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Oversupply of unwanted and shortage of wanted

7 Bidders in North Balwyn - how did that happen? See Buy/Sell below

We were involved with 7 Bidders in North Balwyn – how did that happen? See Buy/Sell at end of this article.

We bid with another 7 bidders in a boardroom auction* last Thursday on the same day AMP predicted a 20% drop

75Barkley

20dropSM

We bid with 8 other bidders in May at a public auction in the same week there was a 9% clearance rate in Kew

4 Fairview

Kewdecimated

6 weeks ago we fought for a client $1.5 million above the quote in a fierce bidding battle, whilst overall stats were the worst since the GFC

Hampden
Wipeout2

We bought at the “Top” but is it? Not everything is dropping!

At a time when we are seeing 10%+ drops in price between now and the last market peak, here’s another little story to the contrary.
Our clients bought 9 Towers at the height of 2016 (“best year ever”) and for the highest price paid in Victoria for a family home.
Last month, in the “worst time” in a long time, they received an unsolicited offer, $7 million above its 2016 price.
9 towers

Excuse the indulgences

We’ve added the royal “we” on all examples in this article to support what we say is really happening out there – these anecdotes are not what others see, these are not one-off examples hidden away – these examples are what we see hitting us and some of our clients, as we deal in good – well-priced A-graders – today, out there on the streets.

However please for the overpriced A’s and many B’s and all C graders this market, is the harshest one since the GFC and we have consistently said that. Get the price wrong and nobody turns up. So we have not tried to write a puff-piece – we have tried to talk about fundamentals and the market(s), with hopefully only a sinew of self-aggrandisement – ok two sinews, when we threw in Towers – but it reinforces property fundamentals in this market!!

So why the dichotomy – 7 bidders v so many ducks (0)?

The apparent inconsistency actually makes sense and is largely predictable.

It’s about:

1. What is “THE MARKET”

2. Melbourne’s property fundamentals

3. The decisions you make

What is “THE MARKET”?

The media headlines are referring to the overall Melbourne Market, which is made up of many submarkets, which in turn is made up of many individual transactions.

Submarkets such as;

Property Types: Houses, Apartments, Townhouses, Bedsits, Mansions and more
Positions: from Pakenham to Werribee, Frankston to Epping
Prices: ranging from $300,000 to $30,000,000

The graphic below is to illustrate how the overall Melbourne market, made up of submarkets, made up of individual transactions, would have appeared in 2016 and would now appear in 2018 to a heat-seeking space traveller.

HM2

Whilst many have, not all submarkets that make up the overall Melbourne market have had significant price falls.

  • Cases in point –  the individual transactions at the beginning of this article
  • In the Top end, position markets – Boroondara has fallen harder than Stonnington and for a very good reason
  • There are property type markets – eg heritage in need of reno is pushing uphill v no heritage with a ready to move in wow home attracting strong interest (if priced sensibly)

So in 2016, almost all homes were hot. Why?

Simple – Massive population increases combined with a tidal wave of cash (refer to last week’s market insight) from local banks and China, meant that almost anything and everything that was for sale, was bought. It was hard to differentiate A-grade homes from C-grade homes if you were just looking at the overall sales results – everything was hot.

In 2018, many homes are unsold and only a few home sales have been hot. Why?

Right now the market doesn’t have as much cash for the C-graders, due to bank tightening and the China demand tide receding.

For the hotties or A-graders, it’s simple – Property Fundamentals.

Definition:

Property Fundamentals are characteristics of a home that remain in demand, usually at a rate above supply, which through market forces, sees those homes with those characteristics rise in price, at a rate faster in the long term, than those without those certain characteristics AND usually homes with good property fundamentals are the least affected in price in a market downturn (when compared to others in the same submarket).

Definitions of each individual characteristic are contained within our James Property Rating book.

Here are a few key ones:

Position

  • Inner (where the private schools are)
  • Near Train (how chockers are our roads)
  • Street

Property

  • Floorplan
  • Land Size
  • Feel

Price 

  • Good Land Content (meaning % of the land to final price around 70% or more)
  • Market Median for Area Property Type
  • All done, no more to spend

We use the full list of fundamentals to tick off a checklist on the above homes – it’s called a James Home Rating – that is why the ratings above are high.

If you’re selling, understand the fundamentals of the home you bought, before you start agent selection and marketing.

If you’re buying, not all homes are the same in 2018, despite looking the same in 2016 – it’s about fundamentals.

Your 2018 buying, selling and pricing decisions will be determined by fundamentals and knowledge of them or luck.

If you are like most of us, your 2018 homebuying decisions will in part determine your future.

Buysell

We buy homes for clients and in 2018 we are still buying, just not as many (good stock is way down)!

We also manage the sale of homes for our buying clients – 21 in recent times and as of today, 0 remain unsold.

Here’s an example of Buy/Sell and it ties in with our Property Fundamentals piece above.

Today Sunday, James Buy/Sell in conjunction with Fletchers (Tim Heavyside and Jason Salan) sold at auction 7 Duggan Street, Balwyn North – 7 Bidders

We have bought for our client earlier and now they wished to sell.

Yes, the market has slipped dramatically in North Balwyn in the last 18 months. However, our clients had 7 bidders today and the home sold above its quote, above its reserve and all in a market that yesterday saw a North Balwyn clearance rate of 20%.

It doesn’t happen on every deal we are involved in, but how does 7 Duggan happen?

1. Property Fundamentals – first and foremost (see above).

2. A very smart client who bought well in the first place – 7 Duggan has a James Home Rating well over 700.

3. Good discussions before the campaign as to what the goal was – price or deal?

4. Solid agent interview process – an unusual selection for many (we interviewed 3) – but there was a reason (not money or marketing).

5. Meticulous prep.

6. Sensible quoting to begin with and then a lift mid-campaign when warranted.

7. Good communication all the way through.

8. The agents themselves were excellent for this particular sale (we have used different agents in almost all 21 recent sales).

9. A little bit of luck always helps – but there were still 3 bidders when it was on the market – that’s not luck.

10. Plus 3 other proprietary parts of the agreed on sale plan process.

Well done to our clients, well done Tim and Jason and well done to the buyers – 7 Duggan is a seriously good home and you had to beat the strong competition.

If we can help you at James Buy/Sell – Mal James 0408 107 988 or Gina 0457 835 255.

We are different in how we do things and it doesn’t have to cost any more.

InsideJames

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Nextweek

Next week we begin our late Spring James 100 Auction Test.

* Boardroom Auction Footnote: Selling agents who sold 75 Barkly Armadale (Lachie Fraser-Smith and Will Bennison) ran a smart campaign. Congratulations to the eventual buyer – advocate Greville Pabst – price was solid, not ridiculous – this was a good home.

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