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.

Middle Park, 51 Mcgregor: three bidders: Bought: $2.27 million. Auctioneer Andrew Stuart, Mr Albert Park, is like a classic rock star, passionately belting out another number for the crowd.

It is 6pm Saturday and the James Clearance Rate for million-dollar-plus auctions is 74 per cent on the 19 auctions we attended and reported on today.

What effect did the interest rates have this weekend? Nil. The only thing we noticed was a few more bought befores, maybe meaning a couple of nervous vendors.

We saw 51 bidders for the 19 auctions. Bidderman is at 2.3 bidders per auction, which it has been steady at all through September. Two auctions had six bidders or more; both in the $1 million price bracket. We saw a Rosanna home sell for more than $1.4 million. Suburbs such as Caulfield South, Carnegie, Bentleigh (mortgage belt testers), which were $1 million ghost towns during 2008, are now back into $1 million-plus deals fairly regularly. So, in summary, we saw no real change from September today and right here and now the market is still hot. Most of pass-ins from today were because of vendor price, not lack of demand at a level.

The Chinese times are a-changing

We have talked ad nauseum recently about the Chinese factor. Why? Because it has been the single most dominant reason as to why the market has done what it has done for $1 million-plus homes in 2009. You can have limited supply but you still need demand to buy that limited supply. And that demand and our recovery was led by Chinese homebuyers.

The FIRB rule changes did not bar people from Iceland or America from also buying, but they were not. Up until recently, 25 per cent of homes in Boroondara were being bought by Chinese people and it was a huge factor to manage around as buyer agents.

However, will the China-led recovery continue? What happens if Chinese nationals move out of the $1 million-plus market? We have definitely felt a drop-off at the higher level in Chinese interest and this recently has allowed us to buy some properties that we thought we would miss (and, in fact, a few months ago we would have missed them).

Why is that and why is it important? Well, first, if Chinese interest is, or has, dropped off, then it is very important – to use a new buzzword – to recalibrate our thoughts on land prices and, even more importantly, to not overestimate the nature of our competition in pre- and post-auction negotiations.

Are you still really surrounded by competitors at a pre-auction best offer in sale?

Maybe the fear generated by a selling agent saying We have Chinese interest in this home will be not quite as frequent (or even believable) when you look at the sums one of our clients supplied to us. And please note that Chinese fear is only money-related. Chinese, American, Norwegian – bring their skills in – we are a multicultural society and far better for being so.

But things are changing – we thank our client, Adrian, for supplying these notes to us for Market News.

Mal, some numbers to demonstrate what I think will happen with the Chinese effect on Sackville Ward Kew and other Melbourne prestige properties:

April 2009: $4 million house purchased costs Chinese buyer US$2.75 million (AUD$1 = US$0.65-0.70).

October 2009: Identical house next door sells for $4.65 million as market moved upwards and costs Chinese buyer US$4.25 million (AUD$1 = US$0.91, up 30 per cent), as the dollar has also moved upwards.

Many of us would struggle to accept a US$1.5 million increase in six months.

Also, the buyer of the house in April is:

• happy, because he has a paper profit of US$1.5 million; or
• thinking of trousering the US$1.5 million.

Chinese buyers of land are now also facing building cost issues.

The buyer of a block in Sackville Ward such as Ross St and Mountain Grove may be thinking twice about their earlier actions.  Many Chinese buyers have been buying land in the Sackville Ward and a block-buyer who paid $1.5 million for the land may have also signed on for a AUD$2.5 million build in April thinking it was going to cost him or her US$1.65 million. Not having paid anything to the builder yet, it is now up to US$2.25 million and he or she has not even enjoyed the variations stage of building. The build costs may run US$1-1.5 million over expected costs.

The rise of the AU$ will dampen some Chinese demand, just like the fall from US$0.98 to US$0.64 fuelled that demand when the FIRB opened the gates.  At AUD$1 = US$0.91, the new Chinese interest will suffer as, in US$ terms, our property market is now expensive.

My thoughts only, but, in my business, I deal with a lot of Chinese people and they, like us all, dislike price hikes!

Alternatively, if the pull to buying a home near a childrens school is not quite as strong as April, especially with the rising building cost scenario, then maybe we will see homes coming back onto the market as a canny or lucky Chinese buyer sees a 30 per cent profit in US dollars in six months.

No, markets never stay the same.

Negotiation 101

Here are some thoughts and tactics of some people:

• Hey you! Take this offer or stick it up your jumper.
• Na, it is my final offer. I have got no more, now get lost.
• You are a slimeball and I have not got any time for you. Do not ring me.

These are three brilliant negotiation lines to use with those bastard selling agents – not.

Pricing – look, do not worry about other sales or due diligence. Some people find the best way to work out value is to get the agents true price – you know, the one they only whisper to you, and then take off $25,000 or add 18 per cent or something.

Rapport – who needs rapport? He or she is just an agent. Why bother wasting your time getting to know them, why listen to what he or she has to say? After all, they are just there to sell the home. I have got a stack of other things to do, like look on the internet.

No, just go straight in on your first million-dollar deal and offer a strong amount, say $150,000 over the ask (you have read the market is hot on all properties and Uncle John told you that as well), and see if that rattles the bones of a Rae Tomlinson of Marshall White or Ross Savas of Kay and Burton. You know; see if that scares them. And save your $7 and 30 minutes of your time by buying Damian Davis from Jellis Craig a coffee: just shout your $2.275 million offer down the phone to Jeremy Fox of RT Edgar when you ring up without any warning.

Better still, demand to buy it beforehand and scare Geoff Hall from Noel Jones with a two-hour deadline threat! He will never have heard that one before.

You have got be tough with these pricks, some books and news articles say. Show em who is boss, eg try that with John Holdsworth from Hocking Stuart or Justin Long from Marshall White and, while you know they have done this for years and sold to many people, how hard can it be? Anybody can pull off a deal. It is like … like cooking – we have all got abilities to make a meal. Anybody can be a masterchef!

Here is some more Negotiation 101 good advice: I think the biggest thing to remember when dealing with people is that these selling guys are not like real people and that personally as a buyer agent I am always happy to go that extra yard for the guy that not only hates my guts but tells me that as well – so I am sure this strategy would also work for selling agents. I am sure that would be a real winner with James or Hamish Tostevin – not.

We do not understand why some people take this approach with good quality agents like Bert Stewart of Buxton or Jenny Dwyer of Hocking Stuart – it just does not work. Agents are people and should be treated with respect, just as buyers are people and should be treated with respect by agents. Sure, some agents do not get it, just like some buyers do not; but have you ever noticed that many of the $1 million-plus homes that are high quality and  sensibly priced - you know, good homes that you want to buy - seem to be listed with mainly one or two key agents in each precinct? Hmmmm – better get to know them, maybe even listen to them.

If you have just told an agent you hate agents and then ask for their help in buying a property, why would they go out of their way? Many quality agents actually still do, but not because you have scared them. They do it because they are professional, work for the vendor and feel you sound like a wood-duck (overpayer, poor people skills or bad decision-maker). However, it must get harder each time you profess your complete disdain for them.

Selling agents have been in this game a lot longer than many buyers, so it is pretty difficult to put one over them, despite what some people might think. Do you really think you are going to outsmart Gerald Delany of Kay and Burton or Peter Bennison from JP Dixon.

But, sure, keep trying to win instead of buying. Eventually, you will win but probably not on the home you should have bought. Footy trade week is a classic – there are clubs there trying to only WIN on the trades; even to the point of missing out on a player that they really needed. Many homebuyers are like that.

If you think buying homes is at all times mutually exclusive from personal relationships then ………actually we wont waste our time.

We still truly believe that most dealmaking happens through:

• a personal connection,
• some level of truth, and
• some form of win-win

but maybe we are naïve – maybe we have fallen into their cunning trap.

Buy well

Mal

Eureka Tower, Melbourne

Firstly you must realize that buying an apartment is not the same as buying a house. After going through all your options regarding lifestyle, location, investment options and finally deciding that you want to buy an apartment then it’s time to start going through all the issues that you have to consider.

If you’ve bought a house before and you think you know what to do then you’re in for some surprises because, although many of the issues are the same, there are also lots of new things to trip up the first time apartment buyer.

With a house, most people have heard of the many issues which can cause problems and with proper investigations these cam be resolved however buying an apartment may bring up issues you’ve never thought of before. The location, the views, the layout, the kitchen, the pool and gym and the feel of the lobby when you walk in are all the things that you first fall for but there are important things which you don’t see and, if you’re not careful, these can quickly become far more important than that lovely Italian restaurant just around the corner.

A major difference to buying a house is that your apartment is part of a building, which you are buying a share in and this makes things very different. The Owners’ Corporation (previously called the Body Corporate) is the entity which is responsible for all the common areas of the building and its smooth operation is vital for you to have an enjoyable and relaxed life in your apartment. It is important that you know that you are essentially joining a club when you buy an apartment and it can be a very good or a very bad experience. You should carefully study recent minutes (they should be in the Section 32 in the Contract) and investigate the issues and how they are managed as it is essential to ensure you are not walking into a minefield.

Heating, cooling and insulation are also big issues which you won’t get to understand by walking through the apartment and expert opinions may be needed. Rubbish removal, security, parking, visitors’ access and all sorts of other matters also have to be looked into or you could regret your purchase soon after moving in.
On-going fees and charges have to be paid on an apartment and these are quite different to a house because the cost of all the facilities in the building have to be shared. It is great to have a full time manager and caretaker, swimming pool, gym, high speed lifts, constant temperature air conditioning and all these things which make living in an apartment so attractive but they have to be paid for so check you know what your costs will be when making your decision.

One other major issue which is often not discussed at purchase time is the value of your apartment as an investment. Whether you are buying as an investment or as your home this is a major issue and, just like houses and neighborhoods, there are some buildings which are not good investments and this is where it is important to get good advice. No one can say why some properties go up in value enormously and others don’t but you can guarantee that the apartment which is flawed on day one will not appreciate well because the next owner can’t knock it down like they can with a house.

We have a 50+ point check list for apartment buyers. After going through this you may find that expert advice may be needed to make this an enjoyable experience.

Overall another very negative weekend for auctions evidenced by the fact that only 2 sold from the 16 we attended as a group. The clearance rates at auction for $1m+ homes is nowhere near the reported overall low 60′s % of the last month.

Our comment on the market is that is has dropped another 5 to 10% in the last 3 weeks on top of the earlier drop of 10-20% in March and April.

Depending on your nature this is either a half empty or half full glass situation. If you are a half glass full kind of person, then there are opportunities out there. As the upper end market contracts now, it comes closer to the lower end now. If you are buying and selling in this market and you have the right advice then you should be able to trade up on a better overall deal – providing of course you do have the right advice. Meaning in Sep 2007 the price difference between the top properties and the median ones was a lot greater than it is on July 2008. So you may have had a changeover of $1 million in Sep 2007 and that changeover could well now be as low as $500,000 July 2008 for certain properties. Of course this is anecdotal and you do need some luck as well as the good advice. Some homes are still attracting multiple bidding and the drops have been nowhere near as great as made out in the previous sentence.

Peter Sinclair in his Show Me the Money Section begins his series today on the facts and fallacies (read traps for young players) of hot spotting (trying to pick the next hot areas) based on previous short term median price increases.

We are now beta testing some new features and formats on this ratings site and any feedback is always appreciated to enquiry@mjba.com.au

We would also like to thank the 30 Bayside agents who attended an information and explanation breakfast midweek at our Brighton Office. We will be having 2 more information and explanation breakfasts for Stonnington and Boroondara agents over the next few weeks.