With Easter 2012 over, many of you will be suffering withdrawals not just from chocolate but also from information about the property market – and more importantly from a lack of homes to look at.

Melbourne's Million Dollar Plus Property Magazine

Winter 2012 seems to have come early in terms of lack of properties listed for auction. Even with  the holidays now over, there are still only a handful of auctions listed for the weekends left in April. In fact this is shaping up as one of the lowest mid year Auction months that I can remember for some time.

That doesn’t mean that there are no properties on the market at all. There are still plenty of off markets (unadvertised homes), pre markets (before they get to market); private sales with no advertising and stales (homes that were advertised a year ago and are now either off the net or on the very last page of the listings).

However, what this does mean is that if you are a buyer looking for an A-grade result in April 2012 you aren’t going to get the best deals by sitting back, thumbing through the glossies and turning up on a Saturday.

As a buyer it is important you understand what is going on, and you are not necessarily going to get that from the Sunday papers. With no public pointers such as meaningful $M+ clearance rates you are going to have to look deeper than the dailies for your market indicators.

For instance, I am still surprised at the number of market watchers who talk to me mid week in coffee shops or at Sunday sport who think that because they’ve heard the market is OK that prices must have been going up. In 90% of the 400 or so transactions we’ve looked at this year, the sale price has in fact been at or below vendor expectations of last year, not above. And while there has been a good spread of solid auctions they have rarely exceeded “trade” price expectations. The main reason the market was healthy pre-Easter was because vendors were meeting the market not because buyers were leaping to ridiculous heights to grab the gold.

On the other hand, when demand is still strong and stock is down as it is right now, prices tend to stay firm. Before Easter our demand indicator Bidderman, which shows an average number of bidders per auction, showed us that there is a healthy level of demand out there when the 3Ps are right – price, property and position. So there is still plenty of competition out there when the property comes up at the right price.

Hence, to use a sailing analogy, your search for a $M+ home in Bayside and the Inner East in the next few weeks may require you to change tack. As with sailing, you will need to look for the winds in different spots and possibly away from the crowds.

So, what can you do to maximize your chance of finding your dream home at a good price this month?

1)      Do your own research. You need to look past the highlighted sales results that skilled agents will present you. These may not be giving you the full picture. As an informed buyer you need to balance out this information with that from results not highlighted by the selling agent. As a buyer it is incumbent on you to do your own independent homework if  a good decision making process one of your home-buying goals.

2)      The Early bird who has clear and relevant goals catches the worm – it might seem a worn out saying, but it’s super relevant in this market. Yes, turning up is three quarters of life but you still need to perform. Your Winter home searching effort needs to include weekly Phone calls to agents, short sharp emails, letterboxing, excel spreadsheets. The good homes are not just going to fall into your lap as they did before Easter or in previous years. If you do, you may get some chances other don’t.

Get a rental. With very limited stock on offer, you’ll need an extra level of patience to avoid making a mistake. If your dream home is not there, it’s not there. In which case a six month rental strategy may be far better in the long term than a ‘quick draw McGraw’ 10 year buying strategy.

Agent Step Quoting is a contentious part of our industry: It’s how selling agents nudge buyers up the staircase towards a price their clients are hoping for. Done badly it can make buyers feel cheated and manipulated and invite accusations of under-quoting. Done well it’s a legitimate haggling process agents use to get a buyer and a seller to meet at a price point they’re both comfortable with.

We usually only hear of Step Quoting when it’s done badly as it highlights the low skilled, unethical agents almost immediately. When highly skilled agents use step quoting successfully it goes unnoticed except through careful examination at a later date. Yet within the Inner East and Bayside $M+ Markets it is a particularly common practiced black or noble art depending on your point of view.

How does it work? Well at the top of the stairs in Step Quoting you have a seller, a mum or dad just like you and they think their home is worth $4 million. At the bottom of the stairs in step quoting is you, the buyer and you think the home is worth early three’s, but your dream price is $2,950,000 – you don’t want to admit to a 3 in front of it at this stage.

Both you and the seller are interested in the transaction because the seller feels it’s time to move on and you hoping it’s time to move in.

You’ve seen the home in The Weekly Review and you’ve rolled up to the first open for inspection. The selling agent at the door says $3,200,000+ when you ask the “how much” question, while not in any way looking interested under your recently purchased “anti-agent” dark sunglasses.

“Mmmmm $3,200,000 – a bit more than the $2,950,000” you thought it was worth and maybe you will have to concede it’s going to have a 3 in front of it. You’ve moved a step to Step Two – not that painful.

But hold on, wasn’t that $3.2 million quote underquoting by the agent? Hasn’t the agent committed an offence by quoting at this stage a price much lower than they said the property may sell for?

Let’s press rewind for a minute.

OK Mal, how can the owner realistically think the home is worth $4,000,000? Trust me, this for many is not a dream figure, this is a cast in stone, almost religious belief and it comes from one of four sources: the agent told them, their mate told them, another agent told them or the tea-leaves told them – but they believe right now their home is worth $4,000,000 when quite possibly in this falling market the home is considered low $3m’s by most serious buyers and even the agent currently trying to sell the home.

How come? Time lag and the well known leap of faith valuing technique. 10 weeks ago the owner met with a number of agents – some competent, some not so competent and some downright rascals and the average of what the seller was told seemed to be $3,400,000 to on a really good day $3,700,000. One rascal agent did say $4,300,000 but the two other competent agents said mid $3,000,000’s. With each of the two “mid $3m’s quote” competent agents the seller asked “do you think I can get more, could I get $4,000,000” Each agent, who still wanted to get the job replied “it’s possible but unlikely”. Luckily for the seller one of the competent agents was engaged, even though they were not the highest in value estimate.

That was 10 weeks ago, this is now.

The vendor, who is now getting more emotional, is convinced more than ever that the news of the world doesn’t apply to him – when in fact it does and his $4,000,000 was always $3,700,000 on a good day – yet the market has dropped 10% in 10 weeks and his home is now worth $3,400,000 – on a good day with plenty of bidders. The selling agent doesn’t know yet if the home will have plenty of bidders as this is the first open for inspection and so being professional and with an obligation to the seller’s interest first and foremost they are quoting $3,200,000 plus. You tell me – are they dealing morally, legally or ethically?

The first open actually went pretty well and the selling agent put 7 names onto their list. As one of my favourite agents and master of the Step Quote once explained there are 3 lists: the door list (everybody who goes through is on that), then there is the engaged list and finally there is the buyers list.

But that’s another story, back to the steps and Step Quoting. It’s Week two and you notice in the papers the home is quoted at $3,400,000+. “Mmmm you think they must have interest”. Well they may and quite possibly they may not. Think about it – the $3,400,000+ quote would have gone in before the first open to meet printing deadlines, the new quote is not a response to the first Open For Inspection(OFI) but part of a well planned Step Quoting process.

You are back at the second OFI and you ask about the quote – of course in a manner behind your “anti-agent” dark sunglasses so as the agent knows you’re not interested. A reply comes either “that was a printing mistake” (one of my favourites if the campaign hasn’t leaped out of the blocks in the first week) or “yes we’ve had a lot or interest and so we put the quote up”.

At this point a number of things have happened – you the buyer have made it onto the second list – the engaged list – as you are a “repeat inspector”. Second time round you really like this home and you, the buyer, have now gone to Step 4 begrudgingly. Step 1 was your dream price $2,950,000 and you blew past Step 2 ($3,000,000) and Step 3($3,200,000) and your teetering around Step 4 ($3,400,000).

Meanwhile back at the ranch the selling agent is also doing all they can to pull the vendor back down from their top step of $4 million – talking about clearance rates, and falling prices and global recessions. The vendor won’t budge. “You said I could get $4million,” they say.

Week 3 and you are back at another open for inspection – you are now being considered a serious prospect. But the price has gone up again: “We have had some interest at around $3.7 million. How do you feel about that? “ the agent asks you.

Actually you feel sick, but behind your special “anti-agent” sunglasses you trot out “Mmmm  guess that puts me out” $3,700,000 – you think – OMG. What – I’m not paying over $3,600,000 and so welcome you’ve arrived at Step 5 in the Step Quoting process.

The agent has deliberately not asked the vendor for a reserve as he/she is aware of what they “may” want and also aware of the law. Meanwhile the agent is pummelling the seller with reports of how the serious buyers have either fainted or been abusive when they hinted at a price of $3.5 to $3.6 million.

So come auction day; you the buyer are at Step 5 with a lean and our vendor is at Step 7 with a lean.

The home is naturally passed-in and the selling agent runs up and down the stairs until a result either happens or the vendor sticks to their guns, and the home is listed for private sale the following week.

So, has the agent acted unethically or illegally?

They would have if they had told the seller that they could get “$4 million, no worries, I promise, maybe even $5 million”, and then once they had “bought the job” given the buyers a quote of $3 million at every open for inspection and never made any effort to work (explain to) the buyer or the seller along the steps.

Such agents are unethical and lazy and unfortunately they are too plentiful in supply through deliberate training or poor supervision.

But are agents who work to bring the buyer up to maximise the vendor’s price, and the vendor down towards what the market will pay, which ultimately achieves what the vendor wants (a sale), doing their job ethically and professionally? In these cases it’s a fine line, but if you are a buyer that moves up the steps and you have been informed along the way then well………… are these quality agents not just doing their job very well?

Why you as a buyer may need some professional help? In this market what happens if you are the only buyer on the engaged and buyers list since the first quote of $3,200,000+?

You mightn’t like being run up the Step Quoting stair, but that’s how the property market works, and the highly skilled selling agent’s job is to get the best price for their client, which by the way is not you.

Well, here we are in early August – and anything that has been written about the market in the last few months has been to fill some space. Because nothing has been happening. Nothing good and nothing bad – just plain ‘ol nothing.

There’s a saying in our business that the really good agents should take the J months off: January, June and July. That certainly happened this year: most good agents have spent a fair proportion of the last eight weeks re-connecting with family, friends or their inner self. Yes, we do have all of the above, (well most of us do).

Sure, there’s been plenty of talk about tough times from the punters and press; plenty of conjecture about where prices are going from anyone who knows anything,  and from plenty who know absolutely nothing about high end Melbourne real estate. Like that other great weekend game there have been some personnel changes – and the odd betting, sorry ‘quoting’, scandal and a few boys who didn’t pass the dope test.

All in all we seemed primed for an interesting four months between Footy Finals and Santa time.

This next four months is traditionally two markets:  the early Spring market – which runs from just before Elimination Final day to Grand Final – and the late spring market which starts the week after Grand Final and runs at a frenetic pace until the Melbourne Cup break and then for another month before winding down into Christmas.

We’re likely to see some ‘Super Saturdays’ at the end of August, on preliminary final day and the weekend before the Cup. And then, depending on the early Spring market, perhaps also the last week in November and the first fortnight of December.

The almost guaranteed Super Saturday will be the last week before the Melbourne Cup – although with the Grand Final running a week later this year sellers will need to start their four week campaign on that holiest of days, the Grand Final, to get in before the horses leap from the stalls at Flemington.

So what should home hunters be looking for? A good start is to look at the thickness of their Weekly Review over the next few weeks. Seriously. If the Review is like a phone book prior to Grand Final, then we’ll have some choice and prices may not run away on the good quality homes. But if it is as thin as a dry cleaning brochure, buyers are going to have to compete hard on the limited quality stock presented.

Which is what has been happening since May. There has been so little on offer that is quality. Which means any quality, well-priced home has attracted considerably more interest than you’d expect reading the gloom and doom headlines. That’s because this market is not a weak market caused by lack of demand – any weakness or negativity is due to a severe quality contraction of supply of well priced quality homes.

Our company went to 28 auctions the weekend before last and a third had 3 bidders or more – with three $1 million plus auctions attracting 5, 7 and 9 bidders That included a 5 bidder auction at 3 Irymple Ave, Glen Iris (Iain Carmichael and $3,000,000 Bought); a 7 bidder at 42 Guildford Rd, Surrey Hills (Antony Woodley and $1,381,000 Bought) and a 9 bidder, at 28 Montclair Ave, Brighton (Peter Kennett and $1,820,000 Bought).

So it’s all about the sellers. The late spring market post Grand Final will be in part determined by the headlines in marketnews.com.au and the newspapers over the next two months. If August and September is all negative headlines and low clearance rates and talk of falling prices then anyone who doesn’t have to sell will again be reluctant to market their homes – and that will again  impact on buyers.

So what are buyers hoping for in this new home hunting season? Choice. Firstly they want some thick property mags in August or September; they want to see some positive headlines in the papers in the lead up to Grand Final; and then they want more thick magazines between Grand Final and Melbourne Cup. If that happens the world should be a wonderful place for Melbourne homebuyers. If not well ….. let’s wait and see.

Published each week in The Weekly Review – Melbourne’s million-plus property magazine.

What is happening this spring after the winter holidays? Hey Mark, c'mon mate! Cheer up -You did sell 27 Rathmines Road Hawthorn East under the hammer with 2 bidders.

At 6pm on Saturday, the James Clearance Rate for $M+ was 48% on the 25 auctions we attended. The Weekly Review Bidderman, our demand indicator, was 1.3 bidders per auction.

This is our last Marketnews summary and auction reporting until Saturday July 30^th. We normally take a fortnight break at this time of the year due to the Winter school holidays, but we have extended it to three weeks due to minimal action in the $M+ Inner East and Bayside market.

Accordingly we have produced our bumper half-year insight on what has happened year to date and what we envisage may happen between now and Santa coming down the chimney.

What has happened on the markets so far this year?

February 19. With clearance rates at 63%, we were thinking this was looking like a healthy balanced market. The $1 million+ was actually looking hottish. But there was little activity on the $3 million+ market, and an increasing number of duck auctions  with no bidders. Overall stock quality wasn’t great and that has been the story all year really.

March 26. Clearance rates dropped to 58%, the first indication that we were moving into a buyer’s market – possibly until Easter and possibly until Spring we suggested. Well, we were right there. The other big issue that portended the future market was the lack of take-up of passed-in auctions from the previous two weekends – just 3 out of 26 had sold over the next couple of weeks.

May 21 saw a surprising lift in the market, with a clearance rate of 84% on the 37 auctions we attended. We certainly didn’t see it coming, but the big difference was the high quality of stock on offer. And buyers snapped it up. As we said though, one swallow doesn’t make a summer. And it didn’t.

June 4. This was the weekend we recognised that this down market was different to last year’s. Last year prices may have been down but there was still lots of activity with buyers and sellers agreeing either at auction or sometime after on a price that was possibly lower. This year the market has been characterised by numerous pass-ins and lots of stales (long term unsolds).

June 18. The wheels of supply really seemed to be grinding to a halt. Clearance rates were 38% but the biggest problems were lack of quality and sellers holding out for unrealistic prices – rather than lack of demand.

June 25. Last weekend saw an uptick in the clearance rate of 58% as an increasing number of sellers dropped their heads back down from the clouds. But, as we saw, it was back down to 48% as we head into the thick of winter.

Consistent Themes of the 2011 Market so far

1. This is a buyers’ market – and basically has been since April last year, 2010.
2. There has been a major contraction of turnover in the $M+ market this year to last year. The A+ sellers have withdrawn and so have the “we also need to buy” sellers. They have become nervous that if they sell now, there will be no good homes to buy.
3. Effectively the market has wound down to a much lower transaction level than last year, initially led by sellers asking prices higher than market, thus reducing turnover. Then as the year has gone on, prospective sellers with A+ homes decided the current market is not for them, reducing turnover further.
4. The underlying market demand is stronger than the stats headlines show. Almost every time we have good stock weekends our demand indicator Bidderman increased (see chart below). Look at the weekends 26 February, 9 April, 21 May and 25 June.
5. Stock overall has been a lot poorer in quality from the beginning of 2011 compared to last year.
6. The key characteristic of price this year has been the stubbornness of both buyers and sellers with regards to movement.
7. Prices continue to improve on selective high quality, well priced homes (yes, it’s true). But this is a very small segment in the market. For many, prices have flat-lined and for lower quality homes the market price has fallen. Overall the market is off by as much as 10% from the last peak in April 2010.
8. Above-market prices are rarely being achieved. So when sellers pass their property in then more often than not they are having to drop their price, wait a long time and go through pain to sell. And even then there is a high chance they won’t sell. In 2011 there is a real risk in sellers going for a big number and not getting any number at all.
9. Stales (long term unsolds) have been building all year. There are hundreds of homes out there that remain unsold and have the potential to negatively affect the market going forward.
10. Selling agents have correctly predicted stock shortages, price corrections and the market gap between good well priced stock and inferior overpriced stock. The market has in fact been predictable if you know how to read the signs.

Buyer Demand weaker, but still there when Quality to be had

 Average numbers of bidders per auction, as shown by our Bidderman indicator above, rarely went above 2 this year. But when stock was of high quality, the bidders were out in force. Clearance rates (below) further supported the argument that there is underlying demand when we have good stock and/or well priced weekends.

On most, but not all, good stock weekends where the sellers have let the market set the prices there has been solid activity. However these figures support the fact, very strongly, that we are in buyers market not a balanced one.

What will happen in Spring?

After a mediocre early Winter market, the question on the minds of buyers and sellers alike is will the market fire back up in Spring?

We asked some quality selling agents to give their predictions.

A number of agents are predicting that we’re likely to have stock shortages again this Spring. Why is that? According to Kay and Burton director Ross Savas, it’s because vendors are perceiving that the market is under pressure, so they are holding off placing their homes on the market till conditions improve.

Is this just false spin to get sellers to act? We don’t think so. Richard Winneke of Jellis Craig for instance reports that most agents are admitting to a 25% volume reduction of high end stock being transacted between this year and last. Balwyn and Kew are down around 20% in overall transactions (not just the high end).

In Bayside Jason Gill paints a similar picture of diminishing turnover but uses a different measurement: “In Brighton in July 2009, 2010 and 2011 we have seen stock on the market go from to 92 to 125 to 150 meaning older overpriced stock is simply not selling.”  What this means, he adds, “is that the stock that comes on in Spring will need to be of good quality and be priced correctly, rather than more of the same, if it is to excite the market.”

As during the GFC, the market has primarily ground to a halt on lack of action and lack of confidence. As with the GFC it will need a kick start of some note (eg Australian Dollar dropping bringing expats and overseas buyers back) to entice WOW and discretionary  sellers back into the market place, thus lifting turnover.

This is where patience presents a conundrum for buyers: if many of us pass on buying in early spring then the late spring surge may not happen at all. And come Christmas time we will still be in a buyers’ market but we won’t have bought. The question is then: how long are you prepared to wait?

For a full wrap of opinions on the Early and late Spring Markets read our Buyer Article section throughout July in Melbourne’s Premier $M+ Home Magazine – The Weekly Review.

So what does this all mean to you the buyer

Smart Buying RIGHT NOW involves:

1. New strategies: You need new bidding strategies at auction. Putting your hand up until you run out can work in a hot sellers’  market, but in a buyer’s market it just means that you are burning cash.
2. Realising that not all sales are at auction:  There are an increasing number of homes sold off-market, prior to auction, as expressions of interest and so-on. You need to have a strategy to keep ahead of what’s out there. And then you need to know how to wheel and deal in these methods of sale – not just to pay the right price but to actually get it, if you want it.
3. Knowing that in this kind of market, you as a buyer may need a new modus operandi. In a hot sellers’ market most buyers are reactive, while in a buyers’ market the best buyers are often proactive. Good homes are still selling well -so when a home is sought after, you may still have to compete as strongly as 2009.
4. Understanding what the Real Value is:  Most genuine buyers are getting the best service they have ever received from selling agents in terms of being told what is out there. How much for all these opportunities? Is 10% on the auction quote or 10% off the sale price the right start point? Well maybe, but there may also be daylight between you and the next buyer.
5. Recognising that Patience is Needed. Patience is the forgotten buyer skill. We are not talking about procrastination, but the ability to wait until you have found the right home that meets your family needs. Just because you can buy now and it’s ‘cheap’, doesn’t necessarily make it your family’s best fit.

IVANHOE EAST, 12 Ravenswood Ave: Going, going gone! Rod Watson (Jellis Craig), under the hammer, $1,059,000, 2 bidders

Biggest Sale: Balwyn, 30 Walsh St, Steven Abbott (Jellis Craig); Under the hammer, $1,992,500, 5 bidders
“An entertaining auction, in a fine setting. Auctioneer Steven Abbott looked for an opening bid but none were forthcoming. Mr Abbott then offered a vendor bid of $1,750,000 to get things underway. The auction did not take too long to get started and there was solid bidding between four parties. The property was on the market at the $1,915,000 mark, and bidding looked almost over at  $1,950,000, when a new bidder came into play. The property was eventually bought under the hammer for $1,992,500.   A good result for vendor and agent alike – this property had been around for some time and although the floor plan itself had some concerns, the Reid Estate positioning underpinned value and ultimately buyer interest here.” (Adam Woledge)

Biggest Pass In: Kew, 34 Macartney Ave, Walter Dodich (Marshall White); Passed in, $3,925,000, 1 bidder
“A sense of deja-vu here at Macartney Avenue: about 3 months ago, auctioneer Walter Dodich auctioned No.21 and today it was No.34′s turn. Both properties fine, modern new homes with all the bells and whistles, built by the same builder. In front of a good crowd of around 120 people, a vendor bid of $3,900,000 was placed and just when you thought this was going to be quick auction, a crowd bid of $3,925,000 was offered. There was no further bidding and the property was passed in at this figure.” (Adam Woledge)

Bidderbuzz Auction: 7 Heathfield Rd, Brighton East, Nick Renna (Hocking Stuart); Under the hammer, $1,625,000, 4 bidders
“Another great Nick Renna auction with fierce bidding, big crowds and a great sale price. A genuine bid kicked off proceedings at $1,000,000 and, while low, it was accepted by Mr Renna before he offered a vendor bid of $1,280,000 (which was closer to the quoted price). Two bidders entered the fray and the price quickly rose to $1,405,000 where it was declared on the market. Bidding continued strongly when, out of the blue a third, strong bidder entered into the competition. The price continued to rise and Mr Renna fielded bids from all three parties before bringing the hammer down at $1,625,000. A great, entertaining auction and a strong result for the Hocking Stuart team and vendor alike.” (Jen Milligan)

We only buy homes

KEW, 34 Macartney Ave: A big crowd of 120 people turned out to watch Walter Dodich (Marshall White) in action. Passed in, $3,925,000, 1 bidder

The big talk on the property market is auction clearance rates: the fact they are well below last year (true) and that they are perhaps even lower than what agents are claiming (maybe).

Last year auction clearance rates across Melbourne were regularly in the 70s percentage-wise. This year they are in the 50s – so it is fair to conclude that this year fewer buyers and sellers agree on price and therefore the market is regarded as weaker than 2010.

But while some journalists and publications are arguing that the ‘true’ clearance rate may in fact be lower because agents do not report every unsold auction, some agents  are arguing that the emphasis on a Melbourne-wide clearance rate is also misleading.

Jack Bongiorno from Marshall White, for instance, argues that while papers like The Age are reporting clearance rates in the 50s, his company has seen clearance rates in the 70s throughout May and June . Andrew James of Hocking Stuart Armadale agrees, saying his office is also seeing clearance rates in the 70s all year.

So The Age is saying one thing and agents another. Well there’s nothing new there.

Who is right and who is wrong – and does it really matter?

Well,  they are both right. And as for whether it really matters, the answer is yes – and no. Is that a splinter I can feel in my bottom from sitting on the fence? Well no, in fact this goes to the crux of what clearance rates can and cannot tell buyers.

According to Andrew McCann of BenMac, clearance rates measure across a very broad number of suburbs, price bands and demographics. “The reality is,” he says, “that some parts of the market will always perform better than others so it is not unrealistic to think that while some areas are soft, others are strong. A good case in point is that our firm sold 11 from 12 Auctions last weekend, while the market returned 56%.”

Scott Patterson of Kay and Burton supports this: “The clearance rate in The Age of 59% is a general rate for the whole of Melbourne and does not reflect what is going on in certain areas.”  Hawthorn for instance has had a clearance rate of 80% for the year so far, which seems a different picture from the outskirts of Melbourne.”

This makes it important for buyers to take Melbourne-wide clearance rates with a grain of salt.

Brad Pearce of Miles in Ivanhoe says that as a buyer you need to be area-specific on clearance rates to ensure you are in line with your market. “Buyers can become too confident with the lower Melbourne wide clearance rates and miss opportunities to buy in their area, where in fact properties are still selling well.”

Hawthorn and Kew, for instance, are currently shining with clearance rates in the 70s and 80s, according to Richard Winneke of Jellis Craig. But next door, Camberwell, Canterbury and Balwyn North have had clearance rates in the 50s so far this year, he points out.

Clearance Rates are wonderful things for analysts and journalists, says Steve Abbott of Jellis Craig, “but they are only part of the story for buyers and sellers.” Kay & Burton’s Michael Gibson reminds us too that clearance rates only represent a few hours within the selling week.

And according to BenMac’s Iain Carmichael: “Some weeks we have shockers and the next it’s a dream, so clearance rates are area specific, very cyclical and not always predictable.”

As a buyer, along with clearance rates, you also need to look at stats on areas, on specific agencies, on different types of homes, price ranges, stock level indicators, Bidderman (number of bidders per auction) and a variety of other measures.

Indeed, while $M+ Melbourne may be down on turnover this year, of the last 10 homes we as buyer agents went after in the last two weeks of May, all were sold quickly (and not all to us). So to our mind,  the late May 2011 “good home” index (describing the kinds of home we go after) had a clearance rate of 100%

The buyer message in terms of Melbourne-wide clearance rates is to understand what they represent and to not limit your research to the changing weekly auction headline number when determining your individual buying strategy.

Printed each week in The Weekly Review – Melbourne’s Million Dollar Plus Magazine

As we pointed out last week, even in a buyers’ market it is still possible to buy badly. You can buy the wrong home for your family, or you can commit the lesser but still significant sin of paying too much for a home.

Why is paying too much a sin?  Because it not only lessens your capital growth going forward but it also puts more of your disposable income towards your mortgage.

What if I promised you a free family holiday in Europe each year for the next 20 years or agreed to pay for you children’s school fees until they have left Carey or Firbank or MLC or Scotch?

That’s what you’d be  losing if you paid $3,200,000 for a home that you could have bought at $2,900,000. Over the life of a 20 year loan you would need to pay back approximately $580,000 or $29,000 per year (after tax) assuming an average 7.5% interest rate. That’s an overseas holiday or fees for two kids at private school.

Paying too much upfront means your capital growth will be lower too. Our investment division has the constant challenge of explaining to first time investors that the price tag of a home is not always the start point for capital growth –  the market value is.

Take the example of paying $2,100,000 for a home that you could have negotiated down to $1,800,000 in this buyers market. If you sold the property in seven  years time for, say, $3,600,000, your capital growth would be 100% if you’d originally paid $1,800,000, but only 72% if you’d paid $2,100,000. Do that a couple of times and the smart buyer gets to keep a free home and the not so smart buyer gets to keep a big mortgage.

Want some more evidence that this is a buyers’ market in which you should be able to negotiate a better price?  Here are three big stats that show the May 2011 million dollar plus market is a buyers market:

Clearance Rates – these have dropped into the 40% and 50% levels at auctions. That means that around half the homes currently up for sale can’t find anybody to agree with the seller on price.

The Weekly Review Bidderman – This stat is derived from the 30 auctions we attend each week. It’s a simple count of all the bidders who bid, divided by the number of auctions, giving a measurement of underlying demand for what is on offer. With Bidderman currently around 1, i.e. an average of just one bidder  per auction, you can see that there aint a lot of leftover bidders for the next home.

Lone Ranger Auctions – Single bidder auctions are currently the most common type of auction, at 1 in 3 auctions. This is why buyers need to be on firm foundations in terms of price.

What those three stats tell us is that there is little group consensus on price right now, which makes it all too possible to overpay.  It also makes it all too possible to miss a bargain. Sellers sometimes get prices too low as well.

Even professionals can get it wrong as this personal story shows: I sold one of my own investment properties during the GFC. I’d bought a ripper little investment in Brighton, but it had put me out of my comfort zone and I decided to get rid of another investment home I’d owned for around 10 years at 13 Durrant St Brighton. It failed to sell at auction (I wanted too much), I got the squeeze and despite everything I knew, because I was emotionally involved I let it go in the $800,000s a couple of months later. If I’d sold a year either side of that, either 2007 and 2009, it would have gone for over $1 million. Shows how much easier and better it is to deal with others than your own.

The point is that this market is a great market to buy in if you have a longer term view, have found the right home and you have a good plan, good strategies and good execution. But you can pay too much for a home in this market and for most of us that doesn’t makes sense.

Printed each week in The Weekly Review – Melbourne’s Million Dollar Plus Magazine

With March auction clearance rates on Melbourne’s million dollar plus properties down in the 50s we seem now to be firmly in the grip of an early winter chill. The average number of bidders per auction is down at around 1.5, and the number of ‘volcano’ auctions with four or more bidders having dropped  from 64 per cent  this time last year to 16 per cent now.

There is now also a significant overhang of unsold stock. Of 26 $1 million plus properties we monitored as passing in at auction in March, only five had sold by the end of the month. That overhang will only add to the further supply of stock coming on to market up until Easter.

For those who can look beyond this frosty spell – and we believe that the factors behind the current lack of enthusiasm may be only temporary – the high pre Easter stock supply is creating great opportunities to buy prestige properties at lower prices or buy a better quality home than they may have expected.

Right now then, buyers’ minds have shifted from panicking about finding a home, to thinking how they can cut the best deal.

But what is the best deal? Is it always about getting a home at a bargain price?

A home should serve two purposes: emotional – shelter and comfort and investment – money maker over the long term.  Cutting the best deal involves understanding what goes into both of those components.

The best deal for a buyer varies according to their own specific circumstances. Your specific circumstances and needs may result in a very different outcome than for me or somebody else.

So our first advice to clients wanting to get the best outcome is to clearly know what they want.

Saving $250,000 off the asking price on a home you don’t like makes even less sense than paying $250,000 more than you have to because you can’t withstand the pressure applied by a selling agent.

Secondly, before you enter negotiations on price, you need to understand what risks you are prepared to take for what rewards.

On a scale of one to ten – with one being lowest price and ten being dream home at any cost – what is your main aim in negotiations:  to buy a specific price or to buy the home? Most buyers end somewhere between 3 and 7 on the scale and that is what we call the individual’s risk v reward scenario.

Thirdly it’s important to remember that saving money is not always the best way to make money in the long run. In this current market it can be relatively easy to knock $50,000 off an overpriced long term unsold (stale). But that price saving may also be an indication of a probable low future price growth on that property. You might be better off in a hot auction, bidding hard against three or more other bidders (proven demand) to buy a home with good land content (which indicates a supply restriction going forward).

Even in a supposedly weaker market some homes can still fly. A mid-week auction on a property at 19 Huntingfield Toorak saw three bidders push the on-the-market price of $6.7 million to a final result of $7.06 million – making for land value at $5000 per square metre. No market weakness there.

So if you’re really keen on a particular property you need to know how much it is realistically worth to others in today’s market. That involves true research (hard work). It means understanding today’s market values on land in the area, what are the replacement building costs, what are the true comparable sales not just the “Red Hot” results.

Yes this is a buyers’ market and there are some great homes to be bought right now. But you can’t start a quality negotiation and cut the best deal for you if your foundations are based on guesswork, inexperience and rumour rather than a plan, preparation and some perspiration.

And remember that this current chill may be just a window – not a trend. It is likely that after Easter some sellers simply won’t put their homes on the market, creating a shortage of stock that may push prices back up.

Printed each week in The Weekly Review – Melbourne’s Million Dollar Plus Magazine

HAMPTON, 56 Linacre Rd: Come on! Just one more! Mark Earle (Buxton) does his best to squeeze every last bid from the crowd. Bought under the hammer for $1,650,000, 2 bidders

Key Points:

• Clearance Rate for quality homes was stronger than our stats show today
• If you went to auction in Brighton, Brighton East or Hampton today you had a good chance of selling with clearance rates 81% (13 from 16). Further down the bay like Sandringham and Beaumaris really struggled.
• Hampton 7 Raynes Park Road with Stephen Wigley Hodges recorded a strong $2m plus result and a volcano (4 or more bidders) – a bit of a rarity for that neck of the woods – $2,204,000.
• Land Price Check with 29 Bay Street Brighton (Bert Stewart of Buxton) selling post auction over $3,550,000 and the final result put north facing (no view) Golden Mile land at over $3,200 per sq metre. That is a steady as she goes price similar to last year Golden mile (no view) buys. 7a Dawson with Nick Johnstone of JP Dixon confirmed this price by selling 762 sqm of irregular land for $2,500,000 at auction – almost identical psqm prices.
• And another $3m+ sale with a strange twist (all non bidders asked to leave) at 40 Drake Brighton (Ian Jackson).

Agent Q & A : How does current pricing compare with the same time last year?

Robin Parker, RT Edgar, Brighton: “The hot topic at the moment amongst many in the market is “what are prices doing”? Well, the short answer is it’s steady. Certainly the less attractive , or the inferior positioned properties, are finding it tough. However if you weigh up the prices of  desirable homes in desirable suburbs in desirable streets,compared to this time last year, then you start to realise it’s  “steady as she goes”. So if it feels right, if the times right, then go for it.”

Scott Hamilton, Buxton, Brighton: “Pretty similar.”

A number of people are calling this current market a Buyers’ Market, with the implication that it is a market that is favouring the buyer over the seller.

That’s a fair call. It is true that the 2011 pre Easter market is not as robust for sellers as was the corresponding market last year or in 2007.

Clearance rates, which are a sign of buyers and sellers agreeing on price, are down; turnover, indicating the number of sales, according to REIV numbers, is down more than 10% on sales this time last year. Bidderman, our indicator showing the average number of bidders per auction, is below what we have come to accept as indicating a strengthening market. As well, supply overhang, a measure of unsold properties, is also increasing.

What does that mean for you as a buyer?

1. You have more choice – meaning that there is likely to be more than one property out there that you would like to buy. Big tick.
2. You do not have the same sense of urgency, or even panic, to act on a decision as you may have had in a racing market. This can lead to better thought-out decisions. Big tick.
3. You will quite possibly not be pushed as hard on price when you are in a one-on-one negotiation with a selling agent. Because, unlike a year ago, the agent quite possibly does not have another buyer lurking in the wings to compete with you, and the vendor is not quite as bullish in pushing for an over-the-odds price – not to mention the fact that the agent still needs to make a living and has seen a few deals go south recently when solid offers were pushed back by an ill-informed vendor. Another big tick.

So, given those advantages of better choice, less pressure and the possibility of better prices – why are more buyers not out there buying?

This is the whole conundrum raised by a buyers’ market. In a buyers’ market the reason conditions are better than ever for buyers is because not as many buyers are buying. As soon as a lot of buyers start buying again i.e. over and above the current supply, then according to Adam Smith’s theory on demand and supply it is unlikely to remain a buyers’ market.

As soon as buyers start to act again in large numbers and with conviction, a buyers’ market in many cases ceases to be a buyers’ market unless an inordinately large amount of stock hits the market at the same time – for example as it did in May and November of last year. (At those times we actually had very active markets and prices were dropping even though large amounts of homes were being transacted.)

More often than not there is a time lag between sellers seeing a market improving and deciding to put their home on the market – thus allowing the market to experience a shortfall in supply when buyers get a wriggle on in the initial stages. Prior to this point quality can drop also off as a number of sellers don’t put their quality home on the market until they are “sure” prices are improving. This creates a supply shortage relative to demand and prices go up. Once sellers see prices go up again, however, they put their homes on the market, bringing supply back into some sort of balance. At that point demand per home dips a bit and runaway prices ease back down again.

But right now we are not seeing a shortage of supply. The quality is out there, so you as a buyer have quality choices, time to decide and prices that on the whole seem slightly less rubbery and explosive than a year ago.

So presuming it’s the right home, and you think the economy will improve and keep your job prospects safe and you need a bigger and better home and the banks are lending – yes it’s a good time to dip your toe in.

It’s all about supply and demand – and the supply is there, while demand has eased – and that is the definition of a buyers’ market.

Just don’t all rush into the market at once – because when you do prices will go up again as they have for the last several hundred years.

Printed each week in The Weekly Review – Melbourne’s Million Dollar Plus Magazine

Manna from Heaven - a bidder! ST KILDA, 124 Argyle St: Adam Guest (Century 21 Wilson Pride): Passed in at $1,220,000 and bought after for an undisclosed amount. 2 bidders.

Key Points:

• There is not a lot of new stock on offer due to Grand Prix interruptions and now we have Easter approaching so lean times for new offerings.
• Nothing approaching or over $2m reported as bought in the last week.

Damian O’Sullivan, Marshall White, Albert Park: “We feel the market is very balanced at the moment as evidenced by the weekly clearance rates. We don’t think the market is biased in any particular way despite a number of exceptional results we have had in recent weeks. Most vendors, whilst hoping for the best result, are prepared to accept market value which represents an excellent opportunity for buyers who are prepared to bid and buy and reap the long term rewards”

New Subscriber System: Over the next few weeks we will  introduce a free subscription model giving you greater access to our council-specific wraps, which include auction results, news, opinion and analysis on a micro level. This subscription model helps us improve your browsing experience as clients or general subscribers by delivering more relevant content to you on the site and in your email newsletter. Sign up by clicking Subscribe at the top right of the website. If you experience any problems as we are testing and implementing this new improved system please let us know at enquiry@james.net.au

STOP PRESS: March, while not huge in numbers, did finish the month with 3 solid mid week $3M+ buys – including 4 bidders at $7 million or better at 2 of them.

• Toorak Ottawa Avenue : Jeremy Fox of RT Edgar – quiet sale off market in the mid $8m’s
• Toorak 19 Huntingfield: Justin Long and Peter Bennison of Marshall White – mid week auction, 3 bidders and on the market at $6,700,000. Bought under the hammer for $7,060,000. James Connell said afterwards that this market was not all bad news and Huntingfield supported that.
• Canterbury 13 Rubens: Jeremy Desmier Fletchers and Tom Ryan, Sold before Auction: Over $3,200,000
• South Yarra – The Caroline Coachhouse – they were looking for $3m ish for a very long time (eg in the years) and now Mike Gibson – Kay and Burton has got it away.

South Yarra 17 Acland St: Gerald Delany. Fairly typical of the market for the slightly overpriced or slightly less than perfect. Passed-In with no bidders and now for sale at POA.

New Subscriber System: Over the next few weeks we will  introduce a free subscription model giving you greater access to our council-specific wraps, which include auction results, news, opinion and analysis on a micro level. This subscription model helps us improve your browsing experience as clients or general subscribers by delivering more relevant content to you on the site and in your email newsletter. Sign up by clicking Subscribe at the top right of the website. If you experience any problems as we are testing and implementing this new improved system please let us know at enquiry@james.net.au

Week Ending 26th March: The Market at this level was fairly quiet this week with the good sales, price wise but not too many of them.

• Templestowe, 9 Edwin: On the market since October of last year with Jeremy Tyrell of Fletchers. Has been bought for in excess of $4,700,000
• Richmond 37 Docker: Ken Griffith of Jellis Craig. Bought at auction, $3,300,000 – $3,500,000
• Hawthorn 23 Lisson Grove: Michael Lui of Marshall White. Bought after auction $3,600,000 – $3,800,000
• Toorak 17 Lansell: Lisa Jarrett of Abercrombys. On the market since December of last year and selling for circle mid $3′s

Armadale 1026 Malvern Road: The recipe was there for a good auction - quality period home on big land - however the market is a different beast from some time ago at this price level and a quiet auction took place with Jack Bongiorno in charge. Opened on a bid of $3,400,000, passed in to that bidder and was bought after for an undisclosed amount. Crowd of 40.

Week Ending 19th March:

Off Markets, Forthcoming Auctions and Expressions of Interest are increasing as market stock levels begin to rise dramatically. However some big sales including a $13,000,000+ in Toorak and a $7,000,000+ in Brighton along with a few other $3m+ buys indicate the market hadn’t completely gone to sleep .

James Tostevin: “Overall a good day. The $3m+ market is hard to read and we are not getting huge numbers of bidders at many auctions;  so there is a case to say the results may be looking healthier than the market actually is – but from a purely stats points of view (clearance rates) today was a good day.”

In Boroondara:

• Balwyn 34-36 Linckens:  (Toby Parker of Hocking Stuart) – a $3m+ auction slotted in for auction this weekend has been bought before.The quote was over $3.7m and if, as we believe, it was bought for close to $4 million then it was a strong sale.
• Kew 41 Victor Avenue: (James Tostevin) – Two strong bidders and sold under the hammer for $4,100,000.
• Canterbury 17a Alexander Avenue: Passed In $3,200,000. No bidders
• Kew 22 Stawell: Passed In $3,000,000. 0 bidders.

In Stonnington:

• 19 Kingston St, Malvern East, Iain Carmichael (BenMac); After auction in excess of $4,600,000
  “Auctioneer Iain Carmichael was in charge of proceedings for this picture perfect home.  A large crowd of over 80 packed in to the beautiful mature gardens surrounding the house, as the sun shone to show this property at its very best.  The initial vendor bid of $4,250,000 didn’t seem over the top given the location of this park-adjacent idyll.  Despite the auctioneer being confident of a sale, no further bids were forthcoming and, after referral to the vendor, the property was passed in. (Debbie McTaggart)
  Footnote: Nobody bid at auction at $4,250,000 but 2 bidders emerged post auction and fought it out afterwards to a price well in excess of the reserve and well in excess of $4,600,000. Go figure.
• Armadale 1026 Malvern: James Redfern of Marshall White: Passed in $3,400,000 and bought afterwards. 1 bidder.

In Bayside:

• Brighton 29 St Ninians: As always, auctioneer Jonathan Dixon opened proceedings right on time and the preliminaries were soon completed. This property has a supreme and uninterrupted view of the Bay from the City to Royal Brighton Yacht Club and the potential for future development was clearly explained by Mr Dixon. Nevertheless, no bids were forthcoming and the property was passed in on a vendor bid of $7,300,000.
• Brighton 18A Martin: Passed In for $3,300,000. 1 bidder.

Labour Day Weekend March 12th: As expected minimal activity over the weekend; well no auctions that is – a heap of new stock was listed to go onto an already over supplied market.

Brighton 2 Shandford: Bought Post Auction for over $7 million or in around $10,000 per sq metre - meaning Melbourne absolute waterfront is amongst the most sought after land in the world. Regina Schmidt and Brian Devlin from Buxton.

On a buying note, the Golden Mile in Brighton is still alive and well with Regina Schmidt and Brian Devlin from Buxton getting 2 Shandford away post auction for an undisclosed amount over $7 million and in fact over Shandford’s other $7 million sale of a few weeks ago. This home had some positives and will possibly be retained but with two blocks totaling around 1400 sqm going for nearly $15,000,000 this shows that Melbourne absolute waterfront has some of the most sought after beach front in the world on a dollar per sq metre basis.

Another quieter one in the Golden Mile just before the long weekend – 11 Kent Avenue (Stan Fisher of Biggin and Scott) – was reported as bought again for an undisclosed amount having been sold only last year for a tick over $4 million. The rest of Melbourne may be a little quiet, but Golden Mile Brighton is relatively hot for land sales (compared to previous years).

In the heart of the Bagel Belt at 85 Lumeah Road Caulfield North (Gowan Stubbings of Kay and Burton) a large block of land (around 1800 sqm) with a tired home on it was sold for an undisclosed amount for over $4 million, under the hammer, having been on the market at $3.5 million – 3 bidders. That makes it number two along with Langdon Road at or over $4m in the last fortnight in Caulfield.

In Stonnington 20 St Georges has been bought for an undisclosed amount. The property had been quietly on the market for some time before a more public campaign this year. The asking price estimate was $12,000,000 to $15,000,000 and it is believed to have been sold in the middle. Andrew Tolson of TBM was the selling agent. We went through it a few times on behalf of different clients and found it to be a home of some class with good light and a nice flowing floor plan – slight negatives were a less than full-sized tennis court and some overlooking at the rear (although it was not significant and, if you lost the tennis court, planting could remedy that). Being St Georges it commanded a premium – although to date its “little brother” down the road at No 10 hasn’t sold at an already passed Expressions of Interest deadline. However, considering the home’s characteristics, it would be hats off to the agents if it got near their $10,000,000 ask, even if it is St Georges.

Also went through 14 Bruce St Toorak late last month –  it has been bought for a reasonable margin over $3,000,000. Again showing the power of good architects and in particular Wayne Gillespie. Difficult block and orientation and a market place that has competition for supply, so this was a good result for an Expressions of Interest campaign and the man that sells a number of these very quietly – Marcus Chiminello.

‘Hoping for $3m in a different market but didn’t quite get there’ stories: In Port Phillip, 7 Pilley Street in St Kilda East, which was originally marketed at an ambitious around $3 million, has been bought for around $2.6 million - Jeremy Fox of RT Edgar. All things considered, this was still a very good result for the area. In Malvern, 5 Gaynor Court with Rob Vickers-Willis got to $2.73 million and a three storey terrace home in Carlton with Anthony Gattuso of AG Property got around the same amount. All solid results.

Overall still a lot of properties on the market at this $3m+ price level that have completed normal auction and Expression of Interest with no result.

Malvern 66 Claremont: Iain Carmichael: Bought for $3,700,000: 3 bidders: At this point, someone yelled "is it on the market?" and the BenMac team hastily retreated inside to speak to the vendor. Upon his return, Mr Carmichael said yes indeed it was on the market and it was here that the bidding really took off. After the price hit $3,625,000, one of the bidders went bang - $3,700,000 - and knocked everyone else out of the competition. A great finish to a great auction

Week Ending 5th March: All the bigger deals were basically in one spot, Stonnington.

Actual Boughts in Stonnington:

• Malvern 19 Hamilton – Justin Long – At Auction – $4,357,000
• Malvern 66 Claremont – Iain Carmichael – At Auction – $3,700,000
• Toorak 9 Ross – Justin Long – Auction – over $3,600,000
• Toorak – 3 Teringa – Andrew(s) McCann and Macmillan of Benmac – post last weeks auction – over $3,500,000 – nearly $5000 per sqm for rear south facing land
• Toorak – 611 Toorak Road – Expressions of Interest – Greg Herman of RT Edgar – $3,500,000
• Toorak – 231 Kooyong Road – James Redfern – Post last Saturday’s auction – over $3,500,000
• Malvern East – 127 Finch St – Rob Vickers-Willis – $3,300,000

Bayside: A Key land Indicator

• 11 William St Brighton with Rod Richardson of Hocking Stuart – $3,100,000 for 1383 sqm of land = $2,241 per sqm for land in central Brighton. Solid and expected result. 5 bidders.

Boroondara: Action at the Top End almost non-existent

• Stock Surge – Large amounts of $M+ stock are hitting the market for pre-Easter campaigns
• 61 Bellett Camberwell has been on the market since July of last year and was sold by Sam Wilkinson of Kay and Burton mid week for $3,100,000.
• The Balwyn formula of big block, new home, big price tag seems to have come to a grinding halt – very few high end new sales. Opportunity?
• Off markets are on the increase.

Port Phillip: The overpriced are as cold as ice in Port Phillip right now. No bites, no action – as evidenced by the pass-ins of yesterday and the first two weeks of this market.

• I went to a Beaconsfield auction yesterday – the offering slightly less than perfect but still a great spot – however the start was a $4million vendor bid and then a $4,250,000 vendor bid. I may have to eat humble pie when the result comes in but for me the four sales on this strip over $4m last year seemed different offerings.
• 49 Howe Crescent, which was advertised in an Expressions of Interest campaign for later this month, sold last week well over its $5m+ guideline for more than $6m (we believe). A very rare large land size at 915 sqm with a double fronted Victorian on it shows the pulling power of large land so close to the CBD in the St Vincent Garden precinct (or just off it). Michael Coen of Hocking Stuart was the dealmaker on this one. Good job.

What are you talking about? - course the market's OK! St Kilda East 239 Alma Road: Phillip Kingston: Bought for $1,500,000: 3 bidders (Photo Kate Agnoleto)

At 6pm on Saturday, the James Clearance Rate on the 31 auctions we covered was 58%.

Bidderman, our demand indicator of average bidders per auction, had a small rise to 1.6 bidders per auction, in part due to four volcanoes (strong auctions) including one 7 bidder auction in 28 Barrington St Kew.

These figures indicate that the market has now cooled – not frozen or falling apart, just cooled. That means we have moved into a buyers’ market, perhaps until Easter and possibly until Spring.

Well-priced homes are still selling. And there have been some surprising above-expectation results, such as 28 Barrington Kew (Glen Coutinho) which sold for $2,230,000 and, last week,Victor Road Kew (James Tostevin) at $4.1 million. But if the market doesn’t agree with initial pricing then it’s a slow, torturous journey to get a result. See our special Pass-Ins and Stales Report below.

This week we also look at the returns of serve on The Economist’s article as the ‘Experts’ hit back against the “Overpriced” headlines of last week.

This Weekend’s Market Summary:

This weekend in most places, except Boroondara, there was limited $M+ stock on offer at auction. The individual council clearance rates we report on in our market wraps could be distorted due to a) lack of auctions and b) lack of overall quality in those auctions. But this is not to imply a lack of stock in general – there are high levels of $M+ stock available across the board and Boroondara in particular is almost awash with homes on the market.

Looking specifically for a moment at Boroondara (Kew, Hawthorn, Canterbury and Camberwell), while this market may be a little out of kilter with the rest of Melbourne in terms of auction numbers, in the past few years it is a market that has shown the strongest resilience against negativity. It was affected by the GST for the shortest time, and has had the biggest price increases since. This weekend too it seemed to have a little oomph and we expect the clearance rate for Boorondara $M+ homes to be in the high 50s to low 60s.

But it does have a fight on its hands right now, with the main demand drivers (overseas buyers) reducing greatly in activity and supply to the market continuing to arrive week after week. Which means that buyers who can look beyond the headlines will find opportunities, and with the right strategies you should be in a position to push back a little against the seemingly never ending sellers’ market.

The next few weeks will be better in terms of auction quality in the top of the Top End in Boroondara. As long as those properties sell and the clearance rates stay stable, and if new stock reduces post Easter, we could move back to a balanced market. But if stock continues to come on in big numbers then the market will almost certainly remain cool with a significant change in demand sentiment.

Most of the $M+ homes on offer that sold this weekend were in the early $1 million range.

Bayside, Port Phillip, Stonnington have been quiet, with only a handful of sales in the post auction wash up from March 19th  and likewise at auction this weekend. In Port Phillip this is understandable as the Grand Prix completely extinguishes the market for almost a month. Why auction numbers are down in Brighton, Toorak and Malvern is not completely obvious – well not to us anyway. April 9th is shaping up as a Super Saturday of some sorts with almost 120 auctions in Boroondara and Stonnington combined. $M+ auctions in Bayside are still light on at the top of the Top End with mainly $1 million to $2 million homes on offer for the next few weeks leading into Easter. Most of the top of the Top End in Bayside is not going to auction.

Agent thoughts: Has the market changed since before the Labour Day weekend?
Chris Barrett, Marshall White, Hawthorn:“There have been a lot of people in the media talking about a negative change in the market since Labour day weekend, I however have found this to be unsubstantiated. As long as vendors prices are realistic and the property is presented well vendors can expect solid interest in their home.”
John Clarkson, Hocking Stuart, Brighton:“Good properties near local attractions and amenities, schools, shopping and the beach are still attracting a high level of enquiry.  Since Labour Day weekend the message is clear: If you are realistically priced you have a very good chance of selling . If you are above market perception, enquiry is reduced to a trickle.”  * For John’s full comments please see the Bayside weekly wrap.

James Special Report: Pass-Ins and Stales – The Autumn overhang build up.

We went back and re-examined all the auctions we reported on this year in 2011 and we revisited all the pass-ins, using still advertised on the net to determine their still for sale status. Please note that the table below is only connected with PASS-INS, not the homes we reported as bought before, at or just after auction on the day.

The table does make for interesting reading on the fate of a home that the market does not consider to be priced correctly at auction.

The table below shows Adjusted Clearance Rates comparing”On the Day” Clearance Rates with “On the Day plus Bought since”. Back in February 19 and 26 Pass-ins were taken up fairly quickly. However the most interesting stat is the lack of take up on Passed-in homes over the last two weeks of auctions: only 3 in 26.

• 1 of the 13 unsolds from the March 5th pass-ins and
• 2 of the 13 from the March 19th pass-ins.

This we feel confirms the view that the $M+ market started the year as balanced, but around Labour Day took a cooling direction.

What's happening Nick? Bentleigh 7 Eddys: Bought $1,312,500: 3 bidders. (Photo: David James)

James Big Issue: Agents claiming there are 100% Clearance rates in this market are just as misleading as saying the market is in freefall – both are far from the truth. Klarity Kris and Architect Adam cover it in the James Big Issue Video. Here is a summary of what they say.

• Still some surprising results. Two in particular, both in Boroondara, that stand out are Victor Avenue in Kew with James Tostevin – which sold for a hard to believe $4,100,000. Nic Franzman, Mark Dayman and Nic Ptak also from Marshall White’s result at 22 Stawell St Kew for $3,300,000. That was also a most surprising result
• We are hearing from agents 100% clearance rates – mainly due to agents feeling they need to respond to the Negativity of The Economist’s article and the Earthquakes, which for the moment have contributed to dampening demand.
• An interesting stat is that only 3 of the 26 homes we reported as passed in after auction in the last two weeks of auctions have since sold.
• We could say that 3 from 26 is reflective of the market strength – a far cry from the 100% Clearance Rate stats, BUT 3 from 26 while true, is also misrepresenting the market just as is reporting 100% clearance rates
• The market was in a balanced state pre Labour Day and as expected it is now going into a cooling phase until Easter due to increased stock levels and drop in demand intensity.

The message for buyers

• You have choice in the $3m+ range but there are still a few surprisingly strong results
• You will still have to compete relatively strongly if the home is good and well priced in that $1m to $1.5m range
• And the middle range say circle $2m to $2.5m is a bit of moving beast – the trend is not crystal clear to us at this stage.

Click on the JAMES BIG ISSUE video with Architect Adam and Klarity Kris in the middle of the home page

Media Monitor: Are Melbourne homes overpriced?

The case for being overpriced arose from The Economist’s article – which we reported on last week.  And now this week the case against those seemingly extreme overpriced by 56% headlines.

Rob Brooker head of economics from the NAB

1. Current events such as floods and Japan are affecting Melbourne short term, but long term our fundamentals are very strong.
2. Not suggesting prices are going to increase rapidly as affordability is hard pressed right now but we do have a shortage of housing stock.

His comments can be found in the excellent Kay and Burton report – sure it’s a selling tool but we listen to the expert commentary each time it’s on It’s well produced, they have credible experts and it’s relevant to our high end Melbourne market. Check it out, at least the expert comment stuff. The home fluff afterwards is up to you: http://www.kayburton.com.au/kayburtonreport

Paul Bloxham – HSBC’s chief economist for Australia and New Zealand, and a former RBA economist savages The Economist’s article stating “it’s too naive to be useful”. His main points in the Business Spectator are

1. We have an undersupply in inner city areas (totally agree with this comment)
2. Our stock is very high quality and has improved considerably over the last 20 years contributing to the increases in price paid (totally agree with this comment)
3. Very strong and improving economy (beyond our level of expertise but sounds good)

For the full article http://www.businessspectator.com.au/bs.nsf/Article/Australian-property-prices-housing-bubble-pd20110317-F24WP?OpenDocument&src=sph This was supplied by Al Craig of Jellis Craig – thank you.

‘Round the Grounds Headlines:
Boroondara- Some solid results but the trend is down under weight of stock numbers.
Bayside- Little movement on a lot of the recent Auction pass-ins
Stonnington- Small numbers of $M+ auctions today – although plenty of Top End non auction stock available
Port Phillip-With the Grand Prix – only 4 key $M+ auctions – 3 sold
More detailed analysis on our Weekly Local Council Market Wraps

Biggest Sales we can report:

• Templestowe, 9 Edwin: On the market since October of last year with Jeremy Tyrell of Fletchers. Has been bought for in excess of $4,700,000
• Richmond 37 Docker: Ken Griffith of Jellis Craig. Bought at auction, $3,300,000 – $3,500,000
• Hawthorn 23 Lisson Grove: Michael Lui of Marshall White. Bought after auction $3,600,000 – $3,800,000
• Toorak 17 Lansell, Lisa Jarrett of Abercrombys. On the market since December of last year

Biggest Sale we covered after auction: 44 Mary St Hawthorn, Antony Woodley of Marshall White. Above $2,700,000 (Undisclosed): Bought after auction, 1 bidder

Biggest Sale we covered under the hammer: 28 Barrington Ave, Kew, Glen Coutinho (Hocking Stuart), Under the hammer $2,230,000, 7 bidders (WOW)
“This Kew property did attract a crowd of 80 people, with quite a few potential buyers in the mix. The auctioneer, Glen Countinho, had to field bids from a whopping seven different bidders! Despite the light rain, the flow of the auction was quite amazing and reached the final amount of $2,230,000 before the hammer came down.” (Sonia Matmati)

Biggest Pass In: 68 Studley Park Rd, Kew, Passed in, $3,700,000
“A very pretty setting for an auction. Standing on an elevated embankment, auctioneer Richard Earle literally oversaw proceedings. He began by highlighting the virtues of this property with energy and detail. No bids came forth, however, so it was passed in for $3,700,000.”

Auction Video: This week i’ts down to Brighton with Klarity Kris at 22 Oakwood Ave, a Hocking Stuart auction with Peter Kennett. Click on the live action.

Please Note: we always ask permission to film and we always show respect at each auction. We also never video at an auction we are bidding at. If you are at an auction and don’t wish to be videoed, there are designated no-video zones. See our co-workers or ask the auctioneer.

Buyer Master Class: Klarity Kris discusses what’s necessary when buying a home when there are kids in the picture. Is it double storey single fronted or single storey double fronted!

Copyright: Mouldy Bread Picture from ChemistryWorldBlog.

We Only Buy Homes

SOUTH Yarra, 17 Acland St: The maestro, Gerald Delany (Kay & Burton) in action. Passed in, $3,250,000, no bidders.

Key Points:

• Toorak 17 Lansell with Lisa Jarrett of Abercrombys sold mid week after being on the market since late last year
• Toorak 16 Cole St with Nicole Gleeson of Kay and Burton sold mid week after being on the market since late last year

Agent Q & A: Has the market changed since before Labour Day weekend?
Lachlan Fraser-Smith, BenMac, Armadale:” The main change in the market since Labour Day is that the quality of buyers at open for inspections is very good, however the numbers of people through opens has slowed after a busier than anticipated start to the year. The reasons for this are: as the year settles down after a typical February spike in prices, people have found out at open for inspections and attending the early auctions what they wanted to know about prices and have assessed the market and either go to auction themselves or sit still and stay where they are. Numbers of properties on the market has increased as well but there are still some very active buyers out and about so they quality of buyers is certainly still there. We have been seeing some very strong results between $1 million and $2 million in Armadale and between $3 and $5 million in Malvern and Malvern East.  We will see a reduction in properties coming onto the market going into the traditional Easter, Anzac day and school holiday period. This will, I believe, underpin the market for the homes that come on post Easter in May.”
Iain Carmichael, BenMac, Armadale:“The Stonnington market in recent weeks has performed well given slightly diminished bidding activity at many auctions. Pleasing elements from a vendor’s point of view is that sales are being made and that clearance rates in Stonnington continue to exceed the Melbourne-wide figures by up to 10% each week end. The trend for buyers to hold off bidding is puzzling as the great majority of properties auctioned are still sold for solid prices at or immediately after auction.  Stock levels are reasonably full and the market will test both vendor expectations and buyer depth in the weeks leading up to Easter. It will be interesting to observe whether buyers will continue to run the gauntlet and back themselves into post-auction negotiations and, in some cases, private auctions or whether the true transparency of the auction system will give consumers sufficient comfort to bid with confidence and buy ‘under the hammer’ or become the highest bidder to gain an exclusive seat at the negotiating table.”
Andrew Hayne, Marshall White, Armadale:“No I don’t think things have changed too much. The market has been pretty price sensitive for a while now, so provided vendor’s expectations are in line with the market then there shouldn’t be any problems selling. I am a big believer in each property sets its own market so each one has to be treated on an individual basis rather than generalize about market conditions or sentiments.”

ARMADALE, 2 Avondale Rd: Warwick Anderson (RT Edgar), Passed in, $1,950,000 no bids.

CAMBERWELL, 6 Tyne St: Jason Scillio (Kay & Burton) does his best to sell "the big home on the big block" but to no avail. Passed in, $1,800,000, no bidders.

Key Points:

• Boroondara has a lot of stock on the market and waves are continuing to arrive each week – the indicators do clearly show a dampening of market demand under weight of numbers, almost identical to May of last year. However these results do not show the market is significantly dropping or without some strong results.
• Surrey Hills was a great place to be a seller this weekend with 6 from 6 bought over a million dollars.
• 28 Barrington Kew – Glen Coutinho was huge (in our mind) drawing out $300,000 more than our best guess with 7 bidders – so what do we know. Wow.
• 23 Lisson Grove Hawthorn was reported as bought mid week for in excess of $3,600,000. Michael Lui of Marshall White
• Our Video Auction of last week at 36 Uvadale Kew with Richard Winneke has been sold post auction for $1,940,000
• Many passed-in properties are struggling in the weeks after auction.

Agent Q & A: Has the market changed since before Labour Day weekend?
Duane Wolowiec, Marshall White, Hawthorn:“The market seems relatively active in terms of overall numbers at opens and auctions. Having said that, I feel buyers are still a little cautious during the auction itself. Some are preferring to approach us post auction to discuss their further interest in the property if the property is in a pass-in situation.”
Jeremy Tyrrell, Fletchers, Balwyn North:“(Since Labour Day), clearance rates are very healthy in view of increased stock levels.”
Tim Heavyside, Fletchers, Canterbury:”The market is a bit of a ‘roller coaster’ ride for vendors at the moment.  With the volume of properties available prior to Easter, the buyers have a fair amount to select from. Hence we are starting to see a tougher market.”

ELWOOD, 44 Broadway: Sam Gamon (Chisholm & Gamon) looking a little concerned. Passed in $1,370,000, no bidders.

Agent Q & A: Has the market changed since before Labour Day weekend?
Kaine Lanyon, Marshall White, Albert Park: “We haven’t noticed or sensed any change in the market since prior to the Labour Day weekend.  The overall market appears to be quite well balanced. That is, well and fairly priced property is transacting consistently, however the over priced property is passing on and only transacting once the vendor aligns their expectations with where the market is actually at.  The fact remains that smart sellers are meeting the market and achieving very good results.”
Sam Gamon, Chisholm & Gamon, Elwood: “The results since before Labour Day weekend have been consistent with the preceding weeks in the lead-up.  This weekend will tell the story in terms of clearance rates and we remain extremely positive as several properties have attracted prior offers & demand is strong providing the fundamentals and selling strategies are correct. Properties priced correctly and supported with clever marketing are attracting competition. It’s imperative vendors choose to work with agents who thoroughly research price and provide justifications and reasoning. Presentation also plays a key role & buyers will always look for a point of difference.”

BRIGHTON EAST, 77 Comer St: It looks like every man and his dog was at this Brighton East auction; but everybody came to just watch. Stewart Lopez (Kay & Burton) passed the property in, no bids and a crowd of 65.

Key Points:

• The level of market softness outside the heart of Brighton surprised most
• Brighton 29 St Ninians: Passed in on a vendor bid of $7,300,000.
• Brighton 18A Martin: Passed In for $3,300,000. 1 bidder.
• On a buying note the Golden Mile in Brighton is still alive and well with Regina Schmidt and Brian Devlin from Buxton getting 2 Shandford away post auction for an undisclosed amount over $7 million and in fact over Shandford other $7 million sale of a few weeks ago. This home had some positives and will possibly be retained but with two blocks totaling around 1400 sqm going for nearly $15,000,000 this shows that Melbourne absolute waterfront has some of the most sought after beach front in the world on a dollar per sq metre basis.
• Another quieter one in the Golden Mile just before the long weekend – 11 Kent Avenue (Stan Fisher of Biggin and Scott) was reported as bought again for an undisclosed amount having been sold only last year for a tick over $4 million. The rest of Melbourne maybe a little quiet but Golden Mile Brighton is relatively hot for land sales (compared to previous years).

Agent Q & A:“What is your take on the Economist’s article that Australian house prices are overvalued by 56%?”
Sam Paynter, Hodges, Brighton:”There is a great report by economist Paul Bloxham called “House prices are high but we shouldn’t fear a bubble” in which he says that yes, house prices are high, but for good reason. One is that the quality of the housing stock in this country is high. Secondly, well located dwellings are in limited supply, and thirdly public transport from outer suburbs in the country’s major cities is generally of low quality, limiting the distance people live from the city and lastly that there is a lack of affordable land at the fringes of the major cities, thus increasing demand for inner city properties. He goes on to say that with strong prospects for the Australian economy we can expect housing prices to continue to grow at a modest rate and that the risk of a sharp fall in housing prices was low. I think that says it all.”
Jenny Dwyer, Hocking Stuart, Sandringham:”The view of ‘The Economist’ that house prices are overvalued by 56% may be accurate in certain geographical locations across Australia, however it does not apply to the Melbourne residential market particularly in blue chip areas such as the bayside suburbs.  The consistent pressure being bought in bear in this city in terms of migration to Melbourne reflects a high level of interest to acquire real estate that is centered around transport hubs, schools, shops and in the case of the bayside suburbs an enviable lifestyle to match. As the saying goes “they’re not making any more land” and whilst we are seeing more stable market conditions across the market place we continue to see strong buying activity across all pricing spectrums and this shows no signs of abating in the forseeable future.”