ALBERT PARK, 139 Beaconsfield Pde: David Wood (Hocking Stuart) rubs his hands together in anticipation, but it was a quiet day at on Beaconsfield Pde. Passed in, $3,250,000, no bidders

Key Points:

• The two big ones over $3m didn’t get a bid – Mary St and Beaconsfield Pde, and the $2m Mary St only had one bidder
• Off Market – Andrew Stuart gets a big one away in Kerferd Rd for $4,900,000

Agent Q & A: How have you found non-auction sales so far this year?
Matt Young, Buxton, St Kilda:“Sales in general, be it non-auction or via auction, have been far more difficult than throughout 2010.  In short, the basics don’t change.  You need to closely match the potential buyers requirements with the right home.  In a softening market this is a far more difficult prospect, buyers requirements aren’t as easily flexed as they have the luxury of choice.  In an upswinging market the opposite is in effect, many potential buyers simply don’t have the choice and are restricted to what they can afford to buy rather than meeting their ideal requirements. With regards to non-auction sales specifically, it’s a common misconception that the auction process is less successful in a soft market.  Vendors may be concerned their home may not sell on the day, they hear many negative reports about auction clearance rates falling and fear what may happen to them.  On the contrary though, non-auction sales avoid much of this negativity due to their being no specific reporting measures available of their success rate.  In actual fact, I would suggest to most that the failure to sell ratio would be far higher through non-auction sales than via auction. Understanding your market place, knowing your buyers and having world class buyer management strategies are all now more important than ever before.  Failure to do this is quite literally guaranteeing a negative outcome for your vendors.   It’s been a terrific start to 2011.  So far this year, we have found the market to have returned earlier than usual as the volume of properties available is higher than normal presenting many potential buyers with great opportunities.”

The sun was out and so were the spectators - but the bidders were nowhere to be seen. Andrew Stuart (Hocking Stuart) at 280 Beaconsfield Pde, Middle Park. Passed in $4,400,000, crowd of around 80, no bidders

Key Points:

• A big day auction-wise in Port Phillip with more than 20 $m+ properties up for grabs.
• We reported on seven – four of those were bought under the hammer and one shortly after auction.
• The biggest sale was at 107 Richardson St, Albert Park (Oliver Bruce, BenMac) which sold under the hammer for $2,322,000, with 5 bidders.
• The biggest pass in was at 280 Beaconsfield Pde, Middle Park (Andrew Stuart, Hocking Stuart), $4,400,000, no bidders.

Agent Q & A: If you were a buyer, how would you buy a house over the next two months, during the Christmas break?
Sam Gamon, Chisholm & Gamon, Elwood: “If I were a buyer wanting to buy over the Christmas period, I would make myself known to the local estate agents in the areas I want to focus on so I’m front of their mind should any new listings become available. Potentially, there might be more low-key Private Sales available as it’s unlikely we’ll see many auctions until Feb 12 & 19. Some vendors would prefer to sell in January rather than wait until February so it’s important to stay in touch with your agent and for them to keep in contact with you. It’s a two-way street and communication is the key. Start pounding the pavement. Of course, the internet is still paramount when searching for the right property so register for ‘alerts’ and keep an eye out daily. After all, that old saying about the ‘early bird’ still rings true.”

Elwood, 63 Spray St, Sam Gamon (Chisholm & Gamon); Passed in on a vendor bid, $950,000, 0 bidders

Biggest Sale: Elwood, 18 Addison St, Kaine Lanyon (BenMac);  Under the hammer, $1,540,000, 3 bidders
“After a slow build up, 18 Addison Street, Elwood had three bidders all keen to make this high rating property their next home. Auctioneer Kaine Lanyon worked hard to dodge the showers and keep the interest of the widely dispersed crowd all looking for shelter. An opening vendor bid of $1,320,00 did its job and the bids started to flow. When the half time break was over the serious stuff started, and the property was bought under hammer for $1,540,000.” (Guy Angwin)

Biggest Pass In: St Kilda, 31 Marine Pde, Josh Stirling (Hodges); Passed in, $3,300,000, 1 bidder
“On a bleak rainy day, Josh Stirling worked hard on his preamble to a small crowd of 35 people and finally got a bid of $3,150,000 overtopping the Vendor opening bid of $3,100,000. However the selling price was not reached and this fine property was passed in on a further Vendor bid of $3.300,000.” (David James)

Bidderbuzz Auction: Middle Park, 2 Langridge St, David Wood (Hocking Stuart); Under the hammer, $1,355,000, 3 bidders
“If you don’t try then you won’t succeed! That could have been said of the opening bidder at this Middle Park auction, who put in a cheeky bid of $1,000,000. Not really what the auctioneer was looking for, and he quickly topped that offer with a vendor bid of $1,250,000. Three bidders in all, with the property on the market at $1,340,000 and selling under the hammer for $1,355,000.” (Adam Woledge)

Graphs
Contrary to the graph on the right, the clearance rate for Port Phillip was 44%. The rest are accurate

Agent Q & A: How much value do you put on land? How much on the building? And finally, how much is to do with emotion?
Joseph Allan, Chisholm & Gamon, Port Melbourne:“Emotion plays a large role in real estate; buyers – particularly owner occupiers – are motivated by the lifestyle a property and its location will give them. The expectation of where they wish to be down the track will influence how long they think they will hold a property and therefore how much they will be willing to pay for it. A couple planning a family will contest harder for a property that can grow with them through extension or renovation than a property that offers the same accommodation but will necessitate a move a couple of years down the track. Conversely, downsizers will be potentially motivated in an apartment purchase by emotion and perceived lifestyle. The reduction in property maintenance, the freedom of movement afforded by a secure complex and the belief that this maybe their last purchase may lead them to compete past what they believe is a property’s mathematical value. Many of these motivators are based on what the buyer thinks might happen rather than what they know will happen. It is why agents target a particular demographic when selling. With most properties we sell not just the property but also the lifestyle.

I believe the traditional mantra of ‘You must buy dirt’ is changing. Melburnians are becoming more endeared to apartment living as a lifestyle choice, particularly in Bayside. This has been supported by very strong price growth for apartments, particularly those that are well built and offer a point of difference. Good developers are now aware of supporting apartments with the correct infrastructure; gyms, pools and open spaces are now much more common than they were in the past. Dirt will always have an inherent value but buyers are now more confident that a wise apartment purchase can not only offer a great lifestyle but also a great investment.”

Mark Harris, BenMac, Albert Park:“The value of land comes purely from comparables, i.e. what sales have occurred in the area previously. As for the value of the building, that is also based on local area comparables. The third and probably the most important aspect to value is the emotional value. This is a lot harder to determine and can vary from person to person as it is subjective.”

Results

We Only Buy Homes

102 Keele Street, Collingwood - 7 bidders when sold in March 2010 by Paul Markovic of Peter Markovic

You may have seen an advertisement recently talking about the benefits of Shares Vs Property.

Essentially the advertisement comes to the conclusion that “shares can work harder than property only with a lot less work”.

The ad compares the results of investing $31,000 in 1993 either in a diverse range of Australian Shares or used as a deposit to borrow and buy a residential property worth $200,000. The outcome, the ad claims, would be $654,000 and $570,000 respectively, making you better off buying shares by $84,000 over that 13 year period.

While I am a firm believer of a balanced investment portfolio and agree that shares should form part of an overall investment strategy, I want to look at a few assumptions made in this ad.

Firstly, the ad calculates the appreciation in property price using the median house price index, which is an ABS statistic that measures growth Australia-wide, in all suburbs – including those which are not suitable for investment.

If you had invested in a property in an inner city location such as Brunswick, Albert Park or Hawthorn, it would have told a completely different story. Using the same initial amount the value of the asset would have been greater than $900,000 – approximately $250,000 better off than shares.

Conversely, if you had picked an average suburb like Melton South or Frankston, the balanced portfolio of shares may have been a better option. But this just emphasises the importance of property selection and quality advice when investing over the long term

It is fair to point out that the value of some shares might have been in the millions if you were lucky enough to have picked them well. But poorly picked shares may have also returned a lot less. And the reality is that Albert Park, Brunswick and Hawthorn will always be well performing areas because of solid fundamentals that are not going to change in a hurry.

Invest well.

Elwood, 45 Dickens, Jason Scillio (Kay & Burton): The biggest auction we attended in Port Phillip on Saturday. Bought under the Hammer, $3,535,000, 3 bidders and a big crowd of 80.

Key Point

• There were three bidders at both hammer auctions and none at the two pass ins.

Biggest Sale: Elwood 45 Dickens St:  Jason Scillio (Kay & Burton) Under the Hammer, $3,535,000, 3 bidders
“A large crowd gathered in the front garden of this magnificent property to hear Jason Scillio provide a well prepared preamble prior to inviting bids from a large crowd on this beautiful afternoon. After the usual hesitation, strong bidding emerged from three buyers and it was on the market at $3,450,000. The house was soon bought with a strong bid $3,535,000.” (David James)

Bidderbuzz Auction: Elwood 69 Ruskin:  Sam Gamon (Chisholm & Gamon) Under the Hammer, $1,600,000, 3 bidders
“An opening bid of $1,000,000 was quickly surpassed by the effervescent Sam Gamon, who offered a vendor bid of $1,350,000. This produced brisk bidding from three buyers with a fourth entering a little later. The property was declared to be on the market at $1,500,000 and, with a strong knockout bid of $1,600,000, was successful in obtaining this well located house.” (David James)

Biggest Pass In: St Kilda 94 Wellington:  Jason Scillio (Kay & Burton) Passed In, $1,700,000, zero bidders
“Following a brief but well prepared preamble, Jason Scillio invited bids for this magnificent two storey period home, a really sumptuous residence just so close to every amenity. Unfortunately his appeals failed to produce a response and the property was passed in on a Vendor Bid of $1,700,000.” (David James)

Agent Q & A: How do you value a home?
Matthew Young, Buxton, St Kilda:“When valuing a property there are two forms: a market appraisal which is what most agents conduct and a valuation that only a sworn valuer is licensed to carry out. As a licensed estate agent, the most important aspect when appraising property is to look at comparable sales. That is, what other properties have sold for in a similar area, the market conditions, the property’s size, features and importantly quality. It is almost impossible to find an exact match so adjustments will need to be made.  This is where experience and local area knowledge play a vital role. We also need to look at a several properties to eliminate any irregularities such as buyer emotion or a freakish result. When buying property don’t hesitate to lean on the experts for professional advice, be it buyer advocates or estate agents.”

Damian O’Sullivan, BenMac, Albert Park:”In order to accurately value a home, comparable sales evidence is of utmost importance. Relying on factual data, rather than guess work is imperative. In particular, our due diligence is based around researching recent sales of a similar / relevant nature in the immediate vicinity of the home being appraised. The research compares homes that are similar in style as well as taking into account the land size, the orientation, the condition they are in, the streetscape and more. We feel that home owners not only deserve a transparent and realistic approach to valuing property but advice they can actually rely on.”

Sam Gamon, Chisholm & Gamon, Elwood:“When we appraise a home, we adhere to certain consistent guidelines in order to ensure we take a scientific approach and provide our clients with a logical estimate, based upon recent sales of like properties. In the event there are no direct comparable sales, we assess properties which might have less features or more features and then add or subtract depending on the perceived value of those attributes. Our first port of call when appraising a home is the “walk-through”. We like to do an internal inspection so we can get a feel for size, light, floor plan, etc. All of these factors weigh into a buyer’s decision making when they’re comparing one home to the next. We then step away from the property and undertake extensive research on comparable sales within the area before we make some judgements on the final appraisal range…and submit our client with their free marketing appraisal report. We take every care to ensure the accuracy of the estimate we’re giving is fair and reasonable.”

Port Melbourne, 272 Esplanade East, Kaine Lanyon, BenMac. Where have all the bidders gone? Don't know Kaine - they weren't in Stonnington either. Passed in, $1,220,000, 2 bidders.

Key Points:

• None of the five auctions we attended sold under the hammer -  one sold before
• Last Sunday, 55 Blessington St Kilda, Graeme Wilson, a ripper home, sold at auction for just over $3,500,000

Biggest Pass In: St Kilda East, 7 Pilley St, Jeremy Fox, RT Edgar, $2,300,000, 1 bidder
“Auctioneer Jeremy Fox gave an honest and graceful description of the pretty East St Kilda home on this cold, dark Saturday afternoon in Melbourne. The façade of the property was truly superb and Mr. Fox alluded to this several times in his pre-auction pitch. Deciding to wait for an opening bid from the crowd, Mr. Fox decided against making a vendor bid to start proceedings. Having suggested an opening of between $2,400,000 and $2,500,000 and receiving no bids, Mr. Fox returned inside the home to consult his vendor. Upon his return, and calling it down twice more, a gentleman in the crowd offered an opening bid of $2,300,000. This was the only bid made for the property, and Mr Fox eventually passed it in at that price. There were 60 or so people that made up the somewhat vibrant crowd; half of whom observed proceedings from inside the front yard, while the other half watched from outside the premises.” (Daniel Ehrenreich)

Bidderbuzz Auction: Port Melbourne, 272 Esplanade East, Kaine Lanyon, BenMac, Passed In, 2 bidders
“The drizzle did not deter the crowd of 50 assembled to witness this Port Melbourne auction. The onlookers, many of whom were neighbours, were chatty as they awaited the commencement of the auction. Auctioneer, Kaine Lanyon was business-like in his preamble and used humour throughout proceedings. With no opening bid forthcoming from the crowd, Mr Lanyon opened with a vendor bid of $1,150,000 and with some encouragement two bidders emerged to compete for the property. Bidding reached $1,220,000 and stopped at this figure and the property was passed in.” (Kate Agnoleto)

Agent Q & A:

What are stock levels looking like post Melbourne Cup Weekend?
Damian O’Sullivan, BenMac, Albert Park: “Supply appears to be somewhat tight post Melbourne Cup Weekend which will no doubt disappoint many buyers desperately hoping to acquire a new home Pre-Christmas. That said, we find that many vendors often leave real estate plans to the last minute, not necessarily by design, but simply due to the fact that time catches up with them. If we see a last minute surge of homes for sale, I will not be surprised at all.”

David Lack, Biggin Scott, Port Melbourne: “Stock levels post Melbourne Cup are looking very positive, with lots of auctions already booked for the last two weekends of November. Many vendors have chosen to auction prior to December if they can, and the State Election scheduled for the 27^th November has not had an impact.”

Nick Yannopoulos, RT Edgar, Albert Park: “I’m not sure if the two grand finals had an impact be we are certainly seeing a bit of a late run this year. We are finding that stock levels will be very similar to last month, in particular the 27^th November and 4^th December being busy weekends. Hopefully if interest rates stay on hold, it should be a good finish to the end of the year.”

Kaine Lanyon, BenMac, Albert Park: “So far we are definitely finding stock levels for post Melbourne Cup Weekend looking on the thin side compared with previous Spring selling seasons, no doubt the State Election on the 27^th November hasn’t helped. That being said, the quality of the listings appears to be solid. Given this we urge buyers to act on properties they like, as the choice is a little limited.”

Results:

Michael Szulc (Cayzer) rejected a low bid of $1m to kick start the auction at 77 Heath St, Port Melbourne. The property later passed in for $1,370,000 on a vendor bid. No bidders

Key Points

• 284 Albert South Melbourne bought at auction for $2,170,000 Nick Yannopoulos of RT Edgar
• Many homes on offer today failed to attract any interest
• Two good $2m+ homes in Park St. St Kilda West  failed to attract a bid

BidderBuzz auction of the day

229 Page St, Middle Park, Andrew Stuart, Hocking Stuart, Under the Hammer $1,620,000, 2 bidders
“I like Andrew Stuart – he is ripper, no nonsense auctioneer and this was another one of his specialties. Bit of humour, bit of pressure, bit of bidding. Opened up around where it sold for less than a year ago at $1,450,000 and two bidders pushed it along under Andrew’s cajoling until it was on the market (officially) and bought at $1,620,000. Sorry the market is faltering – you’ve heard. Not right now on the good stuff – it ain’t. $170,000 above the November 2009 sale figure.”

Agent Q & A:

October 23 is Super Saturday – What can we expect?

Kaine Lanyon, BenMac, Albert Park: “As always Super Saturday is the busiest auction weekend of the year and we expect the clearance rates for that day to be in line with the last number of weekends. The volume so far for spring hasn’t been up at the high levels we have seen from previous years, meaning the market is far from flooded which should keep prices pretty consistent. In summary “Steady as she goes”. Still severely lacking listings in the $2-4m bracket.”

Damian O’Sullivan, BenMac, Albert Park: “A particularly busy weekend for all concerned. We have 27 auctions scheduled and the early signs are promising for our vendors. That said, we’re sure that the buyers will be excited by the volume of property being offered because sadly they have been comparatively starved for some time now. This pent up demand should theoretically see clearance rates in the mid 70% range across Melbourne which would be a reasonable outcome.”

Sam Gamon, Chisholm & Gamon, Elwood:”Super Saturday should be about Super Sales! We have several investors wanting to purchaser for their Super Funds, lots of raving Bayside fans feeling positive now the sun is out & the RBA’s decision has put a smile on everyone’s face.”

Forward Auction Bookings

Some auctions in our forward booking estimates failed to get near $1m – hence discrepancy with results below

Clearance Rates

Results

Big Crowds on Canterbury: 42 Wattle Valley. Bought After: Richard Winneke: Over $3,426,000: Photo courtesy Jellis Craig.

September Executive Summary:

Demand: Solid and increasing

• Reported Boughts: 46
• Bidderman: Substantial improvement in bidders per auction at the higher level. Random cross section of bidders. 1/3/2/1/3/1/3/2/2/3/3/3/2/1/0/0 for a month average of 1.875

Supply: New Stock Low

• Overhang from May however new stock is still light on at end of September and that which comes on at a reasaonble price is mostly being bought.

Price: Firming

• A number of stales (on market over 3 months) were purchased in Bayside reducing overhang – this will have an upwards effect on price if demand remains constant.
• Some new properties coming onto the market but new stock is still limited in Boroondara and Stonnington also encouraging price in an upwards direction.

Quote of the month: Stewart Lopez of Kay and Burton ” In this improving Upper End market, sellers are getting back the control that they lost with the stock splurge in May”

Highlights
Over $9 million
Hawthorn 24 Coppin: Jock Langley: Around $9,000,000 Private Sale. This basic house, on an acre on the river in Hawthorn’s river precinct, has been on the market for well over a year and had quotes at $15m then 12m and then…. A number of agents have worked on this. I went through this home last year and finally Jock Langley has got a sale through under $10m. It is a great block, its only fault until today was its price tag.
Brighton 292 New: Brian Devlin and Regina Schmidt: Around $9,000,000 Private Sale. Up for sale for less than a month, this grand looking home was purchased today for around $9,000,000. A very impressive block just down from Brighton Grammar.
Over $7 million
Toorak 11 Cole: Ross Savas: Private Sale: Quote $8,000,000 plus reported as bought for above that figure
Undisclosed Rating: http://www.james.net.au/rating/11-Cole-Court-TOORAK
Hawthorn East 49 Harcourt: James Tostevin: Bought After: Over $7,200,000: Bidderman 2
James Auction Report: http://www.marketnews.com.au/auction-reviews/8661/49-Harcourt-Street-HAWTHORN_EAST/
Brighton 6 Head: Jeremy Fox: Sold well after auction: Around $7,000,000
Full Rating: http://www.james.net.au/rating/6-Head-Street-BRIGHTON

Bidderbuzz Auction of the Month
24 Somers Malvern: Jeremy Fox: Under the hammer: $6,160,000: Bidderman 3
James Auction Report and Rating: http://www.marketnews.com.au/auction-reviews/8705/24-Somers-Avenue-MALVERN/
The sunfilled courtyard was a perfect setting for the Somers Avenue auction, with the lovely weather attracting a generous crowd of interested parties and onlookers alike. Auctioneer Jeremy Fox asked the crowd for an opening bid, but was disappointed with silence. It wasn’t long before a confident bid of $5,000,000 soon had the ball rolling though. Two parties continued with strong bidding, as the crowd watched on with baited breath. It was at $5,650,000 when another bidder keenly entered the fray, enquiring if the house was in fact yet ‘on the market’. There was clear buzz of anticipation amongst the crowd, as Mr. Fox conferred with the vendors, and finally confirming in the positive. Bidding continued fast and furiously between bidders, whilst the crowd remained captivated. The final knock-out bid brought on a genuine look of relief to the successful bidder. A truly entertaining auction, as you could hear echoed amongst the departing onlookers. (Nikki Hills)

Late Entries (Not Included in Stats)
Brighton Black St: Peter Bourbaud and Barb Gregory: Off Market: James Home Rating 852/1000. Price Undisclosed
Toorak 5 Myrnong: Darren Krongold and Sally Zelman: Private Sale: Price Undisclosed
James Rating: http://www.james.net.au/rating/5-Myrnong-Crescent-TOORAK
Armadale 23 Moorhouse: Gowan Stubbings: Expressions of Interest: Price over $5,000,000
James Rating: http://www.james.net.au/rating/23-Moorhouse-Street-ARMADALE

Apartments:
East Melbourne 144 Jolimont Road: Marcus Chiminello: Penthouse $3,250,000
Melbourne 301/401 St Kilda Road: Marcus Chiminello: Lucient $3,100,000

Albert Park
Albert Park 62 Beaconsfield: Kaine Lanyon: Quote $3,500,000 to $3,750,000: James Home Rating 655/1000: At Auction: Over $3,300,000
James Rating: http://www.james.net.au/rating/62-Beaconsfield-Parade-ALBERT_PARK

Armadale
81 Rose: Tim Derham: Bought Over $3,300,000. A  terrace home that needed a fair bit of work but did have rear access and was north facing to rear. Solid result.
James Undisclosed Rating: http://www.james.net.au/rating/81-Rose-Street-ARMADALE
21 Adelaide: John Bongiorno auctioned this “bulldozer or significant rebuild” home at 4.30pm today. Bought for $3,130,000 or just over $4,000 per sqm. Bidderman 3. Heather Elder and Rae Tomlinson
James Undisclosed Rating: http://www.james.net.au/rating/21-Adelaide-Street-ARMADALE
28 Seymour: Joanna Nairn: Quote $3,500,000 plus: James Rating 682/1000: Bought After Auction: Around $3,500,000: Bidderman 1
James Auction Report: http://www.marketnews.com.au/auction-reviews/9007/28-Seymour-Avenue-ARMADALE/
1 Myamyn: Andrew Macmillan: Under the hammer: $3,215,000: Bidderman 2
James Auction Report: http://www.marketnews.com.au/auction-reviews/8670/1-Myamyn-Street-ARMADALE/
3 Avalon: Ross Savas: Bought: Reportedly over $7,000,000, but not confirmed:
James Rating: http://www.james.net.au/rating/3-Avalon-Road-ARMADALE

Balwyn
Balwyn 23 Bevan: Richard James & William Chen: Quote $3,300,000 to $3,600,000: James Home Rating 742/1000: Bought After Auction: Around $3,500,000: Bidderman 1
James Auction Report: http://www.marketnews.com.au/auction-reviews/8932/23-Bevan-Street-BALWYN/

Brighton
10 Campbell: Peter Kennett. Private Sale after a Pass-In Auction. In excess of pass-in $3,850,000.
James Undisclosed Rating: http://www.james.net.au/rating/10-Campbell-Street-BRIGHTON
20 Bent: Justin Follett. Private Sale . Within asking price range $3,800,000 – $4,000,000.
James Undisclosed Rating: http://www.james.net.au/rating/20-Bent-Street-BRIGHTON
7 St Ninians: Nick Johnstone. Private Sale. In excess of  $3,500,000.
James Undisclosed Rating: http://www.james.net.au/rating/7-St_Ninians-Court-BRIGHTON
292 New: Brian Devlin and Regina Schmidt: Around $9,000,000 Private Sale. Up for sale for less than a month, this grand looking home was purchased today for around $9,000,000. A very impressive block just down from Brighton Grammar.
James Undisclosed Rating: http://www.james.net.au/rating/292-New-Street-BRIGHTON
22 Tennyson: Marcus Gollings. Private Sale. In excess of $5,000,000.
James Undisclosed Rating: http://www.james.net.au/rating/22-Tennyson-Street-BRIGHTON
3/9 Glyndon: Stewart Lopez: Private Sale: Mid $3,000,000’s
James Rating: Click here http://www.james.net.au/rating/3/9-Glyndon-Avenue-BRIGHTON
6 Head: Jeremy Fox: bought well after auction: Around $7,000,000
Full Rating click here: http://www.james.net.au/rating/6-Head-Street-BRIGHTON
19 Wellington: Stewart Lopez and Sturt Hinton. Private Sale after Auction. Over $4,000,000
James Rating: http://www.james.net.au/rating/19-Wellington-Street-BRIGHTON
3 Wellington: Stewart Lopez and Sturt Hinton. Private Sale after Auction. Around $3,900,000
James Rating: http://www.james.net.au/rating/3-Wellington-Street-BRIGHTON
5/23 St Ninians: Stewart Lopez and Sturt Hinton. Private Sale under $5,000,000
James Rating: http://www.james.net.au/rating/5/23-St_Ninians-Road-BRIGHTON
6 Seacombe: Ian Jackson: Private Sale over $4,500,000
James Rating: http://www.james.net.au/rating/6-Seacombe-Grove-BRIGHTON

Camberwell
8 Canterbury: Peter Mitchell: bought after auction: Around $3,000,000: Bidderman 3
James Auction Report: http://www.marketnews.com.au/auction-reviews/7926/8-Canterbury-Road-CAMBERWELL/

Canterbury
42 Wattle Valley: Richard Winneke: bought after, in excess of $3,426,000: Bidderman 1
James Auction Report: http://www.marketnews.com.au/auction-reviews/8807/42-Wattle_Valley-Road-CANTERBURY/
23 Chaucer: James Tostevin: bought after over $3,850,000: Bidderman 3
James Auction Report: http://www.marketnews.com.au/auction-reviews/8221/23-Chaucer-Crescent-CANTERBURY/

Elwood
31 Ormond: Marcus Gollings: Expressions of Interest: Bought over $4,000,000
James Undisclosed Rating: http://www.james.net.au/rating/31-Ormond-Esplanade-ELWOOD

Hawthorn
2 Berkeley: Rob Vickers-Willis: Bought at Auction: Bought over $3,000,000
James Undisclosed Rating: http://www.james.net.au/rating/2-Berkeley-Street-HAWTHORN
24 Coppin: Jock Langley: Around $9,000,000 Private Sale. This basic house, on an acre on the river in Hawthorn’s river precinct, has been on the market for well over a year and had quotes at $15m then 12m and then…. A number of agents have worked on this. I went through this home last year and finally Jock Langley has got a sale through under $10m. It is a great block, its only fault until today was its price tag.
James Undisclosed Rating: http://www.james.net.au/rating/24-Coppin-Grove-HAWTHORN
36 Chrystobel: Lisa Jarrett: Private Sale after auction: In excess of $3,500,000
James Auction Report: http://www.james.net.au/rating/36-Chrystobel-Crescent-HAWTHORN

Hawthorn East
49 Harcourt: James Tostevin: Bought After, over $7,200,000: Bidderman 2
James Auction Report: http://www.marketnews.com.au/auction-reviews/8661/49-Harcourt-Street-HAWTHORN_EAST/

Ivanhoe
59 Studley: David Oster: Under the hammer: $4,300,000: Bidderman 2
James Auction Report: http://www.marketnews.com.au/auction-reviews/8989/59-Studley-Road-IVANHOE/

Kew
63 Walpole: James Tostevin: Bought Before Auction: In excess of $3,000,000.

Malvern
24 Somers: Jeremy Fox: Under the hammer: $6,160,000: Bidderman 3
James Auction Report: http://www.marketnews.com.au/auction-reviews/8705/24-Somers-Avenue-MALVERN/
15 A Sorrett: Andrew Hayne: Week or so after Auction: Over $3,500,000
James Auction Report: http://www.james.net.au/rating/15a-Sorrett-Avenue-MALVERN
Elizabeth: Marcus Chiminello Off the plan $3,300,000
6 Bonview: John Bongiorno: Bought Afterwards in excess of $3,600,000: Bidderman 3
James Video Auction Report: http://www.marketnews.com.au/video/?vid=305
11 Moorakyne: Michael Gibson: Under the Hammer: $4,000,000: Bidderman: 3
James Rating and Auction Report: http://www.james.net.au/rating/11-Moorakyne-Avenue-MALVERN
17 Thanet: Mark Wridgway: Before Auction: Bought over $3,500,000.
James Home Rating: http://www.james.net.au/rating/17-Thanet-Street-MALVERN

Malvern East
31 Finch St: Andrew McCann: Under the Hammer: $3,360,000: Bidderman 2
James Auction Report: http://www.marketnews.com.au/auction-reviews/8376/31-Finch-Street-MALVERN_EAST/

South Yarra
38 Park: Warwick Anderson: Quote $3,500,000 plus: James Rating 725/1000: Bought After Auction: Above $3,000,000: Bidderman 1
James Auction Report: http://www.marketnews.com.au/auction-reviews/8476/38-Park-Place-SOUTH_YARRA/
19 Acland: Greg Herman: 4 bidders: Bought under the hammer: $3,600,000
James Auction Report: http://www.marketnews.com.au/auction-reviews/6886/19-Acland-Street-SOUTH_YARRA/

St Kilda
Two Block of Flats:
4 Church: Claudio Perruzza: Bought at Auction $3,400,000
16 Charnwood: Adam Joske: Bought at Auction $6,060,000

Toorak
11 Cole: Ross Savas: Private Sale: Quote $8,000,000 plus reported as bought for above that figure
Undisclosed Rating: http://www.james.net.au/rating/11-Cole-Court-TOORAK
2/23 Tintern: Ross Savas: Private Sale: Quote $5,000,000 plus reported as bought for above that figure
Undisclosed Rating: http://www.james.net.au/rating/2/23-Tintern-Avenue-TOORAK
8 Macquarie: Jeremy Fox: Private Sale after auction. $6,400,000.
James Rating: http://www.james.net.au/rating/8-Macquarie-Road-TOORAK
4 Forrest Court: Peter Kudelka and James Scarff: Bought after auction $4,050,000: Bidderman 0
James Auction Report: Click here http://www.marketnews.com.au/auction-reviews/8829/4-Forrest-Court-TOORAK
1 Hopetoun: Justin Long: Bought after auction: Over $5,500,000: Bidderman 0
James Auction Report: http://www.marketnews.com.au/auction-reviews/8671/1-Hopetoun-Road-TOORAK/
803 Orrong: Warwick Anderson: Private Sale $4,500,000
Undisclosed Rating: http://www.james.net.au/rating/803-Orrong-Road-TOORAK
1a Como: Greg Herman: Private Sale: Over $6,400,000

Please Note: The $3m+ market can be a very shadowy one at times with regards to what is bought, if indeed it was actually bought and what price (cash and/or otherwise) was paid. At all times the prices we outline are never truly confirmed until they can be viewed six to nine months later at the Government stamp duties office – however we don’t publish without feeling there is a high degree of truth. This is why as buyer agents when pricing homes we never make decisions on one buy alone and why true land and building values plus an overall knowledge of all buys is vital in calculating correct market value.  At this price level it is also a very private world and we respect that when trying to balance market transparency v individual privacy. We accept we don’t get it right every time but we do try. We never discuss buyer/seller personalities; we do not reveal intimate details to the wider press and we do not disclose full details publicly where the source has asked us not to. Our sources are not just the selling agent, but underbidders, our own advocates, REIV, our auction reporters and other agents not connected with the sale/buy. If you aware of an error or omission please email mal@james.net.au and we will adjust – you will be treated confidentially if you wish.

In our last article we talked about the possible tax benefits when investing in property through a self managed super fund (SMSF). While taxation is undoubtedly an issue, and holding your investments within the most appropriate tax environments is vital to ensuring you maintain your wealth, today’s article will focus on one of the most powerful methods of helping people create wealth in the first place: that is unlocking the power of leverage.

159 Edward Street, Brunswick – Quality inner city real estate, 6 bidders at auction when sold in August 2010.

By borrowing funds, and gaining a greater exposure to an asset class that appreciates in value over time, you significantly improve your ability to create wealth by having a larger investment in that asset class. Vital to this strategy is one’s ability to find an asset class which can provide stable, low volatility and proven returns. History has proven that property can deliver on all accounts.

Superannuation is meant to be a low risk proposition and it is important to recognise that borrowing to invest does carry with it a greater degree of risk. However, if you are making a commitment to invest in property past a 10 year horizon, your risks are minimised substantially.

In addition to this, current superannuation legislation makes leveraging within a self managed super fund less risky. “If things somehow go bad, provided you have structured the arrangement correctly, you should never lose more than your investment in the property,” said Fortrend Securities adviser Joel Hewish “Legislation limits financial institutions recourse in the event of default to the property which you have borrowed to invest in. This provides the borrower with more safety and asset protection in the event of default than would have been afforded if the borrowing was conducted outside of super, where banks potentially have recourse to other assets and income should there be a short fall in the recoverable value of the loan.”

So if you have 10 years or more to go before you retire, leveraged direct property becomes a rather logical choice to incorporate into your superannuation portfolio. Combining leverage with the tax savings afforded to superannuation could mean you have an increased chance of retiring earlier than initially thought possible.

To demonstrate how leverage could help boost the value of your superannuation balance over time, I have looked at its impact using the average growth of two Melbourne suburbs, Albert Park and Bulleen, and compared that to investing in the ASX over the same period.

Let’s assume that you had $50,000 available in your super portfolio in 1980 and the ability to leverage was possible.

Here are some of your possible options:

Option 1 – you purchased $50,000 worth of property

Option 2 – you invested $50,000 in a balanced portfolio of shares (All Ordinaries Index)

Option 3 – you purchased $165,000 worth of property, having borrowed $115,000, which represents a loan to value ratio of 70%.

(All Ordinaries Source: Fortrend Securities, IRESS)

As you can see, the results over the long term of having borrowed to buy property are significant. Over a 10 year period from 1980 to 1990 the asset appreciation is more than double the non-leveraged investment. Over a 30 year period it has approximately tripled. That’s even after you repay the original loan of $115,000 (and remember this is paid out of your super contributions, which are taxed at just 15%, not your marginal tax rate).

Of course, much depends on the selection of the property. Some property types will perform better than others and some suburbs are more likely to show stronger growth over time than others – look at the difference of buying in Albert Park and Bulleen with the same initial investment of $165,000 – over a 30 year period the difference in end value is approximately $1,500,000. So getting a professional to select and acquire the right property is essential.

With your retirement nest-egg, time is of the essence and the opportunity cost of a false start on a poor property could be the difference between retiring at 55 or 65.

Invest Well.

John Carter (Hocking Stuart) is all smiles at 14 Ruskin St, Elwood. And why wouldn't he be? Bought under the hammer, $1,200,000, 2 bidders and a crowd of 50.

Key Points:

• Stock levels lower than last year.
• A relatively quiet auction day in Port Phillip.
• Ten homes were bought this week over a $million – with 3 in Port Melbourne, South Melbourne and Elwood
• We covered three auctions, with only one selling under the hammer – 14 Ruskin St, Elwood (John Carter, Hocking Stuart), $1,200,000.
• Crowds were down on last week with an average of 50 people at each of the auctions we attended.
• Only 3 bidders across the three auctions.

AgentQ & A: Stock levels and Premierships?
Kaine Lanyon, BenMac, Albert Park: “Stock levels appear to be ‘reasonable’ for October but certainly not at the same levels as this time last year.
A combination of a long lasting election result, market not as buoyant as last year and footy finals, would appear to have many vendors sitting on the fence with a wait and see approach for now. Geelong will win the Grand Final this year as they have the most finals experience when it counts, plus little Gary needs to win one more premiership for the pussy’s before he takes off to Qld (and) line his pockets !!”

Michael Coen, Hocking Stuart Albert Park “Stock is coming on now but still well below last years volume.”

Bidderbuzz Auction of the Day: 14 Ruskin St, Elwood, John Carter, Hocking Stuart, Under the Hammer, $1,200,000, 2 bidders.
“There were more observers than bidders at Ruskin St, with many onlookers casually perched on fences watching as enthusiastic auctioneer John Carter sold the lifestyle of the location. There were two strong bidders, both very keen, and with the property on the market at $1,175,000, the property was bought for $1,200,000.”

Monitor Results:

Stock Levels:

 We Only Buy Homes

A sea of umbrellas was all that could be seen at 97 Graham St, Albert Park. Around 90 people watched as Andrew Stuart (Hocking Stuart) brought down the hammer at $2,630,000. Two bidders.

Key Points:

• We focused on Albert Park today and there were reasonable bidder numbers across several auctions. However, Port Phillip has still started Spring very slowly.
• Prices had been falling during Winter and the factors are there for that to continue; especially if any sort of Spring stock level surge is not met by a corresponding increase in bidder numbers – our only proviso is this is a small dynamic market and things change very quickly in Port Phillip.

Biggest Buy:
97 Graham St, Albert Park, Andrew Stuart, Hocking Stuart, Bought $2,630,000.
“Despite threatening skies overhead, and persistent drizzle, Andrew Stuart bravely started proceedings outside with a vendor bid of $2,400,000. After a relatively slow start, a battle between two keen buyers ensued. After Mr Stuart declared the property on the market at $2,617,500, the bidding quickly soared to the selling price of $2,630,000 – a strong result for Mr Stuart and the Hocking Stuart team.”(Jen Milligan)

Agent Comments:
Oliver Bruce, BenMac, Albert Park: “There is a reasonable selection of properties available in Albert Park. A good mix of terraces, small and large, modern and liveable. There are a few unrenovated and three or four land offerings too. There is a shortage of double fronted homes and there are fewer properties on the market in Middle Park. South Melbourne is quiet and there is a shortage in the Howe Crescent/ Lamaro precinct. I am seeing a lot of the same faces around at opens and auctions. Reasonable numbers are attending both for correctly priced opportunities. As always, price is a driving factor for both vendors and buyers. I have seen some absolutely phenomenal prices in every price bracket. These big prices have been driven by competition. One can only assume that the buyers are flocking towards the better homes, or the better priced homes. I am seeing very few offers for properties prior to auction. Buyers are sitting back playing the waiting game thinking that no one will bid, only to see two or three motivated buyers pushing prices well above everyone’s expectations.”

Adrian Wood, Cayzer, Albert Park: “The market is fair at the moment. There is a lack of stock and looking into Spring is like looking into a crystal ball – who knows what will happen. Demand is higher than supply at the moment. Bidder numbers have been down overall, but good quality, well priced homes are still bringing outstanding results.”

Bidderbuzz Auction of the Day:
25 Longmore St, St Kilda West, John Bongiorno, Marshall White, three bidders:
“Having to hold the auction indoors due to wet weather, John Bongiorno asked serious bidders to enter one room and anyone else to stand down the hallway. His invitation to the sitting room was taken up by around a dozen people which looked promising for Mr Bongiorno and the Marshall White team. Out of that group, there were three bidders who fought it out, taking the price to $1,075,000 which, unfortunately, wasn’t enough to buy the property under the hammer. Mr Bongiorno, instead, passed the house in at this amount. Bought after for an undisclosed amount.”(Jen Milligan)

Clearance Rates & Monitor Table: Spring start has been slower than a Mark Webber one.

We Only Buy Homes

Phil DeFegely (for JC Street) brought the action indoors at 347 Dorcas St South Melbourne. Passed in $980,000. Two bidders.

Sam Gamon (Chisholm & Gamon) looks for some bidders at 36 Shelley St, Elwood but to no avail. Passed in for $940,000, no bidders.

Key Points:

Analysis: This was Spring’s first test for Port Melbourne to Elwood. As far as auction homes go it failed badly. The quality was questionable and some newer stock coming on is visible – so there is a high chance buyers are holding off until then. Even so this was a poor start to Spring for Port Phillip. This $M+ market is smaller than the others we cover weekly and has a history of responding dynamically to minor changes in circumstance, so the next few weeks will be viewed with interest.

Agent Comments: In  fairness this election question was asked just prior to this weekends’s results.

Joseph Allan, Chisholm & Gamon, Port Melbourne:“When I heard about the election, I thought it was not going to be ideal for the market. But so far, I have had no indication that it has affected it at all. I guess the big question is: will it affect stock levels coming up? We’ll wait and see.”

Kaine Lanyon, BenMac, Albert Park: “I don’t believe the actual election result itself will affect the market in any real direction. It’s more the waiting around, the ‘holding pattern’ until we see a final result of who will next govern the country, that seems to be affecting the market in a positive sense.  Many vendors will still not yet commit to a selling campaign, so there is  less stock on the market – which in my view is largely why some of our results have been so strong over the last four weeks. That is limited choice for the current bunch of buyers to choose from if they miss out on the only property they like that is currently available”.

Sam Gamon, Chisholm & Gamon, Elwood: “I haven’t seen any impact due to the Election.  Buyers are realising they’re not on a ‘deserted island’ and that other people are making decisions. In essence, I feel buyers are very decisive for the right property. If anything the Election may hold back some sellers from listing as they’d like the assurance of a definite outcome. The warmer weather is bringing renewed positivity to the market place and buyers are keen to move forward when they find something they relate to”

We Only Buy Homes

David Wood (Hocking Stuart) successfully sold 80 Neville St, Middle Park, after auction for an undisclosed amount. One bidder, small crowd of 30.

Bit of traffic at 6 Tribe Street South Melbourne both before and during the big game. Bought under the hammer for $1,493,000. Geoff Cayzer and 4 bidders.

Key Points

• 41 sales for the month of July – only one over $3m.
• Albert and Middle Park combined reported only six $M+ sales in July
• Two BidderBuzz Auctions – both with four bidders and both bought under the hammer in the $1.4 millions. 367 Dorcas St with Gerald Betts and 6 Tribe St with Geoff Cayzer.

Agent Comments re the question of Spring stock levels and new WOW projects

Kaine Lanyon, BenMac: “Stock levels over the next month are still looking relatively thin. There is a trickle coming on but we are definitely feeling that many vendors are holding off embarking on a sale campaign until the federal election is well out of the way, thus making sure that won’t be a distraction to the buying public;  The really good homes have been missing from the market of recent weeks and while we have some with the “Wow” factor not far away from coming onto the market, that product is as scare as hen’s teeth at present; New homes being built/constructed are almost non-existent in the Port Phillip area mainly due to the heritage overlays, making genuine ‘start-again-from-scratch’ opportunities just not there” .

Nick Yannopoulos, RT Edgar: “Low stock levels at the moment, I think because of the election. After that I think things might pick up a bit but at the moment there is a shortage; Not too many good family properties out there at the moment; Not much building – planning always takes time…development is slow at the moment.”

Michael Szulc, Cayzer: “Stock levels will increase through natural progression towards Spring. Things don’t just triple however in a few weeks  and properties are very tightly held in this area anyway; In this area, there are only ever a few big, family homes with that “wow” factor on the market – this isn’t the area for that type of property; No building going on. Nothing. The landsize doesn’t suit new big, family homes.”

Clearance Rates & Monitor Table

Buying Activity

We Only Buy Homes

Andrew "Comfy" Stuart sells post auction for $1,235,000. 13 Ward St South Melbourne. 0 bidders.

39 Park Road Middle Park: Hey what's this guy doing back here with a different guernsey on? Greg Hocking formerly Captain Coach of Hocking Stuart now playing full forward for TBM. No bidders though and passed in $2,600,000. Is this a Welcome Back?

Key Points

• Market continues to be very quiet on low stock turnover but this as expected this time of the year in Port Phillip.
• Biggest sale was in Elwood – 4 Pozieres Avenue -  Leonard Persichetti - TBM – $2,345,000 – 3 bidders

Five single fronted period homes went to the market today.  They sold between  mid $900,000′s and mid $1,200,000′s

• Albert Park – 80 Moubray Street  – under the hammer
• Port Melbourne – 247 Ross Street – post auction
• Port Melbourne – 222 Ross Street – post auction
• Port Melbourne – 49 Farrell Street – passed in
• Port Melbourne – 47 Raglan Street -under the hammer

See our reports below and how each one fared – and maybe ask yourself why

• Position
• Land Size
• Floorplan
• Quality
• Campaign

Agent Comments – This week we asked if the election was affecting the market

Sam Gamon, Chisholm and Gamon: “Sellers going post election but not stopping selling; Best buying week in last 6 weeks; Prices are now becoming clearer to sellers and buyers around 5% lower than April; New buyers are coming into the market instead of last year’s buyers; Buyers are sensing opportunities now as some feel things may improve post election when everybody realizes nothing is going to change.”

Vanessa Gillon, Buxton: “For us, the election hasn’t made a difference as we do more private sales than auctions. But (overall) I haven’t heard that there has been much of an affect.”

David Lack, Biggin Scott: “All our vendors have elected (pardon the pun!) to avoid auctioning on the weekend of the election, citing that they didn’t want their prospective buyers distracted. The following weekend, however, will be busy, as sellers try to get a sale in before the AFL finals begin;  Listings are down on the same time last year, and many prospective vendors are adopting a wait and see approach;  Buyer levels have dropped off by a minimum of 30% on properties priced over the magic million mark, though there are still many buyers in the $600-$800,000 range chasing well-presented 2 bedroom apartments and period-style cottages;  Family homes on reasonable blocks of 250 to 400 sq m are in huge demand, and it will be interesting to see how this segment of the market will perform in the coming weeks with 3 such properties being auctioned in Port Melbourne;  Beacon Cove pricing has held up, particularly with the apartment market, with 5 sales in the last month between $1.3m and $1.8m. Turnover in Garden City has also been steady, with 4 sales of un-renovated ex-Ministry homes all achieving in the early $800,000s to $900,000s range.”

Andrew Stuart, Hocking Stuart: “The election hasn’t been holding people back, that’s for sure; Stock levels are good – There were more than 40 properties auctioned around here today so stock levels are normal; Properties are always scarce around here as no one wants to sell or move away.”

Kaine Lanyon, Benninson Mackinnon:”Whilst there were not many auctions today, the vibe was better than the last few weeks; (Our) office sold 4 from 5 with multiple bidder at all  auctions; Perhaps some vendors may be holding back because of the election, but buyer sentiment remains positive.”

Clearance Rates and Monitor Table – always a little unreliable on such small numbers this time of the year.

Buying Activity – A significant drop off in activity – in part expected as it’s winter.

We Only Buy Homes

Investing in your family home means you can avoid, perfectly legally, the tax the government wants you to pay on an investment property.

“Why not live in your money?” one wily auctioneer suggested at a crisp winter morning auction in Melbourne recently.

Why not indeed?

As a buyers’ agent of million-dollar-plus homes in Melbourne, I see people buying and selling some very nice homes in some very nice suburbs.

One thing I often wonder is why, when someone has made money out of one of those very nice family homes, either by design or by accident, their first thought is often to draw on that money to invest in something completely different.

Why would you invest $400,000 in a house in Seaford or an off-the plan apartment on Queensland’s Sunshine Coast when you have made your money in a $2 million home in Eaglemont or Hawthorn?

The family home can be put to work to store and to create wealth. Photo: Justin McManus

Why would you put money you made buying land in inner Melbourne into oil futures or Russian uranium?

Family homes can be the cornerstones for wealth creation and wealth storage.

Suburbs such as Toorak, Port Melbourne, Albert Park, Balwyn and Kew offer plenty of proof that family homes bought in good suburbs can create and store wealth.

Following this logic, then why not invest in something that works – why not think about trading up on your current home as your next investment strategy instead of pulling out $400,000 and buying another investment with very different characteristics from the one that made you good money in the first place?

Why not put some of your superannuation ideas or your new Porsche research effort into something you and your whole family can actually enjoy right now and for a long time to come?

Why not think laterally about what the tax office calls your principal place of residence – your home?

Yes, negative gearing gives you a tax deduction, but by investing in your family home, you can avoid, perfectly legally, the land and capital gains tax the government wants you to pay on an investment property.

And you get to improve your own lifestyle at the same time instead of letting a tenant and an investment scheme salesman enjoy your investment while you live in a less than satisfactory home.

The obvious question is, what to do when you need extra money for things such as school fees or holidays? You can’t live off the income from your family home, but you can borrow against it and down the track you can downsize, and pay the whole lot off, thus getting the school and holidays and interest paid for by others.

So how do you make sure you’ve bought well? Clearly not every family home is a good investment. When investing in anything, what you are looking for is a good financial outcome, which has three parts: growth, cash flow and risk.

How does a family home measure up?

■ Growth: Price increases come from demand and supply, and we can fairly safely assume that there will be ongoing demand for good homes in good suburbs, and that the supply of land in those suburbs is limited.

■ Cash flow: You need to be able to service the investment and minimise your expenses; your income needs to be able to service the interest on your family home. You may be better off upgrading rather than spending too much on renovations.

■ Risk: There is no replacement for homes with a backyard near a train station and shop. I don’t think shelter is on the way out as a human necessity.

Your home as your main investment is only a good idea if it has the right investment characteristics – the three P’s.

■ Position – inner city, near a central business district with an international airport, and near infrastructure.

■ Property – good land content; a land-to-value ratio of more than 66 per cent is ideal for an investment. Remember, land appreciates, while buildings depreciate. The building itself should have a good floor plan requiring minimal renovation.

■ Price – affordable within its market or better and with the right risk characteristics.

There are some great books around that expand on these points.

Try any Jan Somers book (a great Australian property writer), or The Millionaire Next Door by Thomas Stanley and William Danko. Or approach reputable selling agents.

Why not invest in your family home and, as that wily auctioneer said, live in your money? Why not indeed!

We have held over to next week the start of  9 part series on Negotiation which includes a week on Backward Bidding – A New Negotiation Technique : Look for on a Tuesday at James Buyer Opinion from next week.

This article was written in The Age, Business Day section 26^th July 2010. Author Mal James http://www.theage.com.au/business/property/the-castle-as-a-bank-vault-20100725-10qjq.html

What is it with redheads? They're running the country - and now they're taking over the auctions. We counted six in this photo in amongst auctioneer Phillip Kingston from Gary Peer. 7A Nightingale St Kilda East. Bought After $1,200,000. 1 bidder.

At 6pm Saturday the James Clearance Rate on the 22 $M+ Auctions we covered was 59%.

Our Demand Indicator Bidderman was 2.2.  Hmmm – an interesting increase but it was off a very low turnover.

Today’s Highlights

1)      Bidders were present at 18 of the 22 auctions we covered –  and at three auctions there were 6+bidders

• 23 Sunburst Avenue Balwyn North (Doug McLauchlan of Marshall White)
• 12 Lennox St Hawthorn (Russell Turner of Christopher Russell)
• 7 Monomeath Avenue Toorak (Justin Long of Marshall White)

2)      The Pies are top of the ladder – and the election is on

We couldn’t find many $M+ auctions worth covering and only one of the auctions we covered went over $2m this weekend. So with the small numbers – just coming out of  the winter hiatus – it was like a first back training run before we get into the winter season proper over the next few weeks.

Agent Quotes

Scott Patterson of Jellis Craig: “Sold 12 from 16 today throughout the company. Opens and auctions were well attended…those who wish to sell in next month or two could enjoy quite solid results due to lack of supply, because demand seems reasonable… August 28 is looming as big weekend, particularly as it is now the week after the election…only thing is that Hawthorn vs Collingwood might affect crowd numbers etc…’

Hamish Tostevin of Marshall White: ”Opens were steady without being over-run with buyers. Certainly a lack of property at the moment in terms of supply. Should be a solid spring, particularly when the election is out of the way.”

Now, where were we before we were so rudely interrupted (by the school holidays)?

It has been a month since we last reported, and we have seen more Top End activity at Tullamarine than in any other suburb. Was it sales? No. It was our selling agent brethren jetting off to Europe to recharge their batteries. This poor humble buyer agent can only give you a travelogue on the Dubbo Zoo so I won’t bore you with tales of kids and a 12-hour car drive or the fact it ain’t a patch on the Werribee Zoo.

The world is a different place since our last report: back then Kevin ’07 was in charge, Masterchef was still a competition to find the best amateur chef in Australia, not the luckiest cook as it is now, and our $M+ market had prices cooling quicker than a Melbourne winter, after a blistering start to the year (although there were still an incredibly high number of buys).

A month ago we reported that the early 2010 gains had evaporated in the five auction weeks of May due to the sheer number of listings. May’s record supply finally stopped what had, since March 2009, been a rising market, driven initially by international buyer demand and then solid local demand.

So what is happening in our Winter Market (June to August) right now?

To be frank we don’t know for sure yet. But here are some of our thoughts.

1. Prices Now
2. Stock Quality Now
3. Method of Sale Now
4. Risk v Reward Now

Prices Now
Selling agents love to use the ‘p’ word plateau (rather than the four letter ‘f’ word)  to reflect on, or deflect away, thoughts of a declining price market. Right now, we actually agree with the ‘p’ word – especially if you accept that prices fell significantly in May and June. (By the way, the ‘f’ word that selling agents don’t like to use is fall.)

Some reasons prices may be plateuaing are:

• Seasonally reduced action (winter)
• An election on the horizon –  so some buyers and would-be sellers will pause to wait for the result.
• We had a big price fall in May and  for most of us market watchers the way forward is still unclear. Will we see more price drops or …. who knows? Like many, we are waiting for a sign.

Demand in Relation to Price

• This weekend Bidderman was at 2.2 – but, please note, this is based on very low auction volumes and therefore statistical distortions are possible.
• As a buying company,  we have had commitments from a significant number of new clients over the past few weeks.
• We feel it’s better to reflect overall demand as more cautious rather than dropping – however another month or two may tell us a different story.
• Right now, buyers still do have the rare luxury of having their cake and eating it too – if they choose to. Prices have fallen in May/June, and in July we are in a market of reasonable choice. Hooray for buyers!

Private Sale Clearance Rate – the number of Proven Sales is only 11 from 50 – or 22% – over the past six weeks.

Six weeks ago we randomly selected a basket of 50 higher end Private Sale and Expression of Interest properties, right across our $M+ Melbourne market. We did this with the aim of  checking  what was bought 6 weeks later (roughly the same time as a “go to whoa” auction campaign), and to therefore calculate the clearance rates  to see how Private Sales and Expressions of Interest were really going.

We thought this snapshot would provide the best reflection of private sale market activity and confirm or question comments by some selling agents that: “Oh yes, auctions were not as good as March, but we are selling a heap via private sale”. The results proved that while in May agents were selling a heap, it wasn’t so much the case in late June to early July. However,  it could have just been that many agents were away.

• We have made an effort to contact those that were withdrawn without a sale price, and we may have missed a few sales – but overall the non-auction homes are NOT running out the door any faster than the auctions. In fact you could make a strong argument that, as an effective method of sale, auctions are still outperforming private sales in many cases – despite the declining clearance rates, given that only 1 in 4 private sale properties have been bought in 6 weeks.
• These figures must surely help smart buyers put together an offering strategy. It’s certainly prompted us here at James Buyer Advocates to change how we buy in the last two months.

Today’s final word on price – are you a glass half empty of half full person?

If you feel the double-dip recession is fast approaching and the world as we knew it is about to end, then, by all means, don’t buy – and in fact sell (and please give us a ring if you have a good home to sell).

If you feel Julia (Gillard) won’t be changing the legitimate immigration numbers any time soon (demand) and Justin (Madden) won’t be able to release large numbers of housing blocks in Inner Melbourne because they are not there (supply), you may wish to ignore the doomsayers and take advantage of this current price breather combined with good stock offering. The GFC lasted less than a year  (for us) and in July 2010 Melbourne $M+ home prices are still 20 to 30 per cent above 2008 GFC home prices. Remember the 2008 ‘bulls**t’ rumour of the year, which said the NAB and other banks were about to foreclose on 200 homes in Toorak alone – it never happened. Yes we are biased and make a living by encouraging buyers to buy – but the facts are still very positive for buyers.

Stock Quality Going Forward
Spring quality and auction numbers are the variables we don’t have a clear handle on as yet. Right here and now in July, we have a market with excellent stock numbers for buyers – if you know where to look and you actually act correctly (please see the following paragraph on methods of sale). We also think the quality is good. Going forward, quality stock levels are not clear to us, because traditionally when quality sellers see a declining market they are loathe to put their home on the market on a speculative basis (in that, if they don’t have to sell, they won’t). This obviously leads to less stock on the market, which may affect price but, more importantly, it affects choice. Good buying decisions are more likely when, along with good advice, you, the buyer, have good choice.  You have that now.

Method of Sale
As we said, there is choice now if you know where to look, whom to ask and how to deal. Look at the above private sale table – there are some good homes there. We keep overhang lists (stales and unsolds) and there are also a number of off-markets and quiet pre-releases available. Granted, some of the vendors are still in their price cocoons but  quality sellers who have adjusted their price expectations may have homes worth considering. The off-market (unadvertised properties) may well be the market of choice for a number of buyers and sellers in the next few months.  But, please note buyers, you will have to sharpen your negotiation strategies to take advantage of all that is on offer.

Risk v Reward
To digress – Risk v Reward is where Masterchef’s Adam and Claire had it all over Jono. While Jono was going for the big dish on every occasion – and you have to admire him for that – he wasn’t playing the game to the best of his abilities. Adam is the quiet master at the Masterchef game. He sees a situation and says: “Yeah, I want to try and make a dish that will impress the judges and maybe get me a shot at immunity – the reward – but I don’t want to push the boundaries that far that I risk getting in the elimination round if I fail.” Good Home Buying and Negotiation is absolutely the same as this. Why is that? Because in the first instance the strategy should be to get yourself into a strong position and not risk all for the pot of gold. Once you are in that strong position, then you can make a run for the prize. Another analogy is acclimatising at base camp before you make the assault on the Everest summit. This is Risk v Reward.

A full James Buyer Opinion on Risk v Reward in today’s Market will be published here on Tuesday – so look out for it this week. At the moment you will find our biggest ever ‘clicked on’ James Buyer Opinion article – The Learning Fee - right next to this article.

It’s good to be back

We Only Buy Homes

Mal

Balwyn North 23 Sunburst. Big Crowd for Doug McLauchlan of Marshall White - 125 in fact. Seven bidders. Bought under the hammer for $1,567,000.