $2,000,000 - 2 bidders. Click on this picture to go through to a James Home Rating

36 Berwick Street, Brighton. Nick Johnstone. Sold before today’s auction – in a boardroom on Wednesday – over $2,000,000 – 2 bidders.  Click on this picture to go through to a James Home Rating.

James $ per square metre prices we are using for Albert Park land Dec 2017 to Feb 2018. Full tables available for James Buy/Sell clients.

James $ per square metre prices we are using for Albert Park land Dec 2017 to Feb 2018. Full tables available for James Buy/Sell clients.

More interesting on and off market family homes we visited in Bayside mid week - click on  picture to go through to rating.

More interesting on and off-market family homes we visited in Bayside mid week – click on picture to go through to James Home Rating.

InnerEast

63 Lingwell Rd Hawthorn East

Taking the market temperature with Antony Woodley and Kathy Malcolm 63 Lingwell Rd, Hawthorn East – 3 Bidders – sold $200,000 above reserve. Solid Auction.

James Auction Report: 63 Lingwell Road Hawthorn East

Auctioneer: Antony Woodley and Kathy Malcolm

Crowd: 50

Opening bid: $2,450,000m vendor bid

Under the Hammer: $2,800,000

Bidders: 3

I do love the way Antony builds the momentum in his pre-auction spiel. And we are away. So what are we offered? He reminds us of the quote and calls for a start. $2.5m is that fair and so he vendor bids $2.45m – when crowd silence is the reply. Taking rises of $25k. Now at $2.5m with 2 bidders. A little lacklustre but we are at $2.55m – between 2 bidders. $2.6m and we are in $10s to $2.65m – Up bid to $2.7m – And back to $10s. We are on the market at $2.71m – $5s with an up bid to $2.74m. A quick run around the auction crowd and we are going, going and … third bidder in at $2.75m. Strong bidding $2.77m – and gone at $2.8m strong bidding and good bidding for this pretty nice family home. Antony runs a very professional auction, as Kathy runs a solid campaign. Nothing to see here about any market blues hungover from end of last year. Solid and no surprises auction.

James $ per square metre prices we are using for Canterbury land Dec 2017 to Feb 2018. Full tables available for James Buy/Sell clients.

James $ per square metre prices we are using for Canterbury land Dec 2017 to Feb 2018. Full tables available for James Buy/Sell clients.

There are some good family homes at all price levels in Boroondara  - click on  picture to go through to rating.

There are some good family homes at all price levels in Boroondara – click on picture to go through to James Home Rating.

JC

Happy to give a fellow professional a big plug. We bought this home for a client in St Vincents place after a interesting search. As we often do, we worked in sync with one of many architectural firms that we have collabroated with over teh years. See our littel promo video below - which actually shows this incredible home in the early stage of development. Wow

Happy to give a fellow professional a big plug. We bought this home for a client in St Vincents Place, Albert Park, after an interesting search. As we often do, we worked in sync with one of many architectural firms that we have collaborated with over the years. We sourced/secured it, to our client’s specifications and B.E. took it from there, with a stunning result. Click on our little video below – which actually shows this incredible home in the early stages of development. Wow.

APBE

Next Week

Sound the trumpets, hold the phone.

Is it a bird, is it a plane, no OMG – its the return of …..

Bidderman

He is excited by wow buildings, she is disappointed by poor quoting, they fear no auctioneer.

We love you Bidderman – our hero.

Dun ta da dun.

Next week we are covering 33 auctions and 100 in total over the next three reporting weeks; to bring you the real state of real estate in the Inner Melbourne $2m+ family home market.

biddermanlarge 2

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