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

ALBERT PARK, 59 Reed St: Three, two, one - sold! Michael Szulc (Cayzer) sells after auction for $1,370,000, 1 bidder

Matthew Young, Buxton (St Kilda): “The weekend of the 21^st and 28^th of May are looking to be Super Saturdays.

BRIGHTON, 6 Bolton Ave: Steve Tickell (Hocking Stuart) studies the crowd before passing the property in on a vendor bid of $3,200,000.

Key Points:

• Little movement on a lot of the recent auction pass-ins
• Brighton 32 Bay, Regina Schmidt and Brian Devlin – the unit site cnr of Bay and St Kilda was bought for $2,875,000 – before auction.
• Brighton 50 Martin with Nick Johnstone of JP Dixon, sold mid week
• Brighton 6 Bolton Avenue broke that Hampton Golden Triangle run of big auction results in the area – but stay tuned

Agent Q & A: Has the market changed since before Labour Day weekend?
John Clarkson, Hocking Stuart, Brighton:“We are  currently operating in normal market conditions. It is certainly not boom or bust conditions with properties achieving not runaway but realistic results. It is a price driven market for buyers. If vendors are not on the same page, quite simply, the buying market is prepared to walk away. The last three auction weekends have been full of activity . Two of the three weekends have been very positive with last week in Bayside being flat. Stock levels are manageable at this stage . It is unlikely to increase significantly prior to Easter. Buyer enquiry remains steady. It is interesting that for the first time for an extended time, economic forecasters are predicting a potential fall in interest rates next month. That would be a significant influence on activity as we are operating in an interest rate sensitive market.  The $2 million plus market is a tad more reserved. Good properties near local attractions and amenities, schools, shopping and the beach are still attracting a high level of enquiry. However, the buzz word still remains with offers on properties. Many times the  purchaser’s first offer is often the best.  There are some high profile vendors who are still bemoaning the fact they have let a ripper offer go South. The next  party (second highest interested party) is often daylight away.  That is something buyers and vendors are becoming increasingly aware of.  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 at trickle.”
Stan Fisher, Biggin & Scott, Brighton:“I think it is a bit flukey at the moment. At one point, it didn’t matter if a property had something slightly wrong with it. For example if it was near a train line or had an unusual floor plan. But now that’s really not the case. I mean properties right next to the beach will always sell, but at the top end – between $2.5-$5million, there’s a lot of houses that have been on the market for a while now.”

ST KILDA WEST, 54 York St: Jeff Cayzer (Cayzer) looks for bids but has no luck. Passed in $1,775,000.

Key Points:

• Port Phillip the star performer today and especially solid in that early one million bracket
• Bidder depth would be best described as shallow except for the Volcano (4+ bidder auction) at 76 Blessington St St Kilda with Greg Hocking – see report below

Agent Q & A:“What is your take on the Economist’s article that Australian house prices are overvalued by 56%?”
Matthew Young, Buxton, St Kilda:”The question that needs to be asked when reading this article is, are you a pessimist or an optimist? - as your attitude on life and or investment strategies will directly reflect your opinion and outlook. Isn’t there an age old adage “property prices double on average every 7 to 10 years”? This saying has been around well before the late 1990’s when it was suggested by Mr Minack that the bubble had started to inflate. We all know and accept that the market provides no guarantees with financial returns but we are still willing to invest.  Why is that?   Facts don’t lie, some things just don’t need to be overanalysed and simply accepted for what they are.  For as long as I know or care to remember, regardless of any peaks or troughs that the market may provide that it rebounds in time.  Always seek out professional when looking to invest, do so wisely and understand that there are always risks involved. If you read this article with a pessimists approach the only place you would invest your money would be under your pillow……”
Karl Gillon, Buxton, Albert Park:”I recently heard Michael Blyth (Chief Economist for CommBank) speak at a conference where he indicated that some could analyse the data that way. However, debt ratios are higher than in previous years and that’s not concerning as more people are used to living with bigger debts nowadays. I think the way we live now is much different to how they lived in previous generations. Look I think if we’ve weathered the storm of the GFC, all the economic fundamentals are in place and demand for property in Australia is strong so I think we’re in a good position.”
Torsten Kasper, Chisholm & Gamon, Elwood, Black Rock & Port Melbourne:“It is our opinion that the recent statement, that property prices are 56% over priced, appears not to take into account that the growth that the Melbourne market  has had in recent years has been consistent with long term trends. The last five years have shown that growth in the apartment and housing sector has sat between 50-61% respectively since 2006. On an annualised base, this growth is reflective of far longer property trends and simply represents a growth rate of between 10-12.2%. In this time, there have been quarterly adjustments of spikes and declines reflecting appropriate responses to the confidence of the market at any given point in time as a result of  interest rate and economic forecasts. Given that Melbourne is experiencing a housing approvals boom, it would not be surprising to see some mild softening in some sectors and suburbs in the short term. Our belief is that the market has become more predictable in most segments and those properties priced correctly are still generating competition. The old adage is even more relevant – it is wise to buy and sell in the same market. From the longer term prospective, despite migration numbers slowing ,the figures are still historically high. The demand  based on the  new arrivals and localised demand for inner suburban property gives us confidence that the outlook  for Bayside property should remain positive in the medium to long term.”

BRIGHTON, 33 Middle Crescent: Jason Swift (Hodges) - a great auction and a great result. Under the hammer, $4,300,000, 3 bidders

Agent Q & A:“Do you feel there is currently a big difference in the results of sales of lower end ($1m) properties as opposed to those of higher end ($2m+) homes? Yes or no, and why?”
Nick Johnstone, JP Dixon, Brighton:“The strongest market at the moment seems to be the $3m+, while the hardest is the $2-$3m. I think it’s because the (high end) properties and both highly sought after and they are tightly held.”
Errol Driver, Hodges, Beaumaris: “It’s probably true to say the result is driven by the quality of the property being offered. However a constant cry from buyers when we are discussing $2m plus homes is that they would rather buy closer to town (Brighton for instance). In general terms, buyers in Beaumaris seem comfortable paying up to $1.7/$1.8m but are expecting something pretty special for their money. Finance has become a bit more of an issue since the last interest rate rise in November and people are more cautious about committing their maximum dollar to a purchase. Overall, sales activity is considerably slower than pre Xmas.”
Halli Moore, Buxton, Brighton:”The market appears steady across all ranges. Buyers have taken some confidence from the stability of interest rates. It’s too early to call how the market is going – let’s look at things at the end of the quarter, say Easter, and decide where the market is going then.”

THE LEOPARD: Auctioneer Jason Scillio watching, thinking, testing, watching. 1 Stawell Kew bought afterwards for an undisclosed amount. 2 bidders.

At 6pm on Saturday the final James $M+ Clearance rate for the year on the 35 auctions we covered was 69%. You may be interested to remember that back in our first Marketnews report for 2010 it was 83%. Those figures point to the year that was.

Bidderman, our demand indicator, was a strong 2.1 bidders per auction – which only confirms what those in the market know: we have had a bounce and that while the hot market has continued to cool, it has not lost all its warmth on the good homes. Our first market news in February 2010 had Bidderman at 3.0.

This Weekend’s Market:
This weekend the market continued its bounce which began two weeks ago. Bidders were there to meet those sellers who chose to meet the market. They were even prepared to fight a little harder than they were in October. Maybe it’s the need for buyers to be in a home by Christmas or maybe it’s the need for sellers to have money in the bank at Santa time – or probably a bit of both, which is normal for this time of the year. The market was in a bit of trouble a few weeks ago following Super Saturday and something had to give. And something has: sellers have given. Which is why the market has bounced in the last fortnight and is looking healthier. Sellers are now pricing their homes to meet the market. They are listening to their selling agents and they are getting the job done. In return buyers are responding, especially when a good home is placed on the market at a reasonable price. Yes, that reasonable price is 5% below September’s reasonable price and maybe 10% below April’s. But it’s still about the same as this time last year and that is how the market works. It goes up and it goes down and it does that every week on every type of property in every type of market. It’s just the median price stats and some media commentators which encourage the uninitiated to think property is a slow moving beast. It’s not. Footnote: over the long term the property market goes up more than it goes down.

Meet the market – what does that mean?
While our focus is homes over $1 million, many of our purchases are over $2 and $3 million. We also have an investment division – headed up by Valuer David McMillan. This weekend we witnessed a great example of a product that met the market and one that didn’t. They were a kilometre apart and finished around the same price – circa $850,000. Both had competent agents managing their campaigns, both have 2 bedrooms.

• Home 1: 1/45 Thanet Street Malvern with Tim Bennison, had 7 bidders and sold for $880,750.
• Home 2: 102 Sutherland Road Armadale, had no bidders and passed in on a lone vendor bid at $850,000.

The market embraced one home and completely rejected the other.

What to do now?
With basically one weekend of auctions left and two weeks of private sales and off-markets, you basically have around ten more sleeps to find what you want – or sit back, relax and wait till just after Australia Day 2011 for a burst of new stock (hopefully).

Try and make good decisions not emotional ones. If you have to rent then so be it, it’s better to rent than buy badly. But good decisions also involve reading the market and it has stepped up a bit so we do not recommend being too cute on price. Sure, don’t overpay, but don’t be too cute either.

We have bought eight homes in the past eight days – five of them outside the auction hammer. Highlights include the purchase of Munro St Armadale post auction, Kyarra Street Sandringham off-market, and Avenue Road Camberwell before auction. As well we have had solid new enquiry. So internally and externally we are seeing market indicators that point to a bounce. As we at Marketnews leave you for the year we think the market could well be in a healthier and more sustainable shape than it was when we first reported to you in 2010, just 10 short months ago. Let’s hope that is good news for 2011.

Auction in a Garden: Tim Derham, a rose amongst the thorns, passes in to the third bidder for $2,970,000, 4 Mathoura Toorak.

$3m+ market

While the highlights point to a number of successes in the $3m+ market there have also been a number of pass-ins. Which suggests that this market too is cooling or cooled and now seems balanced and healthy and this week has a bit of pep again.

This Weekend’s Highlights:

• Brighton 4/23 St Ninians, Stewart Lopez  Bought at auction for $4,825,000
• Balwyn 32 Stephens, Maurice Di Marzio, Bought under the hammer for $3,800,000 – 4 bidders
• Armadale 17 Denbigh, Justin Long, Bought under the hammer for $3,890,000 – 4 bidders
• Balwyn 12 Knutsford, Tim Derham, Bought under the hammer for $3,520,000 – 4 bidders
• Kew 1 Stawell, Gowan Stubbings, undisclosed Bought after – 2 bidders
• Kew 3-5 Rimington, Scott Patterson, Bought After above $3,650,000 -  2 bidders
• Malvern 376 Glenferrie, Iain Carmichael of Benmac passed in $4,300,000 and bought after $4,415,000 – 0 bidders

Off Market

• Hawthorn 26 Fordholm, Michael Armstrong, Over $5,000,000

Not so Highlights:

• Canterbury 34 Maling, passed in $4,600,000
• Brighton 29 Sussex (this seems to be for sale each year), passed in for $3,350,000 – 0 bidders
• Middle Park 280 Beaconsfield, passed in $4,400,000 – 0 bidders
• Toorak 83 Clendon, passed in – 0 bidders

*For more $3m+ results please go to our weekly updated $3m+ section

Bidderbuzz Auction: 43 Motherwell St, South Yarra, Joseph Allan (Chisholm & Gamon); Bought under the hammer, $1,860,000, 7 bidders
“As I rocked up you could feel a number of people had come to play – and play they did under Joseph Allan’s direction. On the market at $1,400,000. 7 bidders, all with a variety of techniques and wallet sizes provided some sparkling entertainment until there was only one left at $1,860,000. This home needed some serious work. Sorry – did I hear somebody say the market was gone?” (Mal James)

Biggest Sale: 17 Denbigh Rd, Armadale, Justin Long (Marshall White); Bought under the hammer, $3,890,000, 4 bidders
“On a magnificent day in Melbourne, auctioneer Justin Long left it to the energetic crowd for a starting bid. Within a few seconds an opening bid was made from a gentleman in the crowd for $3,300,000, which was quickly followed by a bid $25,000 higher. With four separate parties vying for the Armadale home, the price flew past $3,500,000, then $3,600,000, then $3,700,000, and finally slowed at $3,850,000. Mr. Long extracted the maximum from the bidding parties, managing to squeeze out a final bid of $3,890,000 from one very interested gentleman, and the property was sold at that price. All in all, a very well conducted auction with 80 or so people in attendance, and all participating parties walking away very satisfied.” (Daniel Ehrenreich)

Biggest Pass In:280 Beaconsfield Pde, Middle Park, Andrew Stuart (Hocking Stuart); $4,400,000; no bidders
“A large crowd of 80 sought refuge from the hot sun under the shade of the trees scattered on the nature strip.  In his preamble, auctioneer Andrew Stuart spoke enthusiastically about the property, the ‘outstanding lifestyle’ and it being in ‘Melbourne’s greatest location’.  Mr Stuart looked to the group for an opening bid, but all remained silent, so he opened with a vendor bid of $4,400,000.  Despite Mr Stuart’s best efforts there was no bidding on the day and the property was passed in at $4,400,000.” (Kate Agnoleto)

Market News TV
This week’s video auctions are at 25 Bateman St, Hampton with James Paynter (Hodges) and 19 Ferrars Place, South Melbourne with David Wood (Hocking Stuart). This week Gina, whom many of you would know as she co-ordinates all our new clients, and Jen, our Market News Co-ordinator, step in for Klarity Kris and Adam the Architect – click on the live action this Sunday.

*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 filmed, there are designated no-video zones. See our co-workers or ask the auctioneer.

June 2010: Our favourite Pic for 2010: Susan McGlashan (right) of Bennison Mackinnon leads some very happy buyers inside for the sign up of 2/9 Shipley South Yarra. Bought under the hammer $2,195,000. 2 bidders. Strong.

Summary of 2010

Early 2010 started where 2009 left off, with sellers successfully getting buyers to accept their courageous asking prices, and buyers only too happy to hop on board the train, no matter the price.

Why was that?  After the 2008 Global Financial Crisis many buyers had feared further falls. Instead, by the end of 2009 the market had recovered what it lost in the GFC – and then some. And it seems buyers who missed out in 2009 were putting their hands up at auction with a sense of urgency and even panic, determined to get on the train this year.

For sellers this meant champagne and truffles, a situation that continued until Anzac Day when the market turned sharply downwards. It seems that both buyers and sellers realised that while the property market was booming, the economy – and especially the world economy – wasn’t. The Greek economy was in collapse, the Dow Jones went into a slide, and here interest rates started rising. Sellers decided it was time to rush their home onto the market to make hay while the sun still shone. But buyers were already taking a more guarded approach and were no longer prepared to pay big prices.

Properties were increasingly being passed in, adding to an already substantial overhang of stale unsolds. Where previously the market had been feeding on buyer panic, now it began to slip down on buyer apathy. The market increases of November 2009 to April 2010 were wiped off within a fortnight or so, cutting prices by around 10%.

April 2010: Strange. Very strange. Yes Glen we can see you, but check out the guy to the right. I'm not sure if he was there for marketing or to revive injured buyers. Maybe he will be mandatory at all auctions soon. Camberwell: 52 Athelstan Road: Glen Coutinho. Passed In.

A chilly winter saw a shortage of good quality homes, with only those selling who had to. And even when a good home arrived on the market, it had to compete with a growing overhang of stales (unsolds) that had been building up since May.  But people still need to buy homes, and the shortage now fueled buyer demand, which led to a bounce in early spring. It was surprising  because there were distractions – the August federal election and subsequent postulations and the footy and Collingwood’s replay victory (got it in) The first days of Spring brought out the instinctual buyers who need to move nests as the sun warms their hearts.  The sun also loosened their wallets, creating a small fillip on quality stock. But it only lasted the month.

And it wasn’t strong enough to absorb the surge of 200+ $ million plus properties going to market on October 23rd’s Super Saturday. In the weeks following, rather than risk passing-in their property to the unsolds list where they might wait weeks for a buyer, vendors initially tried to hold their prices. However, after a few weeks of denial and a Melbourne Cup interest rate jolt they finally began to revise their prices downwards. By end November clearance rates were back at a healthy, if unspectacular 65%.

And so we end 2010 almost where we started in terms of price, but vastly different in terms of what we expect for the start of next season. The heat of last summer is over, but it is still warm in parts. (Inner city quality homes are particularly still in high demand). Overall it’s a more healthy balanced market. For now. Stay tuned for next year.

2010 Awards
Most of our year-end efforts have gone into our 2010 yearbook due out before Christmas (downloadable from this site). Our legend section and their pearls of wisdom are contained within this 2010 marketnews yearbook. The two inductees into the Marketnews Legends Hall of Fame are Alastair Craig and Rodney Morley. However as this is our last 2010 marketnews it is customary to put up our 2010 awards. Consider them like Mike Sheahan’s footy awards – a bit of fun.

Auctioneers: we chose who we chose because we saw these auctioneers consistently quote sensibly (well 6 of 7 anyway), give buyers and sellers a fair go at auction, provide great entertainment and handle the sticky situations well. Other three hat auctioneers were Marshall White’s John Bongiorno, Andrew Hayne and Justin Long, Kay and Burton’s “Hollywoods” Jason Scillio and Gowan Stubbings, RT Edgar’s Jeremy Fox and Abercromby’s Tim Derham, all of whom we really enjoyed watching under pressure, who are brilliant at their job, but had a number of quote malfunctions – a Stonnington malaise for much of the year. Jeremy Desmier and Tim Heavyside are ones to watch and if Fletchers could be less conservative in their high-end auction quotes they would be right up there. Phillip Kingston mainly works the day we like to take off but when we see him we like what we see. We think Mark Earle and Craig Williamson of Buxton, Glen Coutinho, Peter Kennett, Andrew Stuart, Andrew James and Nick Renna of Hocking Stuart, Rodney Morley of TBM, David Oster, Damien Davis, Peter Batrouney and Richard Earle of Jellis Craig, Lachie Fraser-Smith of Benmac and Tom McCarthy of Biggin and Scott all put in two/three hat performances during the year.

Agents: These are the standouts for us – agents who are particularly strong in their market segment. Off market we think Marcus Chiminello from Marshall White is the one to watch.

Young agents: we dropped this segment because they are getting older.

Agency: Jellis Craig was a unanimous choice. Their comparable sales system, their attitude to buyers and general respect for all parties meant for us in 2010 they were our agency of the year.

Each year it’s a different format and each year we offend everybody we leave out – so please try not to take it too seriously.

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Thank yous
I would like to thank my fellow co-workers Adam the Architect, Klarity Kris, Value Dave, Cafe Guy and earlier in the year Ralph and Stephen and our market news co-ordinators Jen, Julia, Sim and Peter. A big thank you to our editors Karin and Melinda, organizer Gina and Michael our MD. You’re a champ Michael.  Thank you to our behind the scenes people in Peter, Dan, Julie, Jason and Naomi and our Board; Peter, Adam, David and Chrisso. Thank you to Phil for your insights as well.

I also would like to thank all the selling agents who despite being on the “other side” allow access to almost all results and auctions, assist with quotes and smooth over ruffled buyer and seller feathers which occasionally happen. There are a few agents who are extra helpful friends of Marketnews and our advocacy business. In no particular order Mike Gibson of Kay and Burton; Rob Vickers-Willis of Abercrombys; Mark “Lama” Dayman, James Tostevin and John Bongiorno of Marshall White; Iain Carmichael, Kaine Lanyon and Elliot Gill of Benmac; David Oster, the Richard(s) James, Winneke and Earle of Jellis Craig; Tom Roberts of Nelson Alexander; Ladies in Red – Jenny Dwyer and Barb Gregory and Andrew Stuart of Hocking Stuart and Geoff Cayzer – thank you. Thank you to the agents at Marshall White who let us join some of their open training sessions – it is most appreciated. There are others and I apologise for leaving you out. Three agents who have helped us a great deal and whom we would like to single out are G-E-R-A-L-D Delany of Kay and Burton, James Connell of Marshall White and Scott “Pretty Boy” Patterson of Jellis Craig. An extra big thank you.

Thanks to our trusty reporters and photographers who come rain, hail or shine are out there in their jackets – ducking and weaving, listening and recording. Thank you to Amy, Daniel, David, Doug, Sue, Kate, Tom, Linda, Nikki, Dustin and Joshua – see you all for a great lunch in a week or so and well done.

We also wish our competitors at Morrell and Koren seasons greetings – enjoyed the battle.

Thanks to our readers and the people who come up at opens and auctions and say G’day.

Finally a big thank you to all our clients who have supported us during the year.

Have a safe and happy Christmas holidays period.

Until next year then (our office closes on December 17th and re-opens Monday January 17th)

Was that a bid? Andrew Hayne (Marshall White) at 8 Avenel Rd, Kooyong. Bought after auction for an undisclosed amount above $2,510,000, 3 bidders. Do you think Andrew is looking younger - must be in a good place?

Key Points:

• Clearance Rate hovering around 60%
• James Connell MD of Marshall White: Clearance Rate expected around 80% with quality stock well supported and a bit more zing this week than the last fortnight.

Price Check: 2 Bromley Toorak (off Albany and a court) $5,600,000 for 941 sqm = $5941 per sqmetre. That is solid in anybody’s language

Highlights:

• Toorak 2 Bromley with Jeremy Fox of RT Edgar for $5,600,000 – 3 bidders
• Toorak 2 Linlithgow over $15,000,000 with Mike Gibson of Kay and Burton (Off Market and a little bit old news)
• South Yarra 2/155 Domain Road Marcus Chiminello of Marshall White bought for in excess of $7,500,000 or $20,000 per square metre  (Off Market)
• Toorak 88 Mathoura Road for $6,500,000 bought before – also Marcus Chiminello
• Armadale 12 Munro with Tim Derham, passed in at auction last weekend at $3,000,000 and has been bought afterwards.

$3m+ not so highlights:

• South Yarra 16 William: Passed In $4,200,000: Zero Bidders

Agent Q & A: In terms of real estate, what has happened this year and what do you expect will happen next year?
Brad Fleming, JP Dixon, Toorak: “Real Estate is a continually moving target. Therefore we as agents must have the ability to adapt to change along with the property market, regardless of the variables which ultimately have the biggest influence on property.  This past 12 months we have seen some outstanding actual sale prices, however sale results recently indicate a shift in the market in all levels. Buyers are more educated now with the internet – and vendors need to understand that the market has shifted and that prices need to reflect this. In saying this, there is always going to be a demand for property as people’s needs and life style requirements change with time – as long as they can see fair value in the product.”

Picture of concentration: Tim Fletcher (Fletchers) at 2 Barnsbury Rd, Balwyn. Bought after auction $2,585,000, 1 bidder

Key Points:

• Crowds smaller and less bidders with a clearance rate at 62% – lowish for Boroondara, however there were around 50 auctions over $1 million.
• Hottest market is for the $1,200,000 to $1,600,000 double fronted timber home in need of some work with a market price tag on it.
• Scott Patterson MD of Jellis Craig: Clearance Rate expected around the mid 60% level, but that is normal for this time of the year. The Asian community is complaining about the high Aussie dollar and their market is tracking down. Well credentialed and well-priced homes are going, but those vendors priced a little bit too high are simply not selling. A high ask strategy is nowhere near as successful now as it was this time last year or even earlier this year.

Highlights:

• Kew, 50 Charles, Paul Keane of Jellis Craig – going nowhere for some time then some interest, then – bang: a boardroom auction and a result well north of $4,200,000 was achieved on the night.
• Hawthorn 41 Wattle Road – good home on the market for some time. Bought for well over $5,000,000 also through Paul Keane Jellis Craig
• Balwyn 6 Ropley Laurence Murphy of Hocking Stuart – brand new French provincial believed to be over $3,000,000. The Aussie dollar may be hurting but the market still has a passion for these sorts of homes.

$3m+ not so highlights:

• Hawthorn 5 Yarra: Passed In $4,500,000: Zero Bidders
• Canterbury 35 Logan: Passed In for $2,860,000: Zero bidders

Agent Q & A: In terms of real estate, what has happened this year and what do you expect to happen next year?
Scott Patterson, Jellis Craig, Hawthorn:“2010 started very strongly with healthy demand in February and March.  Sellers realised that this might be their last chance to capitalise on a rising market so they flooded the market in May and June.  Increased volume had an adverse affect on auction clearance rates and we started to see a softening in the market by about June.  School holidays interrupted July and then we had the Federal Election in August which was unresolved for several weeks – again adding to the uncertainty.  Clearance rates dropped back to around 70% compared to 85% in 2009.  September/October saw two football grand finals play out, which meant the predictions of a late Spring were correct.  An interest rate rise on Cup Day and the threat of further increases has dampened enthusiasm and we now see clearance rates hovering around 60% compared to 80% for the corresponding period last year.  On a positive note, properties in quality locations are still attracting strong interest – however it is fair to say that we are noticing less desperation amongst buyers.  Vendors now need to revise their expectations if they are serious about selling this side of Christmas, otherwise the market will go to sleep from December 24 – January 18.  Next year will be ‘steady as she goes’ in my opinion.  We are predicting slow growth rather than the dramatic price increases we have seen in previous years.  A lot will depend on interest rate rises next year as a series of rises tends to affect buyer confidence.”

Grinners are winners: Sam Paynter (Hodges) sells 10 Menzies Ave, Brighton after auction for $2,600,000, 1 bidder

Highlights:

• Hampton’s Golden Triangle continues to perform very strongly with 3 Lorraine Hampton (Nick Johnstone of JP Dixon) over $3,000,000; 23 The Avenue Hampton (David Hart of Buxton) $2,350,000 and fringe there but actually Brighton Beach – 10 Menzies Brighton (Sam Paynter of Hodges) $2,600,000. These, the three buys at this level we reported a few weeks ago plus others says that this is the or close to the hottest “estate” in $M Melbourne right here and now.
• Clearance Rates steady at 1 selling out of 2, or 50%
• Sandringham continues to underperform the area with little action
• 11 sales reported over $1 million in Brighton and Brighton East in the last week – mostly small

Agent Q & A: In terms of real estate, what has happened this year and what do you expect to happen next year?
Scott Hamilton, Buxton, Sandringham:”This year started with a bang. Buyers were bidding furiously at auctions and prices were increasing steadily. Most Bayside properties were selling well ahead of their reserves. Late May to early June buyers started to back off a little bit after a few rate increases in a row. Most good agents recognised this but a number of vendors were still riding the wave from earlier in the year. It is quite evident now that some normality has returned to the market and no matter what an agent or vendor may think, buyers are deciding where they believe the value of a property ought to be. Good agents can direct a buyer’s thinking to a degree and negotiate as hard as we like, but without competition many vendors are failing to meet the market. I would like to think that if interest rates remain as they are, the new selling season will see buyers competing hard at auctions again. People will always want bigger or smaller homes, they will always want to improve their position or their financial situation and they often make the decision to change their circumstances at Christmas. I’m sure we will begin the new year with a bang.”

Price Check:

• Brighton East 11 Clive with Craig Williamson of Buxton.  Bought for $1,350,000 or $1450 per sq metre for land in the Hawthorn Road Tram Terminus area.
• Brighton 52 Carpenter with John Clarkson of Hocking Stuart. Bought for $1,360,000 or $2,810 per sq metre of land in central Brighton. This time last year we had a number of land sales in Central Brighton in Carpenter St and you can see the big holes of development next to the old police station. We reported land, also a corner site, as going for $2437 per sq metre

Albert Park, 22 Madden St, Andrew Stuart (Hocking Stuart); Passed in $1,700,000, no bidders

Price Check: 384-386 Barkly St Elwood (Robert Marden of RT Edgar)  555 square metres of land at $3,400 per sqm. No price drop there since May where we had a flurry of $3,000 to $3,300 per sqm land sales. This was main road land and may have multi-development opportunities.

Agent Q & A: Matthew Young, Buxton, St Kilda:
In terms of real estate, what has happened this year and what do you expect to happen next year?
“In general terms, many would suggest that we have seen the property market turn full circle this year.  When we reflect back to the first quarter the market was still brimming with confidence.  There was a shortage of quality properties, an overwhelming volume of eager buyers, numerous record prices being achieved and auction clearance rates sitting above the 80% threshold regularly. Today, just past the half way mark of the last quarter, the volume of properties on the market is  high and the number of buyers remain strong. However, they are now somewhat more hesitant, are aware that the supply of properties is in their favour, and understand that they have the luxury of choice, even enjoying seeing Auction clearance rates fall to around 60%. They are factoring in not simply that latest interest rate rise but also the much expected rise by the RBA in February. As for 2011, we can only speculate.  I’m not personally one to look at life with a half empty approach, for the real estate market has been incredibly generous to us in recent years.  With further interest rate rises on the cards, should the market correct itself further, we need not worry as it has proven time and time again that it will not only bounce back but be stronger when it does. In short, we have moved from a sellers’ market to one that now slightly leans towards a buyers’ market. In saying that, my suggestion remains that there will never be a better time than yesterday to buy property for the simple fact that we can never accurately pick the bottom of the market until it’s on the way back up. By then people often find it’s too late and they have missed the boat.  Property is, has and will continue to be a proven wealth creation strategy, with properties on average doubling every 7 to 10 years!”

Kaine Lanyon, BenMac, Albert Park:”The real estate market started this year much the same as it ended in 2009, absolutely firing on all cylinders. Prices were still moving faster than anyone could fathom. That lasted until circa early April / Easter time when the signs of easing started to appear. The next few months saw prices come off circa 5%, in my view. After this period, the market seemed to find its new level which was one of more normality and back to being, some might say, more of a fair and balanced market across the board. We generally found that the best properties were still selling under competition, with two or three parties vying for the property. Most other properties appeared to be a little hit and miss depending on where the vendors expectations were, in that a sale was transacting if the clients were prepared to listen to the new market level. If not, some properties were left sitting on the market until both parties realigned and accepted that prices had come back from where they had been. This is still the status quo. Next year I believe will deliver a new fresh market after the usual festive break and one that should be fairly well balanced and pretty even across the board with exceptional quality properties still being in high demand.”

Bidderbuzz Auction of the Day: Bill Stavrakis (Biggin & Scott) keeps cool, calm and collected at 14 Prentice St, Elsternwick. Bought under the hammer, $1,537,000, 6 bidders

Agent Q & A: In terms of real estate, what has happened this year and what do you expect will happen next year?
Tom Kurtschenko, Barry Plant, Eltham: 2010: “Early in 2010 we witnessed unprecedented growth in the local markets with strong buyer demand for all types of property.  Particularly the lower and middle end of the market attracted fierce competition and some very strong results.  As Melbourne medium house prices hit record highs, we had local suburbs in the area performing in a similar manner.  Eltham peaked at $645,000 in June 2010 while Montmorency peaked at the same time at $584,000.  In the last quarter of the year we have seen a minor correction in the local market with the combination of high levels of property available, the hangover from the federal election and recent increases in interest rates.  Over 1000 Auctions are currently booked for every weekend until the Christmas break which will give a strong indication as to the strength in the local markets.  2011: Both the ALP and Coalition have announced pre-election promises with changes to Stamp Duty to be implemented early next year.  Victoria Stamp Duty Taxes currently remain one of the highest in the country.  Liberal Leader Ted Baillieu has promised to slowly introduce new and reduced tax rates over four years, with a 20 per cent cut from July 2011, followed by another 10 per cent each year if elected.  The ALP’s policy does not reduce stamp duty for all home buyers but continues its policy of targeting first home builders, particularly in regional areas.  Both are expected to increase buyer activity early in 2011 and we expect to have plenty of properties still available to the market. ”

Keiran Whaley, Barry Plant, Ivanhoe:”The real estate market in 2010 has been a complete rollercoaster with prices soaring through a bull market in the first two quarters of the year, and the flattening of prices in the third quarter leading into the final quarter of the year where we have been inundated with supply and clearance rates dipping. The market has shown a resilience of sorts through the second half of the year through the over-supply of property.  It would be fair to say that the 10% increase in prices in the first half of the year has been partially wiped out, but our evidence suggests that we have still kept around 5% of the gain.  It will be interesting to see where the market in early 2011 goes.  If the current supply levels remain, we will be in a similar holding pattern. However, if the stock tightens up, it would be no surprise if prices slightly increase as the underlying demand still exists.”

Last week we pointed out that valuing a home is a bit like different vegetable soup recipes. Everybody has a different way of doing it. However, in the end the most important opinion of value is yours.

But that doesn’t mean you should ignore what the rest of the market (the majority of other informed buyers and sellers) thinks the home you are after is worth.

Because while your opinion on value is the most important, it is possible to pay too much for a property. You can pay more than you needed to win the home and/or more than the market thought was reasonable.

When buying a home, most of us are looking at maximising our financial and emotional outcomes on the purchase. Correctly understanding the market value can help you do this because if you pay more for the home than the market thinks reasonable you are affecting four key elements relating to the financial and emotional outcomes of your purchase.

Let’s take a situation where you buy a home after it has been passed-in, or sold through a private sale or an Expression of Interest campaign. You really want this home and end up paying $3,300,000 for it, taking no notice of the fact that no-one else has been prepared to pay more than $2,800,000 for the property.

The first key element your decision will affect is Capital Growth.  Let’s say in five years time you sell the home for $5,000,000, making your capital growth over that time just 52%. However, if you’d paid the market value for the property, your capital growth would have been more like 79%. Taking that one step further, if you’d managed to buy the property really well, at say $2,500,000, your capital growth would have been 100%.  What that means is that, in the long term, if you buy two or three homes well compared to market valuation, in effect what you get is a free home.

Paying too much for your property will also affect the second key element Cashflow. By paying $3,300,000 instead of $2,800,000 you’ve got an extra mortgage of $500,000 to service. That’s an extra $3000 in monthly mortgage repayments (presuming interest rates don’t go up too much), or $36,000 a year, an amount that could have gone a long way to paying the family’s school fees.

Then there’s the third key element of Risk. Should your life not turn out as planned, which is what risk is all about, paying significantly over the odds greatly increases your financial risks in market downturns, job displacement, family crises and so on. Why? Because you simply have less discretionary money to ride through the tougher than expected times.

Finally we come to the fourth key element, the Emotional Outcome. The fact is that none of us like to find that we have paid too much for something (without realising). The homebuying experience sours and the joy of the floorplan quickly dissipates when you figure out you have paid $500,000 more than you really needed to.

So who is to blame if you pay too much? You may be inclined to blame the selling agent, but if you as a homebuyer end up paying more than you need to because you don’t do the necessary research or find a professional to do it for you, you can’t blame the selling agent for rubbing his hands in glee – after all his job is to get the best price he or she can for the vendor.

Remember then, that while your opinion of value is the most important it needs to be well researched. And part of that research is understanding what the market really thinks.

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

Hampton 25 Bolton: David Hart: 5 bidders: Under the hammer for $2,800,000

Key Points:

The Jekyll of Hyde of real estate – one day it’s OK and the next it’s not. This weekend, under pressure, Bayside was all over the shop. Not really, really bad but even the most optimistic agents would still only give it a bare minimum pass. Even so, with 24 buys over $1million, it wasn’t a complete disaster.

There were 22 auctions over a $million in Brighton alone.

The result was a coin toss – 50/50. Brighton East was poor but Hampton’s Golden Triangle put in some real impressive results

• 25 Bolton Avenue with David Hart of Buxton – $2,800,000. 5 bidders – very strong.
• 43 Margarita,  also David Hart and Mark Earle of Buxton, sold Saturday before Sunday auction for over $2,500,000 – solid
• Vacant land also in Margarita St, Steve Tickell. Sold for over $1,800,000 or north of $2,000 per sqm. 3 bidders.

Biggest Sale and Bidderbizz: Hampton, 25 Bolton, David Hart, Buxton, Under the Hammer, $2,800,000, five bidders, crowd of 100 people
“A fast and furious auction, led by David Hart of Buxton. Bidding was so fast Mr Hart didn’t have time to announce when the property was on the market. Bought under the hammer for $2,800,000 in front of a big crowd of around 100 people.” (Kristen Hatt)

Biggest Pass In: Brighton, 34 Head St, Peter Kennett, Hocking Stuart, Passed In, $2,650,000, 4 bidders
“It took what seemed to be an eternity for auctioneer Peter Kennett to extract every bid he could from the interested parties at this auction, who were all very keen to keep their hands firmly in their pockets. The first bid of $2,400,000 was a good starting base and over the next forty minutes Mr Kennett kept the crowd amused with one liners like ‘The grass grows quicker than your bidding’ and “If you keep smoking like that, it’s going to kill you”, before he finally reached a pass in bid of $2,650,000. A long auction but very entertaining.” (Guy Angwin)

Agent Q & A:

What are stock levels looking like post Melbourne Cup Weekend?

Errol Driver, Hodges, Beaumaris: “After a relatively quiet start to the Spring market, the Beaumaris real estate market is showing a definite improvement with a substantial lift in houses listed for sale during November.  A number of potential sellers are tossing up whether to list now or wait till the new year. Last Jan/Feb was unusually busy and there could be a repeat of this pattern, however, as I mentioned last time, the interest rate environment holds the key to what will happen. My advice to those in a quandary is, list NOW to avoid any pre-xmas activity slowdown and consider buying in the New Year.”

Halli Moore, Buxton, Brighton:”Things are looking pretty good post cup weekend with a reasonable amount of auctions booked for the end of November. I believe that it may  be a late end to Spring with vendors also looking to auction into the first 2 weeks of December as well. (There has) also been reasonable inquiry from people looking to lock in dates for February next year.”

Results:

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

Key Points:

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

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

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

Agent Q & A:

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

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

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

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

Results:

Brighton 75a Cole: Adrian Jones for Open Living: No bids: Passed In $1,450,000

Key Points

• Bidders went very cold on this weekend’s offerings

Biggest sale and only auction we saw with bidders

6 Linacre Rd, Hampton, Mark Earle, Buxton, Bought after $2,350,000, 2 bidders
“A perfect Spring day welcomed this Hampton auction. A crowd of 60, many of whom were neighbours, eagerly awaited the auction with much chatting to be heard. Mark Earle was down to business and the auction was under-way with an opening bid of $1,875,000. The bidding was slow and Mr Earle, despite his best efforts, passed in the property at $2,160,000. Bought after for $2,350,000. A strong result.” (Kate Agnoleto)

Agent Q & A:

October 23 is Super Saturday – What can we expect?

Jason Gill, Hodges, Brighton: “The larger numbers may result in thinner coverage at auctions, but the quality properties will still attract the interest they deserve.”

Michael Cooney, Hodges, Beaumaris: “Saturday the 23^rd will be a great test of buyer confidence on the back of the unexpected mini break in interest rate rise speculation. Best advice for mid and high end property sellers is if you receive an offer in your selling range, don’t hang out, sell and move on. There will be good buying opportunities in late November/December.”

Errol Driver, Hodges, Beaumaris: “Finally, after several months of disruption in the local market with a confused federal election campaign, school holidays and two football grand finals, the sales action is scheduled for 23 October. Anticipated results will be mixed with sensible reserve prices making the difference between success and failure.  Recent auctions have attracted multiple bidders but sales success is noticeably price sensitive and current stable interest rates is a plus, but for how long?”

Forward Auction Bookings

Clearance Rates

Results

Hawthorn 2 Violet Grove: The Master has returned. Now I shouldn't say that, as it will only encourage him. James Tostevin gets 1 of 2 bidders over the line post auction at just over $1,200,000

Key Points

• Boroondara still the “healthiest” million dollar market to sell in – although impressive challenge from Stonnington today.
• A few upper end quality homes are drifting onto the market – but supply is tight.
• Current sales volume is way less than the peak one to two months ago

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

Chris Barrett, Marshall White: “Good time to sell – most people will be home in Melbourne after all. Talk of interest rate changes affect the market psyche more – and as they are unchanged for now (and no news to go up in the near future) this is a good thing.”

Nick Ptak, Marshall White: “Opportunity to get in before spring rush. Still plenty of auctions on election day. Buyers left over from May/June who sold; Market steady over spring; Good homes in Grace Park and Sackville are few and far between.”

Geordie Dixon, Marshall White: “Not at this stage, buyer wise; The election was (a concern) for one conservative vendor. They opted for a different date.”

Clearance Rates and Monitor Table

Buying Activity

Land Values

18 Lincoln Avenue, Mont Albert North – Jeremy Tyrrell of Fletchers. 926 sq metres sold for $1,020,000 or $1100 per sq metre. Nearness to freeway discount?

199 Rathmines Road, Hawthorn East – Stephen Gough of Marshall White. Passed In. Main Road discount?

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