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The Market has certainly changed direction

The Winds of Market Change are upon us. But some things never change. Statement of Information $5,800,000 to $6,380,000. Vendor Bid $6,000,000. No Takers. Passed In on Lone Vendor Bid and Reserve is now $6,790,000.

The Winds of Market Change are upon us. But some things never change. Statement of Information $5,800,000 to $6,380,000. Vendor Bid $6,000,000. No Takers. Passed In on Lone Vendor Bid. Asking Price now $6,790,000.

Opening

OM170318

It’s 6.00pm Saturday and the James Clearance rate for $2M+ family homes, was a drifting down 69% on the 32 auctions we covered today, in the third and final week of our James 100 Auction 3-Week Test (Feb 24, Mar 3 and 17). The 3-week Opening Market Clearance Rate was 67%.

James , that is bidders per auction, was 1.3 today.  The 3-week Opening Market 100 Auction test was 1.5 bidders per auction, which continues the significant drop of the last six months and represents around a 40% drop in bidder numbers from 12 months ago.

It is safe to say the market has turned off its last peak, which we now know to have been the May market 2017 – first seen as a possible turner in the Spring market 2017 and confirmed in the Opening market 2018.

Look at Ducks (0 bidders) and Lones (1 bidder) over the 2018 Opening Market – this is why we said last week, that many auctions were charades, rather than theatre.

If you are bidding, then on more than half the homes you are the only bidder – you are the one-act drama – there is no other bidder supporting cast.

Volcanoes (4+ bidders) are not extinct, but they were a rarity in the 2018 Opening Market @ 12%.

OM18PT

Geez Mal, is this not the all time, slowest assessment of a market turn? In this day and age, when opinions change course like speedboats, yours has come slower than a supertanker moving into reverse.

What has happened?

Market prices have turned downwards because there has been a significant loss of active buyer depth, now reflected in clearance rate changes (some A-Graders excepted).

Active Demand has reduced, because the two main drivers of upwards market price (local wealthy and the Chinese community); have not been able to get the same access to the fuel (bank credit and overseas money); that has sparked the current 2009 engine and dramatically increased in horsepower in 2015.

BiddermanSlide

Yeah, but why did you take so long to see the downward change?

We didn’t, we talked of a possible turn on the first day of spring last year.

However, it was too early to say the market had turned, as the Inner Melbourne market has basically operated on a rising price staircase, since the mid 1990’s – meaning in the last decade we have mostly seen periods of steep rises, followed by periods of pausing, not falling prices.

staircase

The only real falling markets (eg two consecutive markets of negative change in ) in the last decade have been the 2008 GFC for 6-12 months (depending on which geographical market – Boroondara (6) and Bayside (12+)) and 2011 when the dollar strengthened, making us a lot more expensive for expats and Asian buyers.

Late 2017 – early 2018 now represents the third falling market in the last decade.

Why has this happened, especially as population continues to rise dramatically?

In this instance it has been government intervention; locally, federally and abroad.

1. The Australian Government through APRA directing the banks, has tightened up credit to local and overseas buyers.

2. The Australian Government is fiddling with overseas student and work visas, which in turn may be reducing overseas buying demand.

3. The Australian Government has tightened FIRB controls – in 2009 they were basically non-existent, they are stronger now.

4. The Victorian Government has significantly increased taxes for foreign buyers.

5. The Chinese Government has made it more difficult for the wealthy Chinese community to move money from China to Australia.

OM2170318

Yes, but this is only a very small section of the market, we still have significant population (demand) increases and a lessening supply (inner land for family homes).

Agreed! All that appears to have happened to the current market, is that it has lost the driver(s). The ones that were going faster and harder than everybody else; the ones who were dragging us all ever upwards at a frightening rate, because they had the credit and cash horsepower to do so.

The market is now awake to the fact we have lost our drivers and consequently the market is in a state of flux, working out what this all means.

When humans are in a state of flux, we tend not to act; or if we have to, we tend to act more cautiously.

This is why active bidder demand has dropped so dramatically. However passive demand is still there on the fringe (look at the OFI numbers), it’s just not there in the ring, in the form of bidder numbers.

It’s unlikely that all of a sudden, all family home buyers have been satisfied; or that future buyers will no longer want a roof over their head.

Three key characteristics of the 2017/2018 market turn.

1. Some of this “turn” has merely been an alteration in the upwards trajectory, rather than a course change and decline.

2. It’s an inconsistent turn – meaning some – maybe 15% of homes are actually still rising, as their Bidderman is still volcanic; but with almost all C and some B-Graders falling substantially, overall the market is gently falling.

3. There was so much pent up demand from 2015 and 2016, that the drop in bidder numbers in the second half of 2017 was disguised to many, by clearance rates still holding up. In early 2016 there were three bidders on every home (average) – in late 2017 there were half that. However some buyers in late 2017 still believed there were three and bid accordingly. In 2018 the “lots of other bidders” myth has been dispelled, by most buyers witnessing significant drops in clearance rates and under the hammer results.

Well done Gowan. Quote $6,000,000. Opening Bid $6,000,000. Sold $6,000,000. 62 Avoca St South Yarra - an auctioneer who is sensibly moving with the times.

Well done Gowan Stubbings. Quote $6,000,000. Opening Bid $6,000,000. Sold $6,000,000. 62 Avoca St, South Yarra – an auctioneer who is sensibly moving with these no nonsense times.

Current Market Players in 2018

the castler

1. The Turn – The Market began to turn in 2017, but it didn’t turn consistently. Some A-Grader pricing continued upwards (just more gently), B-Grader pricing became one of good or bad selling agent work and C-Grader pricing fell.

2. “Castlers” – After the famous movie The Castle and “tell ‘em their dreaming“. These are the sellers who believe “their” market is continuing to rise steeply and reject realist offers as dreamers. The only dreamers in the 2018 market are the Castlers, as evidenced by the increase in Duck (no bidder) Auctions.

However, don’t misunderstand our James sentiment – if we had an A-Grader and no good reason to sell, then we’d be a Castler too.

3. Castlers are creating The Unbridgeable Gap in price between realist buyers and other sellers. Castlers are not selling their homes and are increasing in numbers, in this turned market.

4. Realist Buyers and Sellers – still abound this market and that is why we still consider the current market to be a good one. Realist buyers are offering enough to engage with realist sellers. Realist buyers are not paying The Unbridgeable Gap to the Castlers, as there are enough Realist sellers. It’s simple Demand and Supply. The Castlers have not worked out, or have chosen to disregard, that there has been a significant drop in demand.

Please note: Realist sellers of A-Graders are still getting really good prices and in some cases (under volcanic auction conditions / not via the asking price method) getting increased prices on last year.

Meaning in 2018, to get near a Castler’s price, it almost always has to come at a volcanic auction (4+ bidders), rather than via an off or on market Castler’s asking price. However, volcanic activity at auctions is no longer as prevalent, due to an overall significant reduction in active bidder depth.

5. Conservative Buyers and Sellers – interesting. The conservative sellers are providing good buying for the Realist buyers. On the buying side, the Realist buyers are still beating the conservative buyers on A-Graders (good) and on B & C-Graders (not so good, as they are overpaying).

6. C-Graders. Some C-Grade pricing has dropped dramatically since mid way through 2017 – eg those that want to sell. If you are a C-Grade buyer and now think this market is such, that you can buy A-Graders, that is not the case. There is still market depth for correctly priced A-Graders. The good thing for C-Grade buyers over 2018 if you are patient, is there will be C-Grade sellers who will meet you in the market, as there has been a significant drop in market depth on B & C-Graders.

The only C-Grader question we still ask at James Buyer Advocates is; even in this falling market, in the longer term, where is the advantage in buying a C-Grader (unless you are a developer)?

How we measure market “heat”

OMBidderman18

We measure the “temperature” of each of the four main Inner Melbourne, family home, over $2m, auction selling markets.

  • Opening Market (February / March)
  • May Market
  • Spring Market (Late August / September)
  • End of Year Market (Late October / November)

James Bidderman is very simply a substantial and unbiased sample of auctions, count the number of bidders and divide totals.

We also compare our own clearance rates (to get accurate pass-in data) and we look at stock levels.

We then compare those results to the last market and last year’s comparable market.

The James Bidderman Measurements

Do tell you trends. This is particularly helpful in pricing, when using historical data.

Do tell you the true overall strength of the market, this is particularly useful when planning a strategy.

Do tell you the difference between geographical, property type and dollar (PPP’s ) sub markets.

Don’t tell you the individual nuances of each future deal. That is still best done by engaging a professional buying or selling agent, to look at all the facts in each specific deal.

Somebody is still doing teh business, Jeremy Fox gets 13 Wilks Avenue Malvern away over $6million, after auction. 2 bidders

Somebody is still doing the business, fashion guru Jeremy Fox gets 13 Wilks Avenue, Malvern away for $6.3 million, after auction. 2 bidders.

Sellers

1. Get the right agent. When a market eases, fewer than 15% of selling agents actually know how to market your home correctly. It’s no longer auction-one-size-fits-all. Why would you auction a B-Grader, asking an above market price, when stats are showing you have a greater than 50% chance of no bidders and an almost 100% chance of not selling for what you want – plus it costs you $30,000 for the experience of telling the world you can’t get a nibble.

2. Understand and set up financial buffers (cash and overdraft), so as you can give longer terms to OS buyers (if they are paying the best prices); you can hold two homes if you have bought first and need to hold out for a good price on your sell home.

3. If you have an A-grader and no pressing or convincing reason to sell, then don’t.

We are helping 11 of our buying clients sell their homes and we offer a free service in advising how best to do that, in this market. Buy/Sell together is now our largest market segment.

Mal James 0408 107 988 or Gina Kantzas 0457 835 255

Buyers

About half our deals are Snowballers and that is the big change between now and this time last year.

In 2017, every 10 deal points you got 5 and missed 5, or you got 8 and missed 2 – that is not the way in 2018.

On 10 deal points now, you get 4 and miss 1 AND 5 are carried over until the next month and next month is the same.

Your deal numbers start to snowball, as realistically quite a few of them are not going to happen in a hurry or not going to happen, full stop.

If you as a buyer are dealing with people focussed only on the quantity of deals, rather than the quality of each deal – you may deal poorly.

If you are focussed on homes that are not going to sell at an acceptable price, why are you focussing on them at all – move on, so as you can buy well.

Remember please when the heat returns, snowballs melt, if somebody else buys.

Late Result - Big Powerlift post auction, over the quote, after no bidders at the auction. Good selling agent work from Mr Tickell and Ms Dwyer. 7 Keats Sandringham

Late Result Bought After – Big Powerlift post auction, from $3m pass-in to above the $3.3m quote, after no bidders put their hand up at auction. Mmmm strange. Good selling agent work from Mr Tickell and Ms Dwyer. 7 Keats, Sandringham.

So the market has turned for now, what of the medium term?

Up and back onto the Inner Melbourne price staircase.

We see this current market, as a stay of proceedings, not a change in them. This feels like a lull of an unknown period of time, an eye in the storm, rather than an end. We are encouraging our clients to view this current market as an opportunity, more so than some new world order.

Why?

1. Currently various governments have reduced the access to the market driver/spark – overseas money and big bank credit – but not the cash in the community. All governments can do is scare community cash, not remove it and there is so much cash at the higher end.

Last night a Grace Park Hawthorn home (Marcus Chiminello), which we looked at, had two bidders at a private auction, over $16 million. And who was it, who got away two off-market sales ($28m and $52m) in the last month?

Look at today – we were at 9 of the top-10 auction homes between $4,400,000 and $6,300,000 – 7 or 70% still sold on the day with 3 or 30% remaining unsold. Bidderman was down yes, but there were only 3 ducks (no bidders). Interestingly there were 2 volcanoes.

Active Demand has diminished for now, however the switch can be flicked overnight, as the cash is still out there.

2. Secondly governments have not addressed the underlying (and still overheating) engine of the Inner Melbourne $2M+ family home market – rapid population increases, through wealthy overseas migration and declining or non-existent infrastructure. The government restrictions, have not actually stopped the demand, just distracted it – it will regroup and the journey will continue – the law of that demand and supply, says the price journey will be upwards.

Last Word on the 2018 Opening Market

The market is still a dynamic one – just inconsistent – there is no doubt an overall downward turn is underway.

However this feels nothing like a GFC market and feels more buoyant than the 2011 market slide.

Don’t believe us? No problems, who knows for sure anyway, but;

  • Go to an A-grader OFI
  • Drive in school and peak hours in Inner Melbourne
  • Check out the government census figures on migration and the current Liberal and Labour population policies
  • Have you seen the business annual accounts and employment stats on profits and confidence

This is a market for realists – buyers and sellers.

Our feeling – this market is one of opportunity,

To trade up (smaller changeover $, than a year ago).

To find a home, if you can, with fewer “ballistic” bidding competitors (when the market tanks a little, many A-Grade sellers go into hibernation).

To negotiate well, to avoid Castlers (see above) – but still be a realist, when you find a seller who is also a realist.

It feels better in 2018 to set your family up, than it did last year or the year before. However this declining market is not permanent and you may want to be settled in (only in the right home), before the next Inner Melbourne price staircase begins.

The key underlying foundation of increasing prices, in the Inner Melbourne market – Immigration and limited land – remains unabating!

46 Robinson Road Hawthorn. Pass in $3,120,000 with 2 bidders

These guys must have been brought in to do the auction heavy lifting. It didn’t work. 46 Robinson Road, Hawthorn. Pass in $3,120,000 with 2 bidders.

Round

anecdote

volcanoes

What’s on the menu at the Top: Picky Eaters

Hugh Hardy sells  25 Denham Place Toorak for $5,500,000 with 4 bidders

The Volcanic Hugh Hardy sells 25 Denham Place, Toorak for $5,500,000 with 4 bidders.

Toorak, 25 Denham Place (Hugh Hardy, Abercromby’s) Under the Hammer $5,500,000, 4 Bidders

Kew, 25 Barrington Avenue (Richard Earle, Jellis Craig) Under the Hammer $3,621,000, 4 Bidders

Elsternwick, 13 Gladstone Parade (Justin Long, Marshall White) Under the Hammer $4,965,000, 3 Bidders

For all 32 James Auction Reports

BAYOM2018

Word on the Water: Iceberger Chilly

Gavin van Rooyen sells 10 Lockwood after auction $2,625,000

Gavin van Rooyen preaching to a few still converted, selling 10 Lockwood, Brighton East after auction $2,625,000, 2 bidders.

Hampton, 94 Orlando Street (Michael Egan, Century 21) Under the Hammer $2,595,000, 3 Bidders

Elwood, 34 Foam Street (Leonard Persichetti, Greg Hocking Persichetti) After Auction undisclosed, 2 Bidders

South Melbourne, 10 Bridport Street (Justin Holod, Marshall White) After Auction $3,050,000, 2 Bidders

For all 32 James Auction Reports

STOM2018

Cries from the Power Houses: Hold On

Nathan Waterson sells 25 Albion Street South Yarra under the hammer $2,160,000 with 2 bidders

Nathan Waterson sells 25 Albion Street South Yarra under the hammer $2,160,000 with 2 bidders

South Yarra, 62 Avoca Street (Gowan Stubbing, Kay & Burton) Under the Hammer $6,000,000, 1 Bidder

Malvern, 2 Embling Road (Justin Long, Marshall White) Under the Hammer $4,510,000, 4 Bidders

South Yarra, 25 Albion Street (Nathan Waterson, Jellis Craig) Under the Hammer $2,160,000, 2 Bidders

For all 32 James Auction Reports

INNEROM2018

Drought conditions on the Inner East Greens

John Bongiorno sells 45 Monomeath Avenue Canterbury $4,400,000 with 2 bidders

The Pumper, Big Jack, sells 45 Monomeath Avenue, Canterbury, $4,400,000 with 2 bidders.

Canterbury, 45 Monomeath Avenue (John Bongiorno, Marshall White) Under the Hammer $4,400,000, 2 Bidders

Camberwell, 31 St Johns Avenue (Geordie Dixon, Jellis Craig) Before Auction undisclosed

Kew, 67 Wellington Street (Nick Fletcher, Fletchers) Before Auction undisclosed

For all 32 James Auction Reports

BigDucks

You are only in a bad position if you think you are

20 Gowar Avenue Camberwell - Passed in  with 1 Bidder - $2,450,000

20 Gowar Avenue Camberwell – Passed in with 1 Bidder – $2,450,000. All seemed a little bored.

Camberwell, 15 Victoria Road – Passed in $6,000,000, 0 Bidders

Brighton, 27 Foote Street – Passed in $5,000,000, 0 Bidders

Toorak, 1 Smyth Street – Passed in $4,800,000, 0 Bidders

For all 32 James Auction Reports

JC

Australia’s population policies

(humans) & chickens

Chicken1

More hens laying (jobs), more eggs (growth)

also equals more shit

(living conditions, overcrowding).

chicken2

We’ve had a chicken housing debate!

Do we need a human housing debate?

Population and how our young will live.

Chicken3

JFMP

First Day on the Bayside site with Mal James, Lyndon Hayward and James Hayward

First Day on the Bayside site with Mal, Lyndon and James Hayward.

We are pleased to welcome James Hayward, who has been employed by James Buyer Advocates on a part-time basis, to take a very average Inner Melbourne site (irregular land size of just over 700 sqm, with two older style brick unrenovated buildings) and a very average Inner Melbourne family (arguments, stresses, hope and dreams) and bring them together in a way, where a possible five, but still one family(s) can survive and then thrive, in 21st Century Inner Melbourne………….

We are looking for new ways, for a family (in particular younger members) to live a better Inner Melbourne home life………..

On a macro level the government(s) are waking up to the damage done to younger people’s housing aspirations with immigration and rapid population expansion in Inner Melbourne, since 2008, without the corresponding infrastructure……………………

This is not an immigration argument project – but for the record, we are pro immigration for jobs and humanity and …..and we are all good on African, Asian, Anglo………whatever the community/our leaders deem to be the right balance……………..

On a micro level. How are you and your adult children, grandchildren going to live well with the Inner Melbourne 3P’s?

  • Property (feels like a home)
  • Position (near an inner train station and within cooeee of each other and no 60/90 minute, times two, daily work commutes) and
  • Price (mortgages that don’t kill families and ruin health)…………………….

Click here to read the first James Melbourne Family Project Article and follow us over the next few years – Younger Homebuyers thriving in 21st Century Inner Melbourne

InsideJames

We have been buying away from under the hammer; eg. 3 buys in our last reporting week. Elwood circa $3m after auction (Leonard Persichetti); Kew circa $5m after auction (Richard Earle) and Camberwell circa $3m before auction (Duane Wolowiec).

Next James

Apologies, we’ve again held over the fourth and final piece on Values are Not Prices and Prices are Not Values, as there was simply no room to squeeze this in.

See you again on April 14th, after the Easter Bunny.

Our James Buyer Advocacy office for $2m – $10m+, buying and selling; on & off market clients; will be open all days except the Public Holidays with Mal here and Gina having a well-deserved fortnight in France.

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