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?

We Only Buy Homes

Balwyn North 12 Ajana: 'Mmmm - it is quiet today.' Toby Parker. Passed In $1,600,000, No bidders

Not much happening today, with one of the quietest non-holiday Boroondara auction weeks I can remember. There were 11 auctions and seven sold. In May we were running at four times this almost every week. Very few private sales either.

Bidderman was irrelevant on such small numbers. The highlights were:

3 Longstaff Kew East – Glen Coutinho of Hocking Stuart which had a crowd of 80 and 5 bidders and was bought for $1,413,000. This one was all about the renovation and not the position. It really was a matter of home over location. See our report and click onto our ratings below.

39 Denham Street Hawthorn – Peter Mitchell of Marshall White was perhaps a symptom of lack of stock. It had rock solid potential but there were effectively only 4 bids from 3 bidders: $1.7m – $1.8m – $1.9m – on market – $2.0m – Gone. See our report in Market News and below.

Selling Agent Thoughts

Peter Mitchell of Marshall White

• May 2010 was a vendor-driven stock glut scared off by the GFC in the past and the upcoming election
• Not much stock around
• Prices are flat
• Normal spring

Doug McLauchlan of Marshall White

• Stock is drying up fast
• Prices have plateaued
• Normal spring

Scott Patterson of Jellis Craig

• Listing well for September – should be a solid spring
• Didn’t see a lot of strength in the market today, but the offerings were varied.
• One good result in Eglinton St Kew, yet quiet at Alta Street Canterbury
• Busy at opens – most had 20+ groups

Tim Fletcher of Fletchers

• Should be more on offer in spring this year, compared to other years.
• We are seeing a healthier market now  – it has softened. Buyers are still paying top dollar for good property – even record prices, yet for properties with issues buyers are becoming more and more discerning.
• I was really concerned when the Melbourne property clearance rate for property was in the early to mid 80% range for a number of weeks on end. This was not a normal market – it was overheated. If it had continued this would have put increased pressure on interest rates – which would not have been good for the economy as a whole.

Monitored Auctions

We are looking at 20  auctions next week, so auction numbers are increasing.

We only buy homes

Hmmm - things are changing and right now it's not for the better. One of Hawthorn's top selling agents Richard P. Winneke fails to get a bid at 90 Walpole St Kew. Passed In $2,100,000

Today was a watershed day for the Boroondara market – a day when the market could no longer gorge the incredible amount it has been gorging (for the last six months). Today was a real (excuse me, while I burp) I just can’t fit in anymore kind of day. Today the Boroondara market which has been the strongest of the four big $m+ markets (Stonnington, Bayside and Port Phillip) showed the white flag and said I’m no different to the rest of you. At 52% it was literally a flip of the coin to see if the home sold on the day.

Going forward what will happen? That is all a matter of supply – there is simply too much stock on the market for this level of demand and therefore price cannot remain stagnant, let alone rise.

Price has fallen and will continue to do so until the market rebalances again – which may only be a matter of a month or so or it may take a fair while longer if demand shifts downwards during this transition period.

For buyers this is good news providing you understand the new rules and the tougher playing conditions the selling agents will require you to play under. While there are fewer buyers, those that are around at this level and who want to buy good homes, will face a more rigorous test than put your hand up and take it at a low price – the vendors simply won’t allow that.

However if prices adjust quickly the market may kick along again sooner rather than later. There is still a lot of hidden demand – waiting… waiting…..

The standout auction of the day was Paul Keane’s 50 Hawthorn Grove, Hawthorn, which was on the market at $3,300,000 and fell under the hammer at $3,510,000. 4 bidders.

Some words from the two dominant companies.

Marshall White – James Tostevin

‘” A real mixed bag today for the company – clearance rate around the 63% mark. Good homes as popular as ever, yet some vendor are not in line with market sentiment.”

Jellis Craig – Richard Earle

” 59% clearance rate for the company. A damp day weather–wise and a damp auction vibe overall for the market. Telling factors – upcoming election, rising interest rates, unsettlement in Europe and of  course  generous stock levels affecting the buyer’s psyche’.

Land is Gold! Gold! and Still Gold!

In a day of transition we took a look a Balwyn (and surrounds) Land – four key indicator auctions. This time last year (2009) these blocks were starting to fly with the onset of the FIRB rule changes – we revist exaclty one year on and find nothing, absolutely nothing has changed. Land is still Gold.

54 Stroud St Balwyn (Michael Nolan of Noel Jones) It was a cold, foggy start for auctioneer Michael Nolan today. In front of a small crowd of 30 – including the neighbours who watched from their premier balcony box seats – Mr Nolan kicked off with a vendor bid of $1,000,000. The bidding started slowly in $2,000 rises, but as the fog lifted so did the speed of proceedings. The emergence of 3 bidders helped push the property to be declared on market at $1,151,000. After a final knock out bid of $1,155,000 the property was bought to a round of applause from the audience.   Amy Wong reporting

5 Yongala St Balwyn (Michael Nolan of Noel Jones) Both sides knew what they wanted today and little time was wasted in getting to the end result. Auctioneer Michael Nolan was keen to start and opened the auction with a vendor bid of $1,300,000. So efficient was the first bidder that he did not even bother to leave the car, calling his bids from the front window. Four other bidders drove the price upwards and the property was declared on market at $1,425,000. The property was bought for $1,510,000. Good auction with confident bidding.  Amy Wong reporting

27 Regent St Camberwell (Michael Hingston of Jellis Craig) The cold, drizzly weather encouraged a brisk, fast paced auction. The auction started with a genuine bid of $1,100,000 which was followed by a vendor bid by auctioneer Michael Hingston. This helped move proceedings along and the emergence of another two bidders saw the property declared on market at $1,220,000 and bought for $1,270,000. Amy Wong reporting

7 Almond St Balwyn North (Scott Patterson of Jellis Craig) Hi Mal, 4 bidders, on the market at 1.25m and sold for $1.37m. A strong result. It had potential views and a 75ft frontage. Land seems to be selling well in Boroondara depending on orientation and location. Supply has increased but demand is still quite good.  Cheers,   Scott

Design Smart

Booroondara Auctions – 46 monitored – 24 bought – 52% clearance rate (last week 70% )

THE NEW BOROONDARA POST AUCTION RITUAL?

11.05 am

11.10am

11.15 am

Which way are things going? South Yarra 32-34 Park St: David Colbran and Warwick Anderson of RT Edgar: Passed In: $3,903,000: Bought Afterwards: 4 bidders

It’s 6pm Saturday and the James million-dollar-plus Clearance Rate on the 41 auctions we attended today was 61%.

Bidderman is 1.7 and it seems to have found a momentary level of some strength on large numbers of auctions.

We monitored 174 $million sales across 56 Melbourne suburbs.

Overall Clearance rate is 60% for those 174 auctions and in line with our James clearance rates – confirming again our James Clearance rate is an accurate measure of $Million Melbourne.

Considering the large amount on offer today and two of the next three weeks, it was a solid result for the market, albeit on falling clearance rates.

Summary Clearance Rates

• Bayside – 26 monitored – 12 bought – 46% clearance rate
• Boroondara – 46 monitored – 32 bought – 70% clearance rate
• Glen Eira – 18 monitored – 10 bought – 55% clearance rate
• Inner Melbourne (Yarra) – 11 monitored – 8 bought – 73% clearance rate
• Northern Melbourne – 22 monitored – 13 bought – 59% clearance rate
• Port Phillip – 22 monitored – 7 bought – 32% clearance rate
• Stonnington – 26 monitored – 18 bought – 69% clearance rate

Highlights

• Only 5% were not reported which shows a high degree of accuracy for clearance rates
• Increasing numbers of undisclosed results – maybe privacy or less than stellar numbers
• It is Port Phillip’s turn to not fire under the auction system
• Stonnington was surprisingly strong with Park St South Yarra (Warwick Anderson of RT Edgar) going passed $3,900,000 on multiple bidding and 81 Clendon Road Toorak (Gerald Delany of Kay and Burton) selling post auction north of $7,350,000 and 64 Burke Road Malvern East (Iain Carmichael of Benmac) selling before for 3,320,000 or $1366 per sqm for main road land. We think a number of Toorak and South Yarra vendors have wised up to the mood change and as a result clearance rates are improving.

In some segments, the market has dropped an estimated 5% in the past three weeks; in other segments, not at all. Fringe positioned, poor quality and hard to sell properties we feel could be as much as 10% off what they may have achieved in a frenzied April auction. This is of course opinion and hard to substantiate; but it is what we believe.

But our blanket headline is not 5%-10% price drop; it is mood change for all markets and some markets are patchy and some homes have experienced a drop in price.

Before we are yelled down by the lobbyists, let’s be specific.

First, there are several markets going quite well (for sellers), thank you very much.

$4 million-plus market
Evidence is emerging that this market, which we felt was in trouble a fortnight ago, is not as patchy as it seemed to us – and actually has some strength. Our correction: A more accurate read from us would have been that the auction system itself is frosty at this price level but there is activity outside the auction system (private sale, off market and expressions of interest). Michael Gibson of Kay and Burton agrees this is an accurate statement. He implied his company wouldn’t be selling $6 million-plus homes in Canterbury, Hawthorn; Scotch Hill; Grace Park and Flinders in the last month (and today at 81 Clendon Road Toorak, post-auction after a vendor bid of $7.35 million) if the $4 million and above market was declining substantially.

Note: Back in the GFC days during one six-month period (late 2008 – early 2009) at this same $6 million-plus price level, there were only nine recorded home sales in total (two in Brighton, one in Balwyn; and six in Toorak) for all real estate agencies in all of Melbourne.

$1 million – $1.75 million market in inner Melbourne
While there is definitely less bidder depth than a month ago, buyers may notice little change in end results on good properties going forward as there was such great depth pre-Easter. In fact, we were at an auction in Clarendon St Armadale (Madeline Kennedy and Andrew Hayne of Marshall White) where a nice little Edwardian single-fronted was bought for just over $1.2 million, and its twin sold earlier this month for $50,000 less. The $1 million to $1.75 million market is not seeing widespread price drops; despite less bidders per auction.

Shall we stop building the drama? Where do we feel the market has dropped?

$2 million to $4 million market
Is where the possible gains in 2010 have evaporated for a number (but not all) homes. On some good $3 million homes, we feel that the market view could be $100,000 to $200,000 less than Anzac Day and on poorer homes the drop feels more dramatic.

On what basis do we make such a claim? What about such and such, which went for $150,000 over reserve?

Clearance rates seem weaker at this price level; although today 10 from the 16 we witnessed in the $2 million to $4 million mark sold and that’s 62%. We feel the easing has been mainly in this market, but we have no evidence to suggest anything more than light price drops on some good homes.

Look at three Hawthorn homes we have been involved in, in the $3 to $4 million market in May 2010.

All three of these homes we assessed at $3.3 million under strong competition. All three of these auctioned homes had supporting evidence and independent outside agent opinion matching our $3.3 million assessments.

Yet the results were different (around $3.1 million on two occasions and $3.46 million on the other occasion). This had nothing to do with the agent (despite what their opposition may say). It may, of course, be our poor assessment of two but, if you assume we have some level of competence (others may argue), then it does hopefully give an insight into what we think is happening in the $2 to $4 million market in May 2010.

INCONSISTENT RESULTS and MINOR PRICE DROPS FOR GOOD HOMES

What does this mean for buyers going forward?

Opportunity!

There are $2 million to $4 million sellers out there that have to sell as they have bought and do not have the luxury of holding multiple homes. Interest rates are rising and business, as evidenced by the stock market index, is not as rosy as April.

Even those sellers that do not press the panic button may still be of a mind that things may not improve in their selling horizon and will, if they are listening to their selling agent, be more inclined to deal on a sensible offer rather than wait till the uninformed or ridiculous one arrives (which, increasingly from Anzac Day, is not happening).

A home that in April you would have paid $2.5 million for could now available to you for $2.3 million if:

1)      You know where to look

2)      You look

3)      You have some luck

4)      You put your hand up and then in your pocket.

Some important riders on our $2 million to $4 million blanket statement:

1)      It still needs to be the right home for you.

2)      It still needs to be a good home. Low land content, poor floor plans and badly positioned homes can become better in price but they never become good land content (above average growth), good floor plans (without serious money) or better positioned homes.

3)      Not all homes are adhering to our price drop assertion.

Overall Market Summary

At this stage, we have no feeling that the market corrections are anything more than normal market corrections. Market corrections come from market imbalances and the $2 million to $4 million property market has, in our opinion, been out of balance in May. Other markets are experiencing less bidder depth but not the imbalance and it’s not showing as much on the scoreboard.

While in all markets demand per auction has been steadily falling as evidenced by our Bidderman graph below; that is not necessarily as sinister as it may seem if you look at the supply graphs chart we keep on new million-dollar-plus stock to the market (graph 2). Those charts confirm what agents have been claiming – record months of auctions etc. Look at the up-swing in new stock (and we keep both on-market and off-market data) from 30 to 60 days ago. Big increases!

To some extent, these large increases in stock are the obvious reason why demand per home (Bidderman) has fallen; however, what is different to March and more in line with a normal market, is that the May 2010 market has not been robust enough to absorb all of this stock increase, particularly in the $2 million to $4 million mark. We have seen some seller stress for the first time since mid 2009. In addition the rest of the market seems to be leveling which can’t be a bad thing for all sides of the market.

Note: The above graph (2), implying lower stock numbers coming in over the last few days, may simply be a data entry timing issue from us – the guaranteed accurate stock level indicators for us are the 30 days and over figures and these are unseasonally high.

Three-month market outlook

$1 million to $1.75 million buyers.
There needs to be a big reduction in buyer overhang and a greater mood change resulting in an increased number of pass-ins before many good homes will reduce in price.

We think the current mood change and bidder depth has resulted in a leveling of price. Poorly supported properties are dropping in price.

As another aside there are an increasing number of pre-auction and off-market opportunities even at this level. By example, we bought a ripper little off-market one in Elwood last week at this price level. Good home – we were surprised it was offered as an off market (and, please, we don’t mean that negatively for either party).

$2 million to $4 million buyers
This is the most exciting and unpredictable market at present. Buyers, you need to turn up and keep turning up, because the opportunities to buy good homes are here and may not remain for long as you may think. The longer term big picture still shows population and migration pressures conducive to price increases.

At this level we suggest you need:

• Patience because some good homes are still selling very well.
• To cover a wider number of possibilities. There are off-markets and fringe properties that you are not aware of that are selling.
• To do your due diligence in two ways. Emotionally, is it right for you, and, importantly, is it for sale at $2.85 million or do you have to pay $3.15 million (financially).
• Advice. We’re biased. But with opportunities comes a number of decisions and a “no” decision can be just as harmful as a bad “yes” decision. All good decisions are either lucky or informed ones and it takes a lot of work to be informed for all decisions. So are you lucky or do you want to be informed? Possibly consider engaging a competent and ethical buyer agent experienced at this level to assist you.

Of course the market could also worsen (for sellers) but to assume that this market will continue to deteriorate after the forced sellers have gone is not a given; it is a guess. Going forward a number of $3 million owners have discretion and rather than put their home on the market or be in a forced sale they can renovate or hibernate. This will mean reduced choice for buyers which can start an upward price cycle on low quality stock – a buyers lament.

$4 million-plus buyers:
The proof is in the pudding. Sales at this level are up, surprising all of us. So demand is there (for now) and, while this level of home never attracts the bidder depth of further down the food chain, it also has fewer forced sellers than say the sub-million market unless business hits the wall. We don’t have as clear a take on this market as we thought we had, so, we’re keeping our powder dry and no longer passing  judgment until there is some more water under the bridge (love those clichés).

Buy happy

Mal

The Big Guns failed to fire at auction but didn't miss their target on the reload; with a post auction result in excess of the $7,350,000 Vendor Bid Pass-In. No bidders: Kay and Burton's Heavy Duty Gerald Delany, Mike Gibson and Ross Savas presiding.

22 Ocean Road, Manly - The only property in Sydney to sell in our investigations up at in Sydney. Nice view!

As we have been up in Sydney recently we thought it might be an opportune time to bring you some news North of the border.

A couple of key difference’s when buying property up in Sydney:  Not all prestige property is auctioned with auctions representing approximately  50% of transactions. When at Auction you have to register prior and bid with a bidding card, only one Vendor bid is permitted, Auctions are held inside properties, in board rooms and public venues such as RSL’s and pubs.

The Sydney prestige market is also substantially larger than Melbourne with approximately 60 Suburbs with a median value over the million mark whilst Melbourne has approximately 20 suburbs.  In fact it’s arguable that the prestige market in Sydney is really $2 million plus.

There are also a number of factor’s that play a huge role in Sydney that only exist on a few properties in Melbourne like absolute water frontage, proximity to ocean/bay, significant slope considerations and different types of views (Ocean, Bay, Harbour, City, Neighbourhood).

In the last few weeks we have visited 9 Auctions predominately in the Northern coastal suburbs of Sydney including;  Mosman, Manly, Fairlight, Balgowlah, Willoughby, Cammeray, Cremorne & Seaforth. All the auctions we attended were $1.5 million plus and surprisingly 8 out of 9 passed in. Crowd numbers were around 13 people per auction and things seem a lot more dire up in Sydney than they do in Melbourne.

The pass ins were in alignment with a recent Australian Property Monitors report which indicated that the average marketing time for Sydney prestige property has double from 85 days to 173 days. This is a dramatic increase when you look at the 6 week average turnaround time for prestige Melbourne property.

Lachlan Campbell of LJ Hooker Manly has indicated it’s a mixed market at the moment with a shortage of quality homes and an oversupply of prestige apartments.  Mr Campbell added that quality homes between $2 –$5 million are rarely coming onto the market in the Manly area and as such demand is exceptionally high. Mr Campbell said “on the whole the median price in Manly is fast approaching $2 million due to the demand for house and land” and “it couldn’t be more the opposite with quality apartments as there is an oversupply and falling prices”

Prices for prestige apartments in the Manly area have fallen by approximately 10% – 15% according to Mr Campbell.  It is not surprising then that the most common form of sale for apartments $2 million plus is private sale whilst houses $2 million plus are all being register for Auction (unless sold prior)

Nick Broadhurst of Knight Frank has indicated that the Sydney market has definitely softened in the last few months. Mr Broadhurst who predominately works in the $5 million plus Sydney market said “it is quite hard to attribute the slowdown to any one factor with the Europe debt crisis, increasing interest rates , currency & share market volatility all having some affect”. Mr Broadhurst added that quality properties with unique attributes were still performing well and the most common form of sale for property under $10M is still auction.

Indoor auctions and an average of 13 people in attendance.... hmmmm very different to how things are done in Melbourne.

Below is a summary of the auction we attended, Bidderman is at .2 – Yes that is right of the 9 auctions we attended there was 2 bidders in total. Obviously we have not captured a large proportion of the market so the bidderman statistic can not be used with the same conviction as the Melbourne bidderman, none the less it is a very surprising result. In addition and as previously mention crowd numbers are exceptionally low in comparison to Melbourne, the most that attended any one auction was 25 people and there was an average of 13 people at each auction.

15 Ellalong Street, Cremorne

Interested neighbours, agents and buyers entered this immaculate property as twilight brought more rain. While shoes were left at the door, feet were soon warmed by the under floor heating. High standards and quality living were clear in the eyes of all inspecting. Hugh Rainger of McGrath Real Estate urged the crowd forward before delivering a healthy introduction, detailing the property’s exceptional characteristics to satisfy any buyer’s remorse from potential bidders. The opening offer of $2,100,000 could have been a clever ploy or seen as insulting, Mr Rainger preferred the later and quickly disregarded it. A vendor bid was required to raise the bar to $3,150,000 and then the auction fell silent. Property passed in $3,150,000, no further bidding.

15 Vista Avenue, Balgowlah Heights

This was the first opportunity to purchase this property in 31 years and long term owners had kept pace with style to present a beautifully modern family home. Offers under the reserve had been received during the week encouraging a competitive auction and sale. Glen Wirth’s of Richardson and Wrench surprise was clear when he started the proceedings to a crowd of 8 people. It was clear no-one present was ready to bid and the call for opening offer fell on deaf ears. The vendor opened the bidding with the highest offer received during the week at $1,950,000. Mr Wirth followed Auction protocol in the hope bidders were late or hiding. This auction Passed in duly with Agents scratching heads and preparing for a week of negotiations.

33 Lucknow Street, Willoughby

This private oasis cleverly set behind a plain and leafy entrance was a pleasant surprise for all – agents, nosy neighbours and interested parties alike. Yet this spaciously quirky family home complete with an enormous home office, cottage garden and hot tub delivered another auction non-event. Hugh Rainger of McGrath Real Estate delivered a concise and compelling introduction to the property, though as expected by the agents, no bites from the crowd. With no registered bidders, the home was passed in with the vendor bid of $1,795,000, though expected to sell in the next couple of weeks when the market lifts according to McGrath Real Estate.

22 Ocean Road, Manly

Despite the drizzly weather, a buzz of interest for this superbly located property drew a curious crowd of 25. Yet with three registered bidders it was clear only one was there to do business on the day. Brad Cole of LJ Hooker opened the auction confidently with a formal and fast introduction that fell quickly into silence from the crowd. Mr Cole crackled a few jokes and after a slow start the warm humming of the gas fired place soon lit the first bid of $1,800,000 from the lady intent on buying. Mr Cole highlighted that the property was worth far more with the semi next door selling recently for $2,500,000. The confident bidder then retorted that was the sunny side! A long stall and some more jokes forced the vendor to bid $2,050,000. The same bidder lifted hers to meet the $2,075,000 and after more conferring with the vendor was raised again to $2,100,000, which finally brought the hammer down. Clearly the desire to own this property outweighed financial concern as a more astute bidder could have exchanged for less by letting the property pass in. Exchanged under Reserve.

2 Cabban Street, Mosman - no registered bidders, no actual bidders and not surprisingly no real auction.

2 Cabban Street, Mosman

The agents from McGrath Real Estate expected some bidders and it was with disappointment Simon Cotter informed the crowd that the property was to be removed from the Auction Market at the vendor’s request.  Mr Cotter advised that the reserve of $3 million has not been met by pre-auction offers and the Vendor was not in any rush and may decide to wait until Sydney’s high end market ignites again.

2 The Boulevarde, Cammeray

The rain made no apology for dampening the ground and Auctioneer Hugh Rainger of McGrath Real Estate found it hard to excuse buyers who watched this hidden gem silently pass in. With a reserve of $1,500,000 and one seriously interested party sitting quiet on offer of $1,350,000, the early pass in opened opportunity for negotiations behind closed doors. A little rough around the edges, this home displayed amazing potential with expansive cottage gardens, character filled stained glass windows and detailed ceilings. Most of all, the glass living space with the magical rainforest vista will guarantee a surprise if this property is still listed next weekend.

34 Grandview Grove, Seaforth

The welcoming entrance, sprawling layout and tranquil lifestyle offered by this property deserved a grander auction. Despite no registered bidders, Auctioneer Glen Wirth’s best efforts to seduce the crowds interest did not ease to the hesitant state of the Sydney’s high end over the last few weeks. A vendor bid of $2,150,000 opened the bidding with hope of encouraging interest. “A fair price”, Mr Wirth pointed out given good company of higher price tags in the neighbourhood. A number of quietly interested buyers present did not choose to play the bidding game and appeared happy to satisfy agent confidence of a sale behind closed doors.

The boys from McGrath Real Estate in action trying to sell 34 Grandview Grove, Seaforth.

2/59 Lauderdale Avenue, Fairlight

There were two bidding cards issued at this auction and it felt for a moment that this auction could have a positive result. This simple modern unit pleased the eye to all present but did not satisfy registered bidders requirements once an opening vendor bid of $2,700,000 was placed. The Auctioneer Simon Cotter of McGrath Real Estate highlighted obvious features of this 3-bedder designed by Ian Moore however this did not resiniate with the registered bidders and thus an opening vendor bid of $2,700,000 was placed and the property subsequently passed in.

2/101 Bower Street, Manly

This was the 3rd auction outing for this property and it received the same result – Auction Dismissed. All attending shared curiosity and appreciation of the sun drenched view of Shelly beach but no serious intent to bid. Mr. Hennessy representing LJ Hooker kindly discussed reasons for no auction, highlighted options and stating law that Auction conditions remain until midnight tonight – Interested bidders should be wary of opening Vendor bid of 3,300,000. Reduced from $4m Reserve at last Auction attempt, time may see this property drop price again.

Chris O'Shaughnessy and Edward Hobbs of Biggin and Scott in the middle of battle at 43 Laity Street, Richmond.

Its been a few weeks since our last update and despite the recent interest rate rises the market broadly is still where we left off – moving upwards.

Starting at the Top End of Town in East Melbourne a crowd of 60 strong witness 50 Berry Street pass in on an opening vendor bid of $1.9 million. Rob Vickers-Will of Abercromby’s gave the crowd every opportunity to bid but no one emerged. Things were slightly different at Albert Street where the penthouse with excellent views of the Fitzroy gardens was aggressively pursued by 4 bidders. The property sold well above reserve at $1,355,000 – solid result for Andrew Macmillan of Bennison Mackinnon

Richmond is still  strong with 2 bedroom dwellings like 17 Reid Street, 149 Lennox Street, 125 Brighton Street, 15 Bendigo Street & 21 Type Street all selling around the $ 900,000 mark with multiple bidders at all auctions. The depth of bidders indicates that well located 2 bedroom dwellings in Richmond are moving closer and closer to $1,000,000 – indicating significant market movement from 2009 where high $700,000′s was the norm.

Craig Shearn of Jellis Craig indicated that the Clifton Hill office had a 100% clearance rate with prices well above reserve anywhere from 5% – 15%. Mr Shearn noted that ” limited stock is still the main contributing factor behind the high clearance rates” and that “the recent interest rise appears to have had no affect on prices as the majority of purchases have already factored rises into there budgets”. Most importantly Mr Shearn noted that in his 26 years of real estate he has never seen  the market continually surged as it has in 2010.

Stefan Dzanovski of Collins Simms has also commented on the market strength with company clearance rates being between 97% – 100% in 2010. Also adding that open’s have been very well attended specifically double storey terrace’s in Carlton North, Carlton and Fitzroy.

Things are also hot in Essendon with 28 Schofield Street selling under the hammer and well above reserve – basically a land sale there were 4 bidders in total, one of them the next door neighbour. Solid result for the vendors and complements to Milo Rasinac of Nelson Alexander for an entertaining auction. At $1,267,000 this buy says land is valued around $1500 per sqm for the Salmon Reserve Green Belt.

The month of May has been talked about amongst many agents as a month of good stock levels and we concur, seeing May 1st shaping up to be a big weekend.

We are sure buyers would appreciate any kind of relief coming into the market as evidenced by the rising median price indicators courtesy of the REIV. While there are anomalies caused by small number of sales in some quarters this chart clearly shows prices have been on the march since the start of last year and circumstances seem such that it is likely to continue.

Know your Market

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.

It is 6pm Saturday and the James Million Dollar-Plus Clearance rate for the 38 Auctions we attended today was 74%; basically no change on the 77% ( pre Easter Super Saturday -March 27).

Bidderman was down from to 3 to 2.3 bidders per auction but that is still very strong all things considered (stock quality and Easter holidays).

Market Mood

Today was expected to dip to reflect this being a secondary weekend for $m+auctions; but it didn’t. Many of the really top homes wouldn’t have been launched with an Easter or School holiday start and May 1 and May 22/29 are shaping up to be the next $M+ Super Saturdays (stock quality and numbers wise).

The last 2 weeks confirm the March 27 strength. Hot! Hot! Hot! You know the market is very strong when you see that REIV agent members have reported 170 properties $m+ properties as sold since that pre Easter Super Saturday. That does not include today’s auctions. So basically the large majority were private sale at a rate of 8.5 a day.

This tells you the mood far more accurately than auctions today. Some expected and some unexpected suburbs below ($m+ sales in last fortnight).

Balwyn (5); Brighton (7); Caulfield (11); Docklands (3); Eaglemont, Elsternwick and Elwood (4 each); Hawthorn East (5); Malvern (5); McKinnon (3); Melbourne (5) and how about Mounts Eliza and Martha (6 between them); Surrey Hills (4) and Williamstown (4).

Interest Rates, Population Pressures, Volcanoes  – not sure what is going to stop this speeding train but it does need to and should slow down some time ……..

FIRB rule changes and major price increases confirmed.

The REIV trend chart confirms the effect on prices the FIRB rule changes had in March of 2009 and the leveling off that occurred when the Aussie dollar started to strengthen strongly against the US dollar (relevant to the Chinese community) later in 2009. With the help of Canberra, the Chinese community single handedly (a bit of exaggeration) rescued our Inner East $M+ property market and whether you like what is happening now with prices this was the beginning, one of the catalysts for the incredible 2009 price improvements right across Top End Melbourne.

Liar Liar Pants on Fire

Hi I’m Mal James and some people think I’m a liar.

It’s a bold statement. Is it grounded in truth? Initially, when representing a client, if I do not know the other side well, I instinctively hold information back. I offer information in a structured way, which helps me in assessing the objective and subjective connection to whatever information I perceive they control. If I am asked a direct question, but I believe that it is not in my client’s best interest to give up that information, then, at times, I will make a statement that may not disclose the whole picture or may allow confusion. Eg Privacy of a client’s identity or limits.

So, to some people, I am therefore a liar. That’s fair enough – you can call me what you like, some people do. I also assume that, at any time, I may be lied to – not always to deceive but I assume that some people are communicating to me in a way that, if I want to jump in over my head, then they will let me do that.

What is a liar?

Is it one who makes false statements? False is a most interesting word with a myriad of meanings and powerful consequences, depending on the interpretation applied in each and every specific instance.

On the definition of making false statements is Channel 7 weatherman David Brown a liar when he tells me tomorrow will be sunny and it’s not? Is Eddie McGuire a liar when he says Collingwood will win and they don’t (it seems he could be an infrequent liar this year) or is your bank manager a liar when she promises something will happen by next week and it doesn’t?

In real estate, is Low Bidders Real Estate’s Artina Deco a liar when she says a property should go for $X and it sells well above reasonable expectations, meaning she is 12 per cent out? Is Top Drawer’s Eddy Wardian a liar if he says a house will be on the market at $Y, the vendor changes their mind and it’s not? Is Victor Rian of Home Sweet Home  a liar if he says Z will be sold by tomorrow and that doesn’t happen, because a previously trustworthy buyer recants?

Are any, or all, or none of the above liars?

You may say lying depends on intent. In the end, does that really make any difference to you?

Is it important?  It was rainy, Collingwood lost, the loan didn’t go through or you missed the property.

Is it the lie itself that is of importance or the rules you apply and your reaction to the lie?

The community views deliberate and accidental “lies” very differently in law, despite in many cases the consequences to the “victim” being the same.

Let’s forget the word semantics. Let’s say an agent told you the reserve on a property is $2.45 million when, in fact, he knew it would not be sold for under $2.7 million, or, conversely, it could be sold to you at $2 million. Is it the deliberate lie or what you do with it – and how you react to it – that is the issue? Or does the lie itself determine the end result?

A deeper question is how should a lie affect you?

That may lie (excuse the pun) in the rules you apply to the circumstance.

If you perceive buying a home as being like a relationship, then you will probably react very differently to a lie or liar than if you perceive buying a home as like a business transaction.

What is the right way to react to a lie?

For me, truth or lies are mostly varying shades of grey – even the ones that seem black and white have shades of grey. To be honest, in business, I prefer truth but I’m not fazed that much, if at all, by a lie. In my personal life I take a very different stance. You may have an alternative take and fair enough, but if that different take involves an emotional response that doesn’t maximise your outcomes then …..

Is lying right or is it wrong?

1.  Is wrong related to unacceptable behaviour or self-interest or the greater good?

2. Unacceptable behaviour usually revolves around

• community self-interest (standards, laws etc) and/or
• individual self-interest (your opinion).

3. If it’s right for you but wrong for other guy – is it right or wrong?

Your self-interest opinion may be different to mine, in turn different to the seller’s, the seller’s agent and different again from community expectations. A current real estate and lying conundrum is notional propriety and the disparate self-interests of underquoting.

So, is a lie always right or wrong? You know, truthfully, I’m not exactly sure. We are taught that, morally, a lie is always wrong. I think a lie that kills a soldier is wrong but, if it saves 100 others, maybe it is right to tell a lie in those circumstances. A less dramatic situation is whether a lie is wrong that gets two parties together on a $2.5 million deal, which would not have happened but for the lie and the fact that the deal is in the best interests of both the buyer and seller.

Does a lie really matter?

Let’s return again to the example of a house quoted at $2.45 million, when, in fact, it can be bought at either $2 million or $2.7 million. Is the real issue the lie of $2.45 million? Or is the real issue the fact that you might get it at a different price if you know how? Is the issue that the lie is a danger to you or is it that you don’t have a lie detector process that is the real danger to you.

If you have a tried and true process – in other words a certain set of self-interest rules (such as the CAN process that we use) then is a lie a big deal?

If you have a process such as the CAN process,  then no matter what is presented, you or your advisers will break it down and look into it in an organised and beneficial self-interest manner. You will save flair and risk for the last little leap of faith when the agreement gap is small and all other elements of the deal have been explored and confirmed. Your procedural disciplines will discourage reactions that can be dangerous for you in the event of a lie.

In real estate, when you have such a process, liars are just interesting people you meet along the way that present opportunities to you rather than dangers.

If, however, you do not have a solid set of rules such as the Clarity-Assess-Negotiate process, then liars are Melbourne Real Estate dangers to you.

Is the issue in home-buying the lie or the process required to obtain the truth?

Finally sometimes the liar is within

Yes, some liars are faceless agents representing their clients. However, for some buyers, a far more dangerous liar is part of the inner sanctum.

He says to his family. “It’s just bad luck” that he keeps missing out. He is constantly surprised by the actions of agents, the process of real estate purchasing, the sold prices compared to the quotes. He has missed numerous times on homes his family wanted to –and should have – bought.

Or it’s a she: one who expects history to not repeat itself, just for her, and reacts badly when it does. She ignores that her emotional world of buying a home has collided head-on with the unemotional world of selling agents. She has taken no action, and made no change to her modus-operandi to cope with the emotional/unemotional disparity.

These liars take a “she’ll be right” attitude and say to their family “Let’s move further away” and accept less than they have to, or they say “Let’s look again in five years time, when prices will be cheaper.” Furthermore they take the identity of a victim, a victim with a family and worthy of pity, but a victim without a family home.

In real estate, and in life, some lies are very wrong and can hurt deeply. We have all seen and experienced that. However, lies can allow beautiful things to happen. As truth does; lies save and destroy. Truth and lies are a part of life. Your level of understanding, management and reaction to lies will ultimately determine your short and longer term property outcomes.

Buy happy

Mal

Footnote: Clarity on my position: I personally think truth adds considerable value to the home buying process. The best agents, deal makers and negotiators know how to use both lies and truths to maximise their client’s position and most do so with little emotion. Most experienced negotiators realise truth often bridges gaps that lies cannot. Please, for all my talk of lies, most of the deals James Buyer Advocates are involved in with high-quality selling agents are often win-win and with a high degree of truth. Truth and lies are why again and again we outline the benefit of professional buyer and seller agent relationships.

Rocket Rodney Morley and Marvelous Mike Gibson; Real Estate’s dynamic duo usually playing on opposite sides - this time K&B and TBM were working together to extract a lazy $10,000,000 plus from the market. Toorak: 4 Trawalla and next door: Sold $10,450,000. 4 bidders.

Abbotsford: 8 Turner: Bidder 3. Bought for $1,520,000. John Piccolo of Woodards talking 3 bidders through their options.

Since the start of 2010 we have seen buyers itching to get into the market… the amount of bidders in the North has increased as the weeks have progressed.

Where is everyone coming from…? Well it appears a combination of people who missed out in 2009, investors returning to the market and obviously a new bread of buyers that made the decision to purchase at the beginning of 2010. Add this to positive media commentary, historically low interest rates and relatively low stock levels and you have the ingredients for a boom. But values already rose 20% in Melbourne last year so that should mean we are at the end of the boom…? Correct?

Well the truth is we really don’t know, but we are seeing strong results in the market place and we are seeing bidders in serious numbers.

Take 290 Lennox Street, Richmond sold by Edward Hobbs of Biggin & Scott quote range of $700,000 – $770,000, 8 bidders in totals and more importantly 4 bidders still in the race as the property moved above $900,000, eventually selling for $985,000. The main story line here is bidder depth and market movement with 3 bidders who would have paid above $900,000 for that property that are frustrated and still active in the market place. It was a great auction with Mr Hobbs adding “the market is red hot at the moment with vendors extremely happy achieving prices above expectations across the board”

Similar storey at 102 Keele Street Collingwood sold by Paul Markovic of Peter Markovic, huge crowd of over 150 people, so big that the auction was stopping traffic. The original quote was $490,000. Bidding was opened strongly at $570,000 and then bids went to – $620,000 – $670,000 – $700,000 $710,000 $740,000 in literally a matter of moments. Needless to say the vast majority of the crowd were in amazement. There was a total of 6 bidders however I suspect there was the same amount hidden in the crowd who did not manage to place a bid – again frustrated bidders and lots of them.

David Oster of Jellis Criag Ivanhoe indicated that when the market was strong in 2007 that used to mean  4 or 5 bidders, now it means 8, 10 sometimes 12 bidders. Mr Oster aslo added “there are frustrated and desperate buyers out there who just want to get into the market” and importantly “despite price increases properties are still more affordable than they were in 2007 as interest rates at that time we approaching 10%”

So with the amount of bidders  and people rushing into the market are we starting to see a pack mentality? remember Warren Buffet’s famous Quote -  ”be fearfull when others are greedy, and be greedy when others are fearfull” I don’t yet believe its time to be greedy nor fearfull its just time to be informed.  There are prices that we see out there that are well over the odds and there are prices out there that are just strong results given strong market fundamentals – its very important to know the difference.

Know Your Market!

Strength of Character: Quietly in the background Andrew McCann of Bennison Mackinnon is bringing back common sense and decency to the Auction process.

It’s 6pm Saturday and the James Clearance Rate for million-dollar-plus auctions is 83 per cent on the 24 auctions we attended today.

The big news is on a very large day for auctions the bidder numbers per auction has actually risen dramatically to 3 per auction despite the interest rate noises. This is substantial and indicates to us the market is still moving in an upwards direction.

Chinese buyer interest definitely appears to be waning at present.

This week, we return to the issue of quoting and auction procedures. We would like to share a story that we believe has a message about ethics and about doing what is right. The star of this story is Andrew McCann, who manages the sales staff at Bennison Mackinnon. He is a driver of transparency and truth and he is a beacon in the real estate industry. Why? Because Andrew and Bennison Mackinnon have said “Enough is enough” and they have publicly stated that underquoting is wrong. Wrong like dummy bidding was wrong. Andrew and Bennison Mackinnon have made an attempt where others have not.

Andrew has driven Bennison Mackinnon’s PUBLIC policy of trying to, at all times, declare a quote that is representative of interest and has the vendor reserve within it. In doing so, they are returning us to the good ol’ fashioned fair dinkum Aussie auction days (thankfully without dummy bidding).

As you may or may not be aware, there are two types of auctions in Melbourne: yes, two, not one.

A. Bid to Negotiate auction
B. Bid to Buy auction.

They employ very different sales methods but both are called auctions.

Bid to Negotiate Auction
Marshall White, Jellis Craig, Hocking Stuart, Kay and Burton, JP Dixon and RT Edgar, to name a few, run auctions or selling campaigns for the right to negotiate, where they have no written price and no guidelines and/or no reserve declared within those guidelines. You bid for it to be passed into you or until you are told otherwise.

Bid to Buy Auction
Bennison Mackinnon auctions are auctions to buy and there is a price guide and reserve within that price guide. If you pay a set price, you buy it!

Is one right and other wrong?
No, both are legal. We are buyer agents; it is not our role to force down the throat of sellers or selling agents a message about how to run their business. It’s just that the majority of problems and damage to the industry’s image is caused through the Bid to Negotiate auctions as buyers do not like them and some are turning away from them when they have a choice eg Bid to Buy or Private Sale.

Why do buyers dislike Bid to Negotiate Auctions?

1. There are no written guidelines put out by the agencies on how Bid to Negotiate auctions work – they do not understand the process.
2. Bid to Negotiate auctions are open to the greatest misunderstandings when you get into the realm of verbal quotes and verbal reserves. After all, the contract you agree to when buying isn’t verbal and that is for a very good reason: to help prevent misunderstandings.
3. Bid to Negotiate campaigns waste time for many buyers, as they have no initial idea of affordability. Most buyers are time poor and their property searching time is valuable.

Which works the best? Bid to Buy with quoting and declared reserves or Bid to Negotiate with no reserves and no or misleading quoting?

Statistically, it seems impossible to prove either way - what is the yardstick?

Which one should you choose as a buyer?
Until recently, in Boroondara and Stonnington in particular, you had no choice, so you had to look at the home first and then manage, as best you could, the obstacles put in front of you. You only had Bid to Negotiate Auctions.

Which one should you choose as a seller?
If I was a seller, I would choose the system that maximised my price, within ethical guidelines. Either one is still your choice.

We don’t want to attempt to hide our bias: we are pro-openness (Bid to Buy with quote guidelines and reserves within those guidelines) for the majority of auctions; because we think truth is the best elixir for deals in our industry, not misunderstandings. Our agenda is we represent buyers – yes – but if you dismiss the arguments for and against as simply “Yeah, they would say that as they are buyer agents”, or because you think we favour Bennison Mackinnon, then that is your opinion. But, as a seller, you may have missed the main game. Trickery, misrepresentation, even ethical Bid to Negotiate does not seem to have a proven superiority over transparency and, in fact, there may be mounting evidence that you get a weaker price and less buyers to your door as a seller than Bid to Buy.

The question to sellers is do buyers perform better, eg will you get a higher price, when buyers are not informed or misinformed?

We as buyer agents buy a lot of homes – how does that work? Part of it is we inform buyers in a timely manner what they may need to do.

If there are the stats out there that show that buyers perform better when misinformed, please send them to us and we will publish next week, next month, next year.

We feel that, overall, the auction system is a superior way to sell when there are multiple buyers. This article is not about auctions per se; it is about the type of auction conducted.

Most people are aware of the Bid to Buy auction system: a home is quoted and the reserve is within the quote. You carry out your due diligence as a buyer and you bid if you think the quote is reasonable and, if you bid high enough within the quote to reach reserve or you bid over the quote, then you are the buyer. Yes, there still can be some shenanigans but they are few and far between. No system is perfect.

But it’s the Bid for the Right to Negotiate auction that we are examining in detail here, as this type of campaign seems to be the one causing the most angst and is more open to problems.

Firstly, Bid to Negotiate on some properties does work (after an auction pass-in, negotiation or in some cases interrogation can bring in thousands of extra dollars and it is the sole reason why we are engaged on some auctions).

We are not calling for it to be banned; with some sophisticated, high-end, or professionally represented buyers, Bid To Negotiate auctions can be most effective for the seller. We are just pointing out some of the “unloved” side that may in many cases hurt the overall price a seller gets.

In many cases, it is difficult for the buyer but it is also not in the seller’s best interests, as this Bid to Negotiate system has downsides for sellers that they may not have considered.

With a no guideline/no reserve “Bid To Negotiate” auctions, you alienate many buyers. What you, as sellers, are telling buyers, is possibly:

1. You don’t think we can handle the truth – meaning there is a reserve but either it is too high for buyers to contemplate or buyers are not sophisticated enough to be told it. Lovely, a buyer has $2 million to spend and the selling agent is telling them that the reserve may scare me so they won’t tell the buyers what it is.
2. You don’t know value yet: great, a supposedly professional selling agent has conducted a four-week campaign and has not been able to ascertain any value parameters for the property. Does that not speak volumes about the level of trust or skill between that agent and the buyer? Sellers, why are you hiring these people?
3. You are greedy. To sell your house to a buyer, you are going to squeeze every last drop out of the buyer. You are going to make it so painful that I almost don’t want to buy this house (more buyers than many sellers think simply walk away under these conditions). It is true that fear of loss is a driving force in our lives. But there are two other powerful forces from buyers: the fear of doing something stupid or that they will regret, and karma. Some people don’t act because they are scared of making a mistake and some people don’t want to buy a home that has bad deal vibes. Within the past month, we have had two homes that our clients were the highest bidders on but did not buy. Our clients have moved on and, in one case, the home was sold for less and, in the other case, the home remains unsold.
4. You still want more and that is your right. Fair enough.

That mistrust is what you, the seller, choose, when you run a Bid to Negotiate Campaign and it permeates through many things. There can be a real cost to you the seller when you hire an agent to conduct a less transparent campaign.

1. First, you get less qualified buyers through your door (granted this last few weekends makes a mockery of this – they are going through everybody’s door – but in normal situations). We know this is denied by any non-quoting agent, but we dispute this- many buyers simply do not look at your property if it has not got a quote on it. Our IT guy, Michael, just bought a home in Nunawading and he did not look at any properties that did not have a quote.
2. Sellers, ask around at your dinner parties – are people seeing more auctions where there is no bidding at all? Why is that? When we first saw this, we were puzzled ourselves but we delved further into it. There are some agents who are running auctions using this Bid to Negotiate method that are so low on the buyer trust scale that buyers just cannot bring themselves to bid and some, at the last minute, bid afterwards but many just simply walk away.
3. Quality Restaurant: Are you happier to go back to a restaurant that provides good and friendly and honest service or would you rather return to a restaurant where you are told it’s $15 for the scallops – they are good but when you leave, you are charged $25 instead. What about if you found another restaurant next door that tells you their equally well-cooked scallops are $25 and actually charges you that?

Running a Bid to Negotiate auction does have the potential for upside, however it also has the potential for downside when you consider on all properties there is only one best buyer and by your choice of auction you the seller may have alienated them.

Next step: the Negotiation (Ethical) / Interrogation (Unethical) part of the Bid to Negotiate Auction.

Fair, tough negotiation is totally respected by buyers and sellers alike. However, are you, as “squeeze the lemon dry” sellers, happy to condone any form of post-auction INTERROGATION?

I mean, nobody is going to shed any tears at a post-auction negotiation if I’ve got five heavies breathing down my neck and fair enough.

But if you are a “squeeze the lemon dry seller” with a Bid To Negotiate campaign and an unethical selling agency, what rules are in place for the post-auction interrogation. Put the shoe on the other foot: what if it was your 28-year-old daughter who was looking to buy her first home? She got a pest and building inspection ($600 to $700) and legal check and was told the home was $800,000ish and also got her finances in place.

She turned up to the auction and bid $845,000. The property is passed into her and she is taken inside by three men in suits.

There is no female present and no water is offered and she is told firmly that if she doesn’t pay $1.05 million, then her dream home will be sold to another buyer waiting outside.

She feels totally intimidated and she was given no warning of this – she thought she was going to a fair dinkum auction, not an interrogation. If she knew it was going to be like this, she may …………

How long does this go on for? PRESSURE. PRESSURE. PRESSURE. Is this a form of assault? Is this harassment?  What happens if she agrees to something she can’t afford because she is so intimidated (deliberately)? Is this coercion – is the contract still valid?

Can she sue you the owner or sue the agents? Is this a legitimate contract?

Should she have got a buyer advocate? Not the real question. The real question to you, as sellers, is: is this right? Is this particular Bid to Negotiate auction how you want to be represented?

With ethical sellers, you now have a choice. Bid to Buy Auctions with ethics. Buyers may still have to face very difficult negotiations with Bennison Mackinnon, but they also have a choice in that they can pay the reserve or asking price.

And, please, we have never witnessed or heard about any of the above intimidation tactics happening at any Marshall White, Hocking Stuart, Jellis Craig, JP Dixon, or Kay and Burton auctions. We have made up the example to illustrate a point about extreme ”squeeze the lemon sellers” in an unregulated and unethical Bid to Negotiate auction. In the above instance is it OK for a selling agent to say I was only operating under sellers instructions.

A strong argument as to why agents don’t put a quote/reserve out; is that it limits the buyers.  We agree but the reverse is also true. We have seen no provable evidence that misinformation or no information outperforms, across the board, genuine information.

We argue with buyers saying you sellers and selling agents are not idiots; so now we ask the question of you, do you think that buyers are idiots and don’t fight back against these tactics?

There are a number of strategies such as:

1. multiple bidders,
2. price with conditions, and
3. raise, raise and then lower strategies. Try getting slightly unreasonable with us and we think we are the only buyer – we will rip back a lower offer than before – that’s right, we go backwards – we will and we have – it is just that maybe your selling agent has disguised it and/or we are very polite about it.

I think some people misunderstand our role or our demeanor at James Buyer Advocate at times. Yes, we are polite and, yes, we have tremendous respect for the negotiating abilities of agents at Marshall White, Jellis Craig, Kay and Burton and so on. But we are not doormats on the buyer’s behalf. We have represented hundreds of buyers and most of the deals are done with respect, aided by a relationship and on a win-win basis; however, the auction practices of no written quote guidelines related to the reserve are counterproductive to our industry. We don’t just “whinge” about them, we develop strategies to deal with them. And so do many other buyer advocates and experienced buyers.

Sellers, you may not believe this but it “ain’t all about the money” for many buyers and we have always thought, and been prepared to pay, the strongest prices when the light is obvious at the end of the tunnel; ie when it is on the market or there is a clear price and rules. We often have two prices – one for openness and transparency and one for smokes and mirrors – guess which one of the prices our clients give us is the higher?

Our clients and many buyers can handle the truth when it is put forward.

We applaud Andrew McCann and Bennison Mackinnon for their ethical and also smart business approach in Bid to Buy auctions with quotes and declared reserves. Is your selling agent offering you the choice of quotes, reserves within the quote to bring more informed buyers to your door or are they telling you that the only way to run your auction is to keep everybody in the dark?

Buy Well

Mal

PS Andrew McCann 0414 643 744 or any other Bennison Mackinnon agent 9864 5000; ring them and hear what they have to say when you are about to list your home for sale.

Brighton East: 1 Regent Street: John Pollard of Woodards. Crowd 100. 3 bidders. Bought $1,853,000

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

Tim Heavyside of Fletchers was pumped today - in fact, we almost thought we saw a bit of disco on the way to his four-bidder sale at Surrey Hills.

For many years, Scott Patterson has been the “pin-up” auctioneer of Hawthorn and surrounds – well, according to the ladies we represent, he is. Scott is the “new face” of Jellis Craig. Our personal dealings with Scott have always been straightforward and, while we have had differences and probably will continue to do so with Jellis Craig (this is not a derogatory comment), at least with Scott, and for that matter Jellis Craig as a whole, we feel we do get a fair hearing. As a Boroondara auctioneer around the $800,000 to $1.2 million mark (difficult or easy auction), Scott has no peers – he is consistently the best we have seen. And, finally, we like talking to Scott because he is a stats man – yes, there are issues with stats but at least many of Scott’s thoughts are supported by reason. His contact number is 0417 581 074

Mal: Morning Scott.

Scott: Morning. Have a good holiday?

Yes thanks. What, in your opinion, has the market done to date this year? Eg do you think the market may have kick-started in volumes?

The year to date has seen a dramatic turnaround in price due to a combination of low interest rates, high rental returns, government stimulus packages, Melbourne’s growing population (1700 per week), a housing shortage and increased foreign investment.

Volume levels year to date Jellis Craig in 2007 – 909 auctions; YTD in 2008 – 794 auctions and YTD in 2009 – 700 auctions. Clearance rate this year sold 683 from 726  auctions (94 per cent- that does include sold afters).

What are you expecting to happen up until Christmas?

Between now and Christmas, I would expect the trend to continue.  The steam will not come out of the market until interest rates go up.

The strongest market segment?

For us, it is the $1m-$2m range, as there has been limited offerings. Big stock shortages earlier in the year created pent-up demand that has not yet been satisfied.

The $2m to $4m segment is not quite as strong but is still going well, as there have been fewer job losses than expected.

$4m+ is interesting. I can remember in 2007 when your company bought Grange Road Kew off us and there were four bidders over $6 million and then you bought Sackville Road off us a few weeks later which had seven bidders around $5 million but in 2009 there has been only one property per month over $4 million in all of Boroondara. But I don’t think it’s a weak market. I think the demand may be there, it’s just there is no stock.

Another interesting market, Mal, is land. Values in Hawthorn have gone through the roof.

Yes I agree. Kew and Canterbury has been booming for some time.

True, with the Chinese influence.

But since the Urquhart sale and then, the following week your sale at Manningtree Road, Hawthorn land has grown another leg. (In late July, 49 Urquhart sold for $2.11 million when we at James thought a few weeks before that $1.6 million was plenty. 64 Manningtree – the 3AW-publicised home -was bought for $1.92 million after early quotes were at $1.5 million.)

True, Mal, those two sales were the catalyst for Hawthorn to start catching up to the increases we were seeing in Kew and Canterbury. Look at 3 and 9 Ardene Court Hawthorn. No 9, which was renovated and we sold for $1.1 million in May versus 3 Ardene, completely unrenovated but after those two auctions above we sold in August for $1.275 million. That is a quantum leap.

500sq metres, or what we traditionally called smaller blocks, are a real flavour. 8 Rossfield (533 sq metres and $1.43 million), 2A Rae St (538 sqm and $1.39 million), Swinton (590 sq metres and $2,000,001). The first two had no house value.

The weakest market segment?

The weakest market segment? Tough question because they’re all going well at the moment.

Scott, come on.

OK anything that is compromised eg main road, tram line, is still being avoided or discounted, although those discounts are fast diminishing again. Mal, we are selling almost everything.

Auction bidding is in the news – your thoughts?

Auction bidding has been strong for well positioned real estate.  Traditionally, the Asian community has not liked to participate in auctions; however, now they are the main players.  We have been using whiteboards to help them understand the bidding sequence and, in some situations, we have conducted the auction in both English and Chinese.

Scott, I agree that Jellis Craig does run superior “Chinese auctions”. The heat on quoting seems to have gone out of the debate. Do you agree and why is that?

The heat on quoting has diminished.  As a company, we made the decision to remove “price quotes” and it hasn’t affected business one bit.  I think buyers prefer to have a discussion about recent sales in the area than be told an agent’s “quote”, which turns out to be inaccurate in a rising market.  We have noticed less aggro since removing reference to prices.  As we all know, the market determines the price on the day.

Now you know I don’t agree with no quotes but I am accepting that there is a logic to what you, Marshall White and Kay and Burton espouse. But isn’t it reasonable for buyers to be given some guidelines?

Mal, they are. This is not a work-reducing exercise. We are spending a lot of time training our sales staff to communicate better and spend MORE time with buyers discussing comparables. No quoting is more work, not less work. Consumer Affairs are coming the heavy; the market is rising quickly and there is significant lag time in such publications as Melbourne Weekly and it is a rapidly rising market. That is why we removed our quotes.

You could put you quotes on the internet only.

Mal, I grant you that the issue has not been completely solved and we may return to quoting but, as an interim step to remove criticism, we have removed them. Maybe Consumer Affairs need to give better guidelines.  And, to be frank, I think, for some of our sales staff, it has put them more in touch with buyers – you do have to spend more time explaining the comparables. You do like our comparables system as you wrote about it last year as the best single innovation by an agency in 2008.

True. Your comparables information on the web and at opens is great information for buyers and still superior to all other agencies in Melbourne.

Thank you. We do try to update each property each week and we are working harder with all our staff to be more accurate and we are looking for the perfect quoting solution, but I feel it may not be there.

How much effect is money from mainland China in your market and do you think that money is here for the long haul? Another question: has there been a bigger influence on price?

Money from mainland China has added a another layer of value in my opinion – probably as much as 10 per cent.  The relaxing of the foreign investment rules has spurred it along a bit but the investment from China was already happening because Australia is seen as a safe haven.  I think so long as China and Australia have a healthy working relationship, investment will continue.  Will it continue forever? Probably not.  India is a country with a massive population and they like Australia too.

What about the thoughts that Chinese people are only buying here for the private schools and they are full to overflowing in enrolments?

Some truth in that and we need to be careful if we are claiming that. I remember a few years ago we had to withdraw any reference in our advertising to Balwyn High when they suspended enrolments for two years. But, yes, Mal, this may affect a push into areas by Asian buyers who have a good school for their children as a prerequisite to purchase.

I do think Chinese interest did spike a few weeks back and, as Robert Ding in our company stated, the Aussie dollar is climbing all the time, which may also lower the spending abilities of some Chinese buyers.

Anything else you would like to talk about?

It is very positive now that Australia is in “recovery” mode.  The doom and gloom of last year is behind us.  Our stock market is recovering well, business confidence is back and people feel safe to invest in bricks and mortar.  With our population growing so fast, it is likely that the established suburbs in Melbourne will continue to grow in value.

Also I found the Neil Mitchell article interesting reading, stating we are going through a population boom. I’ll send you a copy.

And, finally, did you know that in Balwyn and Balwyn North between $1.8m and $2.3m in realestate.com right now there is one new home to look at. One – this time last year, and I know this because I was helping my sister, there were 35 modern homes. Big change.

Love those stats, Scott, and thanks for talking to us.

Thanks Mal.

Bentleigh: 22 Yawla. Nick Renna - Mr Dynamo firing up a huge crowd of 100 to a 4 bidder final result of $1,065,000.

It’s 6pm Saturday and the James Clearance Rate for million-dollar-plus auctions is 68 per cent on the 19 auctions we attended today.

In this week’s Market Wraps, we are most appreciative of the time and effort Scott Patterson of Jellis Craig (Boroondara), Iain Carmichael of Bennison Mackinnon (Stonnington) and David Hart of Buxton (Bayside) put into answering our Market Wrap questions. As this weekend is a quieter weekend, with weaker homes and land sales and smaller turnover, we thought the focus should be on a Q&A with quality, key agents on what to expect between now and Christmas.

Please note Chinese translation pdf to the right of this article.

But onto our Market Insight. Buyers – a time to perhaps keep your head?

We think the hot topic of today is definitely buyer panic. You can see it at auctions, you can hear it in buyer voices at opens and you can feel selling agents are thinking we are back to 2007 buyer mindsets.

As a buyer, you can panic if you wish; that is your prerogative, but there is no need to do it and there is no value add for you, the buyer, while you are in that state of mind.

Yes, the market has moved and, yes, it is still rising and, yes, it is hot. Many credible agents have been advising for some time that “now” was a good time to buy – that “now” was last year and early this year – that “now” was five years ago. We are at another “now” – now. So is it a good time to buy or should we throw up our arms and say it’s all too hard?

Look, why not throw up your arms and give up? Or why not just go and buy something – anything – just something to get off the treadmill of inspections, bid and miss.

Why not? Because such a decision could lead to a lesser, unhappier life for you and your family.

When the pressure’s on, when – to use sporting parlance – you are in the premiership quarter or, if you are a golfer, when you are on the back nine on Sunday, or, if you run marathons, when you hit the wall at the 36km mark, when the real pressure is on, do you achieve anything by giving up? No. The “winners” are those that can keep their head and make good decisions under pressure.

And there is no doubt that buyers in the $1 million to $4 million range in Inner Melbourne are under considerable pressure right now.

So let’s look at the pressures. Let’s examine what is happening in the market and then let’s look at some practical solutions.

Pressure No 1: Overseas Demand: Scott Patterson from Jellis Craig (the full interview, full of interesting insights, is in our Boroondara Wrap below) pointed out broadcaster Neil Mitchell’s article in the Herald Sun examining our population increase as reported by the Bureau of Statistics. (It was a good article: http://www.heraldsun.com.au/opinion/how-many-is-too-many/story-e6frfhqf-1225780951508). But let’s move on from the article’s point as to whether we should be encouraging population increases. The fact is that we are actually having migration increases, have been having them for a long time and, from all reports, we will continue to do so for decades. Population is the key to Demand and Migration is the key to major price shifts (new ideas, new money, new price levels). So what evidence can we see of this in the market? The clearest evidence is at auctions (if you attend them) and statements from Marshall White and Jellis Craig that 25 per cent of their sales over a million dollars in Boroondara (Hawthorn, Kew, Canterbury) are to Chinese or Asian buyers.

Pressure No 1a: Local Demand: We are experiencing a mini baby boom, more family homes now, and, in 20 years’ time and beyond. That will put more pressure into the housing market. But, right here and now, local demand is very strong and that is best evidenced by the fact that, despite the world being in the greatest recession/depression since the last depression/recession, there is genuine talk of interest rate rises in Australia from Glenn Stevens of the Reserve Bank. This, in our opinion, proves that people are feeling good, acting on it and this is shown locally in, say, Bayside (Brighton) where there are some overseas buyers but nowhere near the same extent as in Boroondara (Kew, Balwyn etc); however the Bayside market is buoyant and also rising steadily and, while not at the same level as Inner Eastern, is fast approaching the 2007 price peaks and will, in all likelihood, surpass them before Christmas. Bayside demand is still largely driven by local buyers.

Pressure No 2: Supply: While right here and now in early October 2009 we are seeing some good supply, this, according to the best advice from selling agents, is a small window created by the Melbourne sporting and religious calendar. In Spring, there are three key weeks for stock: the first week in September (to get it sold before Grand Final), the first week in October, after Grand Final (to get it sold before Melbourne Cup), and the first week in November, after Melbourne Cup (to get it sold before December and Christmas). This week, we have experienced the second of the three one-week bursts and there were literally hundreds of homes brought onto the market in the past week. However, there will not be that number next week or the week after. We are in an overall low stock environment right now and that is confirmed by figures such as from Scott Patterson of Jellis Craig: year to date Jellis Craig in 2007 – 909 auctions; YTD in 2008 – 794 auctions and YTD in 2009 – 700 auctions. Marshall White, the other dominant Boroondara agent, reports similar drops in activity. It is the same in Stonnington (Toorak, Malvern etc) and Bayside (Brighton to Albert Park).

Why is this happening?

Three key reasons:

1. Overseas buyers find it easier to buy than last year and do not have another home to onsell. Increased demand and reduced supply.
2. Local buyers are buying homes for their future generations. Increased demand and reduced supply.
3. We are an increasingly wealthy society and homes are seen as a store of wealth and many can afford to hold multiple homes as investments. Increased demand and reduced supply.

As an aside, reasons one and three are actually encouraged by government through FIRB changes and the negative gearing tax regime.

Adam Smith, in his book Wealth of Nations back in the 1700s, said, and we, as agents, witness this every day; when demand goes up and supply goes down, then price, without artificial interference, will also go up and the stronger the demand and the weaker the supply, then the greater the price increases across the board.

So, for buyers, the pressures are very real. But you know that.

On top of these pressures, buyers who read and listen may also be influenced by commentary, some of which is not necessarily well informed. These comments, while well meaning, can also spook “panicked” buyers into changing course.

Remember the doomsayers of last year? Well, the world didn’t end.

Equally worrying can be seemingly well-informed commentary such as an article I read recently by Tim Lawless from the respected RPData. It stated “That capital growth apartments are virtually on par with detached houses … This puts to bed the myth that houses appreciate at a faster rate than units.” (See http://www.realestate.com.au/doc/Resources/News/tim-lawless-units-versus-houses.htm).

While by some statistical twist this may appear true, in practical terms we strongly disagree that this is a helpful or relevant comment in Inner Melbourne. And these sorts of statements may encourage the wrong buying action.

Across the board in Inner Melbourne, the above statement is not true and, in fairness to Tim, he may not have meant it to be read in such context. Also in fairness when you look at the reported $15m paid for the Melburnian Penthouse this week through Ross Savas of Kay and Burton, or you just look at the incredible growth in some bottom rung 1 and 2 bedroom apartments in say Hawthorn recently, you may correctly argue that some apartments are money spinners. And finally it is fair to say that a small number of investors dealing in multiple apartment purchases with very sophisticated purchase and “flip-on” or purchase and hold strategies have made excellent returns. But overall if the article was meant to imply that apartment buying was the almost the same as home buying in terms of capital growth ceteris paribus (with other factors being equal) then we find the article not helpful and therefore we feel these sort of blanket comments, around one selected statistic should be qualified a lot more than what they are.

Labouring the point a little, yes it is true that there are some well performing apartments (yes, we buy apartments) particularly in the suburbs, particularly low rise and particularly brilliantly located ones. So, yes, some apartments have performed very well BUT there are vast numbers of apartments out there that have been investment dogs (for all except the developer) and, if these sorts of articles encourage younger people (who can afford to buy either land or apartments) to buy apartments instead of well-located land as their new family home, then it is doing a great disservice to those people if longer term financial outcomes are important in their considerations. I will leave this for another day, but I ask the question: what about resales v new apartments in the RPData figures? What about Docklands, St Kilda Road, half of Port Melbourne (eg the big blocks not on the beach)? What about suburb by suburb comparisons, such as below?

Government – Valuer General Median Prices:

Hawthorn

2003 Homes $662,250; 2003 Apartments $313,700

2008 Homes $1,292,500; 2008 Apartments $372,000

Five-year increase homes – 95%.

Five year increase in apartments – 18%.

Toorak

2003 Homes $1,450,000; 2003 Apartments $430,000

2008 Homes $2,600,000; 2008 Apartments $560,000

Five-year increase homes -  79%.

Five year increase in apartments – 30%.

Brighton

2003 Homes $886,000; 2003 Apartments $475,000

2008 Homes $1,550,000; 2008 Apartments $590,000

Five-year increase homes -75%.

Five year increase in apartments – 24%.

Port Melbourne

2003 Homes $560,000; 2003 Apartments $475,000

2008 Homes $775,000; 2008 Apartments $478,500

Five-year increase homes – 38%.

Five year increase in apartments -1%.

Do these figures prove we are right and Tim is wrong? No, we respect the work of RPData, and we use their stats. What this proves is that figures can be made to say anything. Practically speaking, and all things being equal, we would encourage all young buyers to think position first, land second and building (apartments) third. Of course, with spousal approval being even more important than position. If your buy is more than emotional, consider land before apartments, if you can afford it.

Wars are not fought over apartments; they are fought over land. And finally with any data analysis (including ours), if you throw enough ingredients into every different soup, then they all taste the same.

Please don’t panic and change course or just react to a headline because you are under pressure!

But I digress. Continuing with Buyer Pressures which are real and increasing. Do you give up or make poor decisions? Is your case hopeless?

Practically, let’s look at a sample of what we have bought in the past month of September. These homes are worth a million dollars or more.

Northcote (Jellis Craig): couple who wished to move from Outer Melbourne, considered Kew etc and then decided the Fairfield area was more affordable. Great purchase at auction: a lovely renovated period home, with good land content, near shops and Fairfield station. Over a million.

Toorak (Marshall White): Over $2 million, this home had been sitting around for months and months with several agents as well. With $300,000 spent on cosmetic renovations, this home will be simply stunning and will have made up for any market movement in the six months it took to find. Land content more than 70 per cent of the price. We love quality stale properties when the market meets the asking price.

Sandringham (Biggin and Scott): Lovely family home bought at the second attempt to buy for around a million dollars. Good position, street, land content and north-facing rear.

Brighton (Kay and Burton): Family home twice offered, bought after four weeks of negotiations for a fair price to both buyer and seller. Good selling agent work. Over $2million.

Canterbury (Marshall White): More than $3 million. Block of land in Canterbury’s Golden Mile bought after two previous attempts for this client. Great land.

Balaclava (Beller): Off-market: Great initiative by buyer who found the home with a letterbox drop and then asked us to negotiate with the appointed selling agents. Robust but pleasant negotiations and a fair price to both parties. Great land and well done to buyers who did something different but then were smart, not cute, when it came to doing a deal. More than a million dollars.

Hawthorn (Jellis Craig): Off-market: Boardroom auction. Flexible buyers who had tried with us to buy three homes before – kept their nerve – adjusted their PPP (Price, Property and Position) and still bought in a good location with a reduced budget and it’s still a good solution for an expanding family. Over a million.

Hampton (Hodges/JP Dixon): Over $2 million. These clients had been looking for more than two years (with us). Saw it and we bought it pre-auction. In one of Melbourne’s great locations (Hampton Beach, Railway, Shops and Brown Cow). Good land and a brilliantly designed and built home.

South Yarra (Hocking Stuart): Over $1 million. This was the clients’ second attempt with us, but they stayed true to what they wanted and could afford and just shifted suburbs a little. Good land content.

But, please, we are not claiming a perfect strike rate – a sample of where we missed at auctions. Richmond, Camberwell, Surrey Hills, Glen Iris, Mont Albert and Malvern during September in various $1m to $4m price brackets.

Our point is that the successful buyers didn’t give up (not even after two years) and still bought sensible (yes some strongly priced) well located, good land content, workable floor plan properties.

It’s not the price now (within some parameters), it’s the quality of what you buy that will protect you into the future.

Please for young people in particular (if you haven’t nodded off) all of this is to encourage you not to panic, but to stay your course and to not jump at shadows. The market will not be easier in the future; it will be harder – act now (if it makes sense – if not keep looking till it does). When you act do so with streetsmarts. Don’t bury your head or just buy or, worse still, buy crap. Think!

1. Understand clearly what you want emotionally (room for future children?) and financially (growth for your next purchase?) both now and in five to 10 years.
2. Make a plan and, in that plan, understand the value of land content, happy wife and happy life, floor plan flexibility and position.
3. Act on that plan with an accurate assessment of your needs match and values.
4. Negotiate to buy well, not buy poorly or just keep missing out.
5. While understanding that selling agents work for the vendor (always), we would still encourage you to listen to quality selling agents that do tell  truths. We learn more off them than any other group of property professionals.

Finally, we know you are under pressure. While it is almost always better to miss an opportunity than make a mistake, sometimes continually missing good opportunities becomes a mistake.

If all else fails, ring us.  We may be able to help you achieve your dream.

Apologies if it’s sounding like a lecture – we are genuinely trying to help.

Stay cool, buy well and be brave (at the right time).

Mal

PS We all really enjoy the people that come up to us at auctions and open for inspections. It’s good to meet you.

Toorak, 78 Clendon Road: $4.35 million. Paul Castran as the buyer would see him!

It’s 7pm on Saturday and our James Clearance Rate is 82 per cent on the 22 auctions we attended and reported on. Need we say any more – the market continues its strength and subsequent price rising, despite being in an increasing stock level environment.

Flashback: our report from 22 November 2008: Today, only two of the 13 auctions we attended sold under the hammer. The weakest market is the $1 million to $4 million market. What a difference a year makes. In September 2009, the strongest segment at present is this same $1 million to $4 million market.

Summary of today’s Market Insight:

1. The James Connell State of the Market Interview.
2. Repeating 2007 and The Chinese Influence.
3. Buyer Stress.
4. Re-think rather than Give Up.
5. Control Price – Neighboring Properties Discount.

James Connell, Managing Director of Marshall White, one of the two dominant selling agencies in Boroondara and Stonnington, talks to Market Insight this week. James has 30 years in real estate (a slow learner) and has co-owned Marshall White, with John Bongiorno, since 1993. The water-cooler talk within our industry is that he has respect among his troops and his support is very hands-on, even when it was a bit tough. He has given our company solid helpful advice over the years and, while buying off Marshall White is never overly easy, we have always found their salesman quality runs to the bottom and this must ultimately be a reflection, in part, of his leadership.

Mal: Where is the Boroondara/Stonnington market going?

James Connell: Under $1 million, I think the market has peaked. The $1 to $4 million market, I think, hasn’t peaked and there is some steam left. Over $4 million, the air is pretty thin and still minimal activity.

Mal: Anything else?

James Connell: Most secondary properties, eg main roads, next to commercial, have, up till recently, taken a pounding; however, they are now gaining momentum again, along with the rest of the market.

What are you saying?

There are times to buy secondary properties – that time has passed. Buy quality – you will need to wait for the next downturn to again buy most secondary properties well.

Anything else?

Period homes in that $1 to $4 million market (which, in your past Market News’ articles, Mal, you have correctly identified as slow last year and hot this year) are very, very strong and, in a natural cyclic movement, we are finding Armadale is going better than Malvern.

What do you expect until the end of the year?

No change in the current strength of the market. Our company’s auctions are 20 per cent down on the 2007 peak (120 to 100) but, looking positively, we are 20 per cent up on last year.

What about bidding? What are you seeing?

Most of the same ol’ same ol’. People who don’t normally do it are taking advice from people who did it once 10 years ago. Giving your company a plug, Mal, and other professional buyer advocates – I really don’t know why people don’t pay your fee and hire some expertise. It is not as easy as people think and, under pressure, people make mistakes. However, the auction system, when run well, is still the most transparent and fair way to buy/sell a home.

What should buyers do if they are going to do it themselves?

Pre-determined figure. Actually bid and then buy it or walk away at a pre-determined figure (or maybe a little bit more).

Both laugh.

What about quoting: I have always thought you guys were wimps not putting some sort of figures out there.

It is not in the vendor’s best interests to do so, Mal. We think quoting puts artificial ceilings on homes. Also, as you well know with your Control Prices, you don’t get it right all the time and, in fact, in this market, we have media lag times for advertising of at least 14 days and things can change a lot during that period.

But you say at the door what the price may be?

That is buyer interest and we can change it and explain it.

Aren’t you alienating some buyers who simply won’t bother if they can’t work out price?

I firmly believe in this market that we are not missing any serious buyer enquiry.

Chinese buyers?

Major, major effect on our market. 25 per cent of our sales in Boroondara and 12 per cent in Stonnington. And I think Chinese money is here to stay. Chinese buyers are not scared to pay what they need to and, with government changes, it looks like this solid migration will continue. Mal, Chinese people have effectively kick-started our economy and underpinned all our housing values in inner Melbourne. We have a lot to be thankful for and I believe their influence on price has been around 10 per cent. Chinese people are buying $1 to $4 million homes, well positioned and good land and, with the FIRB changes, they have moved from buying apartments (which is very quiet – nowhere near 2007) to land.

And what else have you seen in the market?

The complete collapse, due to lack of success,  of Expressions of Interest Campaigns.

Why?

No standard rules, in fact no rules, and agents are just as confused as the public. That is our fault. Also, it’s human nature for people to only offer what they want to, not what they have to.

Please expand.

An expression of interest or auction is only a conduit, not a solution. The solution is good agent work. However, as a conduit, Expressions of Interest is not working and not allowing a good agent solution. Buyers don’t understand it (as many agents don’t) and buyers certainly don’t trust it.

What makes a good auctioneer?

Empathy with crowd – one with the crowd – can settle buyers and raise their excitement at appropriate times.

Premiership?

My team is your team – the Pies and Dane Swan for Brownlow.

Thank you, James.

My pleasure and good luck tomorrow.

(This interview was on Friday)

Continuing on with James Market Insight – Repeating the Past of 2007:

Flashback: October 2007 James Market Insight: …These large increases as per most of the rest of the world are largely confined to inner suburban quality properties. Land itself, meaning land where homes can be pulled down, is particularly well sought after in all Melbourne Bayside and inner eastern suburbs. What is driving the market? It is being driven by overseas buyers, stock market wealthy buyers, buyers who have seen large increases in their own properties and buyers who are confident in their future.

Back to now in September 2009:

The question I get asked the most. Why is our market so strong? It was initiated by demand from Chinese buyers. It started as a trickle in April and now the floodgates are opening, as evidenced by such comments as those from Pat Dennis of Jellis Craig, who, when we were on the phone, said his last 13 sales in Balwyn and Kew had been to Asian/Chinese buyers. Both Jellis Craig and Marshall White – the two dominant Boroondara agents – state that around 25 per cent of all their sales are to Chinese/Asian buyers. The market stock levels are reducing further, as most Chinese buyers do not have homes to sell – or do not wish to put other homes back into the market for sale.

I’m not saying this is a concern; I’m simply saying that this is a fact. It is government policy that is encouraging Chinese people to buy up large amounts of land here. Good on them – in many ways, while there may be some concerns now and in the future re price increases and stock tightening, if it wasn’t for Chinese money earlier this year, we may now be in a far worst state economically than what we seem to be.

However, we are a micro society compared to the wealth of China and maybe some thought needs to be given to the long-term effects of such amounts of money coming into the local housing economy.

Boroondara’s activity has placed price pressures on the nearby Stonnington suburbs of Malvern, Armadale, Toorak and South Yarra and prices have continued a steady rise, as more Chinese buyers buy more properties.

Bayside suburbs have not yet experienced the Chinese influence to the same extent and, consequently, have not had as sharp an increase in housing prices.

The biggest issue out there at the moment is increasing BUYER STRESS or panic or feeling of hopelessness.

If the market continues like this, then you the buyer have PPP adjustments to make or else you will not meet the market on Price, Property or Position.

While we encourage the buying of quality properties only, we don’t encourage paying more and more and more. There comes a time where you can either stop, (we have never found that a successful strategy, as most who stop are often too late restarting and miss the market again) or re-think. What we think works is a re-think. Adjust your Property or Position while still being a bit flexible on Price, but, if you can’t keep up with the market, then firmly focus on Position or Property adjustments. Rule of thumb; it is usually (but not always) preferable (long-term financially and emotionally) to adjust Property (land + building) rather than Position.

In September 2009, if you have $1.5 to $2.5 million in Hawthorn and you are looking for a family home, then prices like Urquhart Street say you have a lot of friends also looking for a home but little to choose from. If you can’t afford the $600,000 jump, then why not consider Eaglemont or Kew or Glen Iris? If that Positional change does not excite you, then why not consider a 1980s home or a period home that is a bit dated rather than a new home now.

Your mortgage levels need to be considered. If interest rates are about to be increased, then bigger mortgages at higher rates will soon take the gloss off your new home joy. Buying rubbish is not a suggested solution either, as we have often talked about the GAP LAW – time does not heal bad buying decisions. And James Connell confirmed above that the time for smart rubbish buying may well have passed.

So, if you can’t stop or get bigger mortgages or buy rubbish and be happy, what can you do?

Why not consider smaller land size and a smaller home (if that is possible)? It still makes sense if you keep Land Content to Value Ratio in the 70-plus percent range - even on some smaller block sizes. Albert Park (block sizes around 150-200 sq metres) as a whole is testament to this. You do have choices rather than give up or kill yourself with a huge mortgage – you can rethink.

In summary, some “rethink” observations:

1. Stopping or panicking usually isn’t a long-term solution.
2. Be careful with major positional rethinks. For example, do you really want to live in that area or have you just found a house you can afford? We feel yes, connect with the PROPERTY, but you still need to connect with the POSITION.
3. In property, it is position first, then go for a home with good bones, even if you can’t afford the “skin” right now.
4. PRICE is important as to paying market and your ongoing affordability.
5. And if all else fails, you can always get a new spouse with more money!

Now, a word on our James Control Price performances. Got a few “right” today and also a few “wrong” Another “wrong” by a million today and this time the agent was right. Happy to politely bag Jeremy Fox at times, but this time he was spot on and I got it very wrong. I used the James Control Price to say land at 6 Kensington should be worth $4500 per sq metre, or around $4 million for the dirt and $1 million for the home = $5 million. Jeremy said I was “on drugs” with that price, as the adjoining flats were hurting this home. He was right. It sold around $4 million. No excuses – he was a lot more on the money than our Control Price.

This neighbouring property discount was further backed up by 78 Clendon Road Toorak, which also had an incredibly dominating block of flats as a neighbour (you can see it in the marketing picture). 1143 sq metres x $4500 per sq metre plus $600,000 for the home (it needed major refurbishment) equals $5.7 million. Today, under the hammer, it sold for $4.35 million. So is the land worth less or do we keep the land the same and apply a negative emotion discount? Either way, just like irregular blocks or main roads, neighbouring properties with serious issues can present significant discounts to the end result.

But, please, I am not saying every block of flats presents an issue. We recently bought a beautiful period home that was next to a block of flats but those flats did not present an overriding privacy issue that it seemed to in both of today’s examples.

Finally, on this matter, as we keep saying, the air is still thin at $5 million, despite the pumping along at $1 to $4 million. Here the buyers do have more choice and they demand “perfection” or they discount or don’t buy.

Lead Photo today was a brilliant one by photographer Tom Wilson.

Buy well and make good decisions

Mal

The Not So Old Gun? Tim Fletcher: Are Fletchers becoming the Top End third force in Boroondara? Kew: 10 Vista: 200+ people. Five bidders: Sold $3.936 million.

It’s 6pm Saturday and the James Clearance Rate for million-dollar-plus auctions is 84 per cent on the 25 auctions we attended today.

The market today (Saturday) was again very, very strong. In fact, this is one of our biggest ever clearance rates for $1m+ homes. This, despite stock increasing and interest rate talk. Still two big weekends of auctions to come before Collingwood’s premiership and Bidderman is steady at 2.2 bidders per auction. Supply is up, demand now obviously hasn’t missed a beat and subsequently prices are reflecting that. The stand-out result was Kevin Sheehan’s 10 Irving Road auction – a small sub-500 sqm block had two ferocious bidders fighting it out to more than $3.5m or $7771 per sq metre. Where is this going?

This week we have featured the portrait work of one of our best auctioneer photographers, Julia Atkinson. Most of the bigger pictures are her work today.

A number of buyers and clients now use our James Full Ratings system to help them answer three questions:

1. Is the home right for me?
2. Is this a good home and what does the market think of it?
3. How much?

What have we learnt over the years and what are our thought processes behind the Ratings system?

Introduction

Nobody can predict with complete certainty the behaviour of each individual buyer or seller in a property exchange. However, it is possible to predict with a high level of certainty how large groups of human beings (market) will react to a home.

That is, there is a body of facts or truths that, when systematically analysed, show the operation of general laws with regards to home exchange. It is therefore a science as medicine is but, arguably, not a pure science like mathematics is.

The Science of Property has laws. We have based our Ratings system and CAN process on those laws.

These are those laws as we see them.

Law One – Outcomes

Home Ownership or control has two Human Outcomes:

• Emotional - a place of belonging.
• Financial - a store of wealth.

Law Two – Characteristics

A home has three main characteristics. The 3Ps are:

1. Property (eg building, land size).
2. Position (eg near CBD, street).
3. Price that is asked or paid.

Law Three – Position

Position is the single most important characteristic in determining financial and emotional outcomes

Law Four – Property

• Building and land characteristics can have a major effect on an owner’s emotional outcomes through light, space and flow.
• Financially, the building characteristics are an integral part of cash flow, as the land characteristics are the key to growth. Building and land can be diametrically opposed in terms of longer-term value.

Law Five – Price

Unless the transaction is a major distortion from the wider group (market), then price, while thought to be the most important, can be the least important characteristic in a longer time frame with regards to maximising financial and emotional outcomes.

Price is a reflection of two opinions: the buyer and the seller matching expressed opinions at a particular point in time. They are often (but not always) influenced by a wider group of opinions (the market).

A buyer has flexibility of choice on all three property characteristics; a seller only has flexibility on one characteristic – Price.

Law Six – Emotion Outcomes

The nesting instinct/comfort felt by the owner(s) in the home’s characteristics is the key to long-term outcomes.

Law Seven – Financial Outcomes

Price growth, through its compounding effect, is the key determinant of financial outcomes.

Cash flow and risk are the riders.

Law Eight – Relationships

There is an interrelationship between owner’s outcomes and property’s characteristics.

They are different for each property and owner combination. However, across large populations and over long periods of time, owner outcomes matched with property characteristics fall into predictable patterns.

Law Nine – Control

People who “control” or own properties generally have better emotional and financial outcomes than those who do not.

This is true of individuals, as well as of whole societies.

Law Ten – Time

Time does not create equal financial and emotional outcomes for all.

Time magnifies the quality of the owner’s decision (good or bad) in relation to the property’s characteristics (good or bad) and therefore, ultimately, the owner’s outcomes (good or bad).

This we call the Gap Law.

Law Eleven – Demand and Supply

Across a wider market, home prices will rise (unless artificial controls are in place) if buyer demand exceeds seller supply, and home prices will fall if seller supply exceeds buyer demand.

Law Twelve – Migration Demand

Overall population is the key determinant of demand and migrants have the greatest influence on change.

With new migration comes new opinions and those opinions are reflected in price, which ultimately establish new market price levels and requirements.

Law Thirteen – Land Supply

The most consistent long-term determinant of supply is land content; that is, the combination of the land’s characteristics: size, position and allowable use.

Land’s improved value, eg buildings, and available money supply are other supply determinants but they do not have the level of long-term effect that land content has.

Law Fourteen – Risk

Risk (things not happening as planned) is increased with poor property characteristics; however, it is not isolated to the 3Ps.

It also rests with the owner’s characteristics (cash flow, debt, family and physical etc).

Risk and outcomes are determined at the matching of the property’s 3Ps and the owner’s characteristics.

Process

To best match an owner’s outcomes (financial and emotional) to a home’s characteristics (price, property and position), we have found that the following process works. You may, of course, have no process or a different one.

The CAN process:

1. Clarity
2. Assess
3. Negotiate

And  the Tools we use:

• My Home Score
• Home Ratings
• Control Price

We do appreciate people coming up to us at auctions and, yes, we do enjoy putting this together and the input we receive from the public and our clients. If you think the above rules makes some sense, we missed something or is a load of old codswallop, then we are always happy to hear from you.

We can forget happy wife, happy life for one day – happy father’s day tomorrow.

Mal, Adam, Kris, Grant, Eddie and Melinda