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, 657 Toorak Road: 60 people. Five bidders. Sold for $2.59 million. A fairytale ending for the buyer of this fairy-like castle from the fairy-loving auctioneer Andrew Macmillan. That is a misprint, should read from the fun-loving auctioneer.

Armadale, 25 Glassford St: Auctioneer Iain Carmichael opened with a vendor bid of $2.8 million. Three bidders joined in. On the market at $3.3 million and sold under-the-hammer for $3.584 million.

As much action as we have seen in Stonnington for many a day with 14 sales over a million dollars and four pass-ins. Three substantial sales were 25 Glassford St Armadale with Susan McGlashan and Iain Carmichael of Bennison Mackinnon – see our auction report. If you said the home was $1.2 million, then that would put land around $2800 per sq metre. If you said the home was worth $1 million, then land was $3065 a metre and north-facing land at that. We have had this discussion a few times and land seems to be approaching or around $3000 per sq metre and significant value is still placed in period homes in this area.

A similar sale to this was today’s auction at 4 Chastleton Toorak with Peter Bennison of JP Dixon. $3.02 million for 650 sqm of south-facing rear, buy and bulldoze land - that is $4646 per sq metre.

657 Toorak Road Toorak

James Home Rating was 518 out of 1000. From an emotional point of view, the home is charming and we really like the feel. It has a homey feel and it is a real “fairy at the bottom of the garden” house.

There are other issues that you need to be comfortable with:

• Road noise is substantial.
• Second storey house slope.
• Back garden is impractical except to look at.
• The position is not as ideal as it may seem with regards to walking to shops.
• Exiting and entering premises in peak hour.

James Control Price: Dirt $2,210,000 + Building $200,000 = $2,410,000. Based land on sales such as 2 Selwyn Court, which sold a few weeks ago and was a difficult block as this one is because of its sloping rear and the street it is on.

James Auction Report: About 60 people attended this auction and there were five bidders. It opened with a genuine bid of $2.1 million, which was followed by a vendor bid of $2.3 million and eventually sold for $2.59 million. A fairytale ending for the successful purchaser of this fairy-like castle.

James Post-Auction Examination: House is an iconic home by 1930s architect Geoffrey Sommers, with garden attributed to Edna Walling (got that from the selling brochure). The level of bidding did surprise us a smidgeon and really showed the market placed significant value in this home and, by logic, maybe less value in the land than we thought. It’s hard to put a figure on it but $500,000 seems the right number for the home now. Perhaps we at James should never underestimate the value of something a bit special.

The agent quote and reading of buyers was spot on. Well done to Andrew Macmillan, Chris Stoupas and Mark Harris of Bennison Mackinnon.

33 Hunter St Malvern

James Home Rating was 726 out of 1000. This property has a very appealing facade with wide street frontage leading to a simple, workable floorplan. Fine to live in now, but provides the opportunity to update and extend in the future. Consideration needs to be made regarding off-street parking. There is access from the ROW from the rear, but a car at the back will affect land available for living. There may be a possibility for cars in the front yard, as there is room. There is no ensuite to the main bedroom, and this could be an issue for some if not wanting to extend/renovate. With most Malvern period homes in brick, this is a weatherboard, as is much of the street, and, as such, may not appeal to some buyers in this area.

James Control Price: Dirt $1,162,800 + Building $500,000 = $1,662,800. Houses that were looked at were 21 Valentine Grove Armadale, which is also timber, and 28 Llaneast St, also timber, and a finished home like 20 Viva St Glen Iris ($2.3m+) on what you might be with a good reno.

James Auction Report: Sold before in a Boardroom Auction for an undisclosed price, believed to be in excess of $1.6 million.

James Post-Auction Examination: Pretty well as expected. Good interest and strong result.

The agent quote was conservative and agents were John Morrisby and Heather Elder from Marshall White.

Design Smart

Port Melbourne, 6 First Point: A large crowd of about 90 people turned out for this auction. Auctioneer David Wood of Hocking Stuart opened with a vendor bid of $4.75 million but there were no takers and the property was passed in at this price.

Auctioneer Kaine Lanyon opened this auction with a vendor bid of $1.5 million and no result.

Bayside was alive with the sound of keys changing hands.

Well, except for 6 First Point at Port Melbourne – beachfront. Our auction report: A large crowd of about 90 people turned out for this auction. Auctioneer David Wood of Hocking Stuart opened with a vendor bid of $4.75 million but there were no takers and the property was passed in at this price.

Moving South

To the big one that did sell, which was with Kay and Burton, at 23 St Ninians Road. It was a three-bedroom Golden Mile beachfront apartment selling towards $6m. On top of the two $3 million-plus Male St sales last week, it has been a big week for Kay and Burton’s Church St office and, in fact, Brighton.  With just over 300 sq metres at St Ninians of internal area, that works out around $18,000 per sq metre, or similar to the record sales reported at the Salta Mercy Development in East Melbourne before the GFC. It does also have 200 metres of external courtyard and four car spaces and is beachfront. Nonetheless, this is better than what Toorak and South Yarra have been doing in terms of townhouse/apartment sales.

And speaking of apartment sales and Kay and Burton, two sales over a million dollars reported at the 30 Willansby Avenue development, which is out the back of the old Bowling Club development.

7 Blairgowie Court Brighton. Sold after at $2.04 million with Peter Kennett of Hocking Stuart. Our auction report: About 40 people gathered inside for this auction. Auctioneer Peter Kennett opened with a vendor bid of $1.8 million and was eventually able to extract a bid of $1.9 million from the sole bidder on the day. There were no further bids and the property was passed in at this price. This says land values are holding strong in Brighton. House value $400,000 would make land at $2500 per sq metre; however, if we look at it as a bulldozer or no value like 7 Cosham St Brighton, which also sold with Peter Kennett a month or so ago, then both got north of $3000 per sq metre improved.

Moving South

Hampton: 2 Ocean St Hampton with Steve Tickell and Jenny Dwyer of Hocking Stuart interested us as it sold last year for $967,000. The 2008 auction was very quiet and it was passed in and bought after for $967,000. Then came the Global Financial Crisis and doom and gloom. This is our auction report of yesterday: There were five bidders in the crowd of 60 at this auction. It opened with a genuine bid of $910,000, was on the market at $1 million and sold for $1.155 million. Nothing was done to 2 Ocean St and it resold for a near 20 per cent increase. It’s good money if you can get it. Location. Location. Location.

Moving South

13 Prospect Grove Black Rock (two streets back from beach and shops) with Garry Murphy of Hodges sold for $1.135 million. It was land only and that says land is $1746 per sqm in that immediate area. That is Golden Triangle prices; mind you, it is just as close to the water and shops as some of Black Rock’s outer Golden Triangle.

Moving South and still with Hodges – Errol Driver and Suzi Finch at

3 Bodley St Beaumaris

James Rating 715 out of 1000. This house has a great feel and would suit a younger family well. Really like the way light is brought in to the rear living areas and bedroom separation and car garaging is good. Given level changes, rear yard and pool is a little higher than the internal floor area. This is not ideal, yet you do have good views out to the backyard from the kitchen area, which is important. Well presented home offering alternative living areas for a variety of family needs. Perhaps could have done with an extra bedroom upstairs, depending on your needs. Easy walking distance to The Concourse, schools, beach and parks.

James Control Price: Dirt $942,000 + House $300,000 = $1,242,500

James Auction Report. About 35 people witnessed this auction, which opened with a genuine bid of $1.2 million. On the market at $1.315 million, three bidders pushed this to a sale under-the-hammer of $1.355 million. Errol Driver is an auctioneer we like: on time, succinct and gets the job done.

James Post-Auction Examination: Our land was right but the market said the home was worth $400,000 and, upon reflection, we agree that was not unreasonable. Good home – well  done to the purchasers.

Finishing off with a good result also with Hodges and also with Suzi Finch at 2 Tramway Parade (just around the corner from Bodley on similar land size) which sold for $2.15 million.

Happy Wife Happy Life

Camberwell Golf Links Estate: it is cold and the home needs renovation. So, a quiet auction? Well, 120 people showed up and 5 Marlborough sold for $1.302 million with four bidders. Marshall White's Mark Dayman, Stephen Gough and Joe Muinos presiding.

It’s 6pm Saturday and we have been to 16 auctions (less than usual because there is a real shortage of $1 million-plus auctions that are worthwhile covering) and the James Clearance rate is 81 per cent.

Please note our Chinese translation and Wormy to the right (our price opinion and a general guide to trends over $1 million-plus, nothing more.)

The dominating issue of the week is stock levels. Iain Carmichael, a respected 20-year-plus veteran and director of Bennison Mackinnon, said today that this market has the lowest levels of stock, at the top end, in his memory.

James Redfern of Marshall White, also an agent of 20-years-plus, agrees and adds that prices are rising and, although we are not quite back to the peak, we seem like we will get there soon.

Jeremy Fox, director of RT Edgar, says buyers are starting to get stressed. How long do you wait? Do you pay up now or sit it out and hope prices will drop, which he adds, no longer looks like happening any time soon. He then mentioned two properties as evidence: 43a Berry St East Melbourne, a brand-new family home, quoted and on the market at $2.2 million, sold for $2.7 million; and 760 Drummond St Carlton (see our rating below), a terrace in need of significant renovation (we estimated would cost up to $800,000) and no car park. It was quoted and on the market at $1.1 million and sold for more than $1.8 million.

Let’s focus on the demand and supply equation. Why are stock levels so short?

Well, first and foremost, the GFC has squashed the natural flow of the market and we are now in a Joseph Heller Catch 22 situation. The Catch 22 theory is “If you went to war, you were crazy and therefore you didn’t have to go; but if you said you didn’t want to go to war, you were sane and therefore had to go to war.”

At the moment, potential sellers do want to buy. They need a place to live, but they can’t find anything to buy, therefore they are not selling. There needs to be selling pressure to act but with interest rates so low and now a rapidly improving market (from a sellers view), there is the opposite pressure on sellers and that pressure is to hold. This means more and more buyers (eg overseas influences plus natural increases) are looking at less and less stock, therefore, through demand and supply, pushing prices up further. As prices continue to go up, the “pressure” on sellers to hold increases and even less stock is made available in the established homes $1 million-plus market. Catch 22.

Further insights

Increasing demand:
(1) Expats. Tim Picken of Jellis Craig said today that many of his recent buyer enquiries have been expats wanting to return home and he cited the sale of a timber double-fronted home at 9 Carrington St in Hawthorn (1.3 million-plus quote and sold for $1.685 million) as a prime example. Four of the bidders/bidders if they had a chance, were expats.

(2) If I hear how expensive Melbourne homes are one more time, I will go heee. Expensive compared to what? Certainly not to Chinese buyers. These are notes supplied from Su our translator.

• 1 million AUD in Beijing would buy someone only a middle-tier apartment, and definitely not a house as we know them here.
• It is quite common for Chinese parents to buy a house for their children living as international students in Australia when they gain permanent resident status. However, because the Foreign Investment Review Board recently changed its policies regarding foreign property ownership, many of these parents are now buying these homes while their children are still studying (and haven’t gained permanent residency).
• The large majority of Chinese business people or investors who can afford to immigrate to Australia are very willing to spend more than 1 million AUD on a house.
• After the US, Japan, Britain, and Germany, China has the fifth largest number of millionaire households worldwide.

(3) Another interesting point re demand pressures was from Peter Kennett at Hocking Stuart:

• Last year: the GFC, kids growing, let’s not trade up honey, let’s renovate, find a builder, got one, let’s start.
• This year: the GFC, kids growing …. can’t find a builder, let’s look for a new home.

Not sure we have noticed a builder shortage, but we will do some research over the next month.

Decreasing Supply:
(1) Richer people no longer selling
Peter Kennett makes another very interesting point. Of the six bidders and numerous other enquiries he had on 7 Cosham St Brighton (sold today for $2.97 million), the majority were looking to buy and NOT sell their home but to hold their current home as an investment, if they were successful. This means less supply of saleable homes.

(2) More blocks of land needed for apartment living
More and more land has been taken up with developing apartments and townhouses and, when the developer market moves back into full swing, there will be even less family homes available than now. Please read Another Point of View below on St Kilda’s Greasy Joe’s and the Camberwell Station developments.

There are some other issues out there in Million Dollar Melbourne that relate to stock levels.

Buyer stress

Today the bidding process at auctions was sluggish – in many cases, it was not spirited and people tended to be grim-faced rather than excited. There’s a feeling that people are loath to pay the prices being fetched at auction because they don’t want to acknowledge that the market is rising, that the market has changed. But they’re also accepting (being forced) that they have to put their hand up, otherwise they will miss out. People are realising that properties won’t be falling in value any time soon, nor will they be falling into people’s laps for a cheap pre-Christmas 2008 price today.

Old stock

When the market is rising, don’t overlook old stock – properties that have been on the market for some time and that may seem stale. Properties tend to go stale generally for price reasons. But if the asking price has dropped or the market goes up or both, does that not then negate that price reason?

Older properties are selling in this market. In the past week, we’re aware of six sales where the houses had been on the market for quite some time: one for eight months, one for six months and one for four months and so on. Properties in Balwyn, Hawthorn, Toorak, Malvern East and so on. Most were good houses and some received exceptionally high ratings from us, so it was simply a matter of matching price expectations with the market and then these properties sold. All of these have sold this week and all well over a million dollars; eg 53 Kinkora, 11 Crest, 4a Macgregor, 11 Torresdale and so on. This is also a sign of a rising market.

We bought old stock this past week. Yes, there is off-market, alerts and the auctions, but buying good homes is not all about a need for speed. To buy well, you need to look at all options.

A big thank you to Peter Small, director of Urbis, for his Another Point of View interview.

Thank you for the incredible response to our TV videos. Please keep saying hello at auction – we like it.

If you know anybody who wants to be an auction reporter, please let us know. You need to be able to use a camera, have a car and it’s paid. We are looking to expand our auction coverage and we can’t get to the outer areas, as well as bid and report on inner city auctions. One more thing – of course, it’s a Saturday job. Please contact adam@james.net.au.

Architect Adam’s article this week is on Andrew James’s Gasgoine gem up for auction this coming weekend.

And, finally, a big thank you to editor Melinda Brown who helped greatly in putting together this edition of Market News.

Buy Well

The million-dollar-plus market is looking reasonably stable in Stonnington on low stock levels.

63 Albany Toorak (Coonara) with Kay and Burton is back on the market again and it will be interesting to see what happens. It sold early last year through Marshall White’s Marcus Chiminello for a reported $8 million. Since that time, the owners have completely renovated the home to quite a high standard and made what was a disastrous floor plan quite liveable, although it still doesn’t flow naturally to the west where much of the garden lies. These high-quality renovations look to have cost over a million dollars and the current owners have removed or hidden a very unsightly power substation that previously dominated the yard. According to Kay and Burton, around 8000 sq ft of the original parcel, which was well in excess of 20,000 sq ft, has been taken by a neighbour since last year’s transaction. Ross Savas is quoting more than $6 million and, boy, this is one for the calculators. Last year’s price was that high? Less land lost – add back renovation costs – add back substation removal – minus GFC allowance – plus shortage of stock and the price comes to …….

http://www.realestateview.com.au/Real-Estate/Property-Details-buy-residential-1368973_S.html

32 Grange Road Toorak is back on the market with Paul Williamson of Jellis Craig. Out of his patch but not out of his depth on this one. http://www.realestateview.com.au/Real-Estate/Property-Details-buy-residential-1366442_S.html. Sold under the hammer (with Paul) on 30 August last year for $4.15 million (913 sqm, $4545 per sqm) against a quote of $3.3 million. Nothing seems to have been done to it. Our archived last year’s auction notes are:

“A very strong and well conducted auction by auctioneer Paul Williamson with a realistic quote, on market at the quote and competitive bidding until it sold for a strong price. Three bidders.”

3/1 Chastleton Toorak. This is a pointer for the $3 million-plus or 300 sqm apartment market. Expressions of Interest close this coming week and, managed by the professional Peter Kudelka from Kay and Burton, it’s line ball as to whether or not they will get their price. This truly is one of the best floor plans you are going to see in an apartment so they should get their price if … if there is a market at this level.  http://www.james.net.au/rating/3/1-Chastleton-Street-SOUTH_YARRA

11 Grosvenor Toorak. Despite our love of the smell of renovating Aston Martins in the garage, this home seemed to attract no interest or bidding at auction. Can’t think this won’t sell – it’s too good – so it must be a price or timing issue. We await news. http://www.james.net.au/rating/11-Grosvenor-Court-TOORAK

Architect Adam talked at length in his architecture column last week about two Malvern beauties that needed work, 13 Bonview and 7 Parslow. Both sold yesterday, with 13 Bonview a pass-in at $1.89 million and a later sale above that, and 7 Parslow under the hammer at $1.421 million with seven bidders.

Chatting with Andrew McCann of Bennison Mackinnon last week, he said that they have had two weeks in a row of 100 per cent auction clearance rates, which was the first time since 2007. We await this week’s result to see if it was three in a row. This is a market pointer.

It’s 6pm Saturday and the James $1 million-plus clearance rate is 77%. The market seems healthy at present. Today’s Herald Sun said the market had fallen in price and that is correct; however, if there was meant to be an implication that the $1 million-plus market is today dead or in the doldrums like it was for the latter parts of 2008, then this is incorrect – that news is four months out of date.

February to May 2009 has seen prices generally stronger than what was achieved for similar homes in November 2008. These buys and sells represent a willingness of sellers to meet the market and buyers to compete with cheaper money (for those who can get it) for the 2009 lower prices.

We are not saying for one second that the market is flying above 2007; we are saying nothing like that (although there are some rare exceptions). What we are saying is that good-quality homes are attracting strong interest and, in many cases, three to five bidders; with as many as eight bidders competing at two auctions of the past two weeks that we attended.

But there is still two markets and two extreme examples show the divide between the sought-after and the not-sought-after.

On Anzac Day, we monitored five auctions over a million dollars and all sold. One of particular interest was 49 Mathoura Road Toorak which sold for $3.1 million. Although very well positioned, it was a difficult home to sell, as it required a $2 million-plus renovation. It was auctioned last August and we reported that auction. In fact, we saw a live bid of $3.7 million rejected. That’s a big drop in sentiment in a short space of time.

Link: http://www.james.net.au/rating/49-Mathoura-Road-TOORAK

Today, we saw an absolutely brilliant townhouse (sound like a salesman, but it is great) at 21 Trinian St Prahran sell for $2.5 million under the hammer at auction, after a previous hard-to-fathom expressions of interest campaign. This, by any measure, was a strong price for the home. A James Home Rating over 800 is rare for a townhouse (land content often prevents a better score) and this townhouse was rated at 820. This property’s near-twin, situated next door, sold off-the-plan for $1.8 million 2 years ago. If you allow for the fact that 21 Trinian St had a reported $200,000 of improvements, it still shows a healthy “profit” in 18 months. Not sure of its growth prospects from here, but it proves the age-old adage that ”sex still sells”. Agent Heather Elder should be congratulated on her management of the campaign and, in particular, her handling of the quote. Buyer value and seller value were miles apart and the temptation to quote $2 million-plus would have been immense. I did not see that and the price that was achieved proves that a quality agent can manage a very difficult situation without resorting to lies.

Link: http://www.james.net.au/rating/21-Trinian-Street-PRAHRAN

The big end of town is happening again and Grant Atkinson is outlining that in Sunday Reflections tomorrow. Two big sales that he touches on are almost $8 million for a Ross Savas (Kay and Burton)-sold home in Kooyong Road Toorak and a Nick Johnstone (JP Dixon)-sold mansion at 19 North Road Brighton. The price was around the quote of $7 million.

When speaking with Ross, he also stated that he disagreed that overseas buyers were out of the market. In fact, he had several $4 million successes in the past fortnight. While he wasn’t specific, if we accept this comment at face value, then that is interesting. We are not seeing that. We believe that, at present, many overseas buyers are so traumatised by world economic events that they are not acting. The market for $1 million-plus homes for what we report on seems to be almost all locals. We find that encouraging for our market and Australia in general but maybe we are optimists – or maybe we are realists. Time will tell. My hardest conversation is telling an overseas client that he or she really is not going to get an armchair ride to a giveaway price on a quality Melbourne home.

What’s in the news below:

• Four of the homes we reported on today were sold before today’s scheduled auction and some expressions of interest campaigns have multiple bidders. These situations are leading to an increase in boardroom auctions and this week Kristin has written an informative article outlining tips and tricks for managing boardroom auctions. We thank Glen Coutinho of Hocking Stuart for his input.
• In architecture news, Adam looks at a Brighton home with some difficulties and explains how a thoughtful renovation can improve it. On this subject, we will publish next week an insightful “warts and all” article on the frustrations of Heritage, written by client Margie Lane who purchased an Albert Park home through us two years ago.
• Finally, a big thank you to Sam Gamon of Chisholm and Gamon for his Elwood insights in his Another Point of View article.
• The Worm – off to the right – this is our attempt to reflect as accurately as we can minute by minute $1m+ residential market sentiment.

Buy Well

At 5pm on Saturday, the clearance rate of the 21 auctions we previewed was 58% and sure to go up overnight. Sounds ominous – sorry.

The James Tostevin auction featured above was 13 Woodlands Avenue Camberwell. We knew this was going to be huge – the James Q rating was 778 (great score) and we had six firm phone enquiries re price before the auction. Our 13 Woodlands website address had the highest number of hits and unique visitors for a rated home this year. We knew it was going to be a hot auction and so it was.

(Please note, we do not discuss buyer information similar to above with anybody other than our clients before an event.)

So what is happening? Well, at the moment, buyer confidence is higher than three months ago and higher than what was predicted about a month ago.

Why?

1.     Stock levels for quality homes are low. You can see this by looking at the expensive restaurants agents and advocates used to frequent – they’re half-empty. Agent and advocate businesses rely on turnover (hopefully professionalism as well) and in the high-end world of million-dollar-plus homes turnover, is still low – low, that is, compared to the recent past.

2.     Buyers think the world is not about to end.

3.     Don’t underestimate the value of price reductions. The market dropped significantly last year, vendors have acknowledged it and buyers are now coming back (for the moment).

Personally, we still think the jury is well and truly out on the 2009 market direction. However, present indications are better for sellers than any may have thought at Christmas.

We are stating the facts as we see it, not making predictions.

For buyers under a million dollars, there is a strong message. There is little sign yet of any significant downward easing of prices. In fact, it dropped only a few percentage points last year (5%-ish) on good sub-million homes and this year zip – there’s been no drop obvious to our advocates.
An auction at Fairbairn Road Toorak today with seven bidders follows on from Mackay St Prahran (five bidders) and Park Lane South Yarra (six bidders) two weeks ago. If it’s good, correctly priced, got a competent selling agent and got interest, then houses valued around a million dollars should go strongly at auction right now. Of course, who knows if this will be the same situation in six weeks.

Let’s talk about swings and roundabouts or mini-cycles.

Swings and roundabouts one:  long-term, did you know that if you bought in Toorak or Brighton in 1989, it would have been 1996 before you started to see any improvement in prices; but if you bought in 1991-92, by 1996 you probably had a significant capital gain.

Swings and roundabouts two: nobody bid at $2.6 million at last Saturday’s auction at 7 Collins St Brighton. A few hours later it was bought for $2.65 million (approximately) with a claimed three bidders. Strong interest, yes, but 7 Collins St was also bought last year for a reported $2.9 million.

Swings and roundabouts three: this is an interesting story and it comes from Anthony Reis of Marshall White and it concerns a property we featured last week at 37 Westgarth Street Malvern East.

Pre-auction quote: $1.3-$1.4 million – we thought that was about right.

Last Saturday’s auction: We attended. One bidder at $1.15 million and passed into them. Reserve was $1.25 million. A deal could have been done at $1.2 million.

Monday after auction: two offers at reserve at $1.25 million.

Tuesday after auction: boardroom auction and it sells for $1,358,500.

Swings and roundabouts four: we have recently bought two strategic properties – one had been bought once in the past 40 years and for the other this was the first exchange in 40 years. We were not sure we had time to wait till the market moved again and we didn’t want to miss the boat.

The market is still very good for buyers and we think it may get even better; however, the truth is, at the moment, it’s a bit more expensive than three weeks ago. Yes, that would worry a day trader but not a long-term player. Make sure you get the right long-term home, rather than panic and buy a cheap price.

No Market News next week as its the long weekend and there will be few auctions to report.

Buy Well

At 5pm Saturday – welcome back. What is 2009 going to bring? Everybody is asking themselves questions such as should I sell now or wait a while?

Is this the right price or is it not? By the way, if we hear one more time that a private banker has spoken to a mate who tells him/her there are 200 houses in Toorak under order to be sold quietly, we’ll go “heeee”. It may be true but we just haven’t seen any sign of mass selling yet – some forced sales yes, but not large-scale mass mortgagee sales.

The million-dollar-plus market is not thriving; it is drifting or dead if you are a pessimist, after its 10% to 40% falls of last year (some of the largest in living memory). Significantly reduced activity on the peninsulas and only a few million-dollar-plus sales to date in inner Melbourne (but there have been some) points to this. There is no buzz of excitement, more a feeling of nervous anticipation in the market. But, keeping this in context, you would expect few sales at this time of the year. It’s early days.

On a different note, numbers are up at open for inspections over the past few weeks (particularly last Saturday, despite the heatwave). What does this mean? Not sure yet – maybe there was nothing good on the telly or maybe the market is gently returning to balance.

Low interest rates may mean buyers will find more money but they still need to feel good in their job security. Interest rates may also mean some sellers don’t have to sell because they can hold on.

It’s a different story for properties under a million dollars. We saw two from two sell under a million today (Prahran and South Yarra) – one auction had six bidders and the other five.

If you are in this category, we’re really not sure what you are waiting for – yes, there is that possibility that in a year things may be even lower but the market may also be moving upwards where you find your $800,000 is not enough to buy against other cashed-up buyers.

Investors who are now, for the first time in many years, looking at neutral cashflow situations (instead of negative) from many home buys must surely be a possibility of starting to price push on quality homes (and aren’t these the only ones you want to buy?) at some stage in 2009-10.

In early 2009, the “for sure” buyer blockbuster hit is: if you are trading up between $2-4 million, you will probably be buying at a discount to 2007 of anything up to $800,000 and you will be paying it off at around half the interest rate. If that doesn’t get you out of bed, then please don’t ring us for help because we can’t excite you any more than that.

So, in our opinion, buyers will have some time up their sleeve – maybe this year, perhaps even a few years – but the party doesn’t last forever. If we’ve had the drop and 1990s history repeats, then it could be harder sooner (price wise) for buyers as prices return back little by little.

2009 is a time where hopefully you will make quality decisions that set you up for good long-term emotional and financial outcomes.

Stay tuned, we are in this together, and buy well.

Mal and Adam

Sunday results: we do think that the market for sub-one million dollar homes has some ooomph in it; however, we also think the 70% REIV clearance rate has had some air pumped into it if you look at how many were sold beforehand.

If the market does rise gently, as these figures point to it doing, this may not be all bad, even for some buyers. Why? Well, if it encourages you to buy that quality dream home you always wanted but last year you did not think possible because you were waiting for Armageddon, which in fact may have already happened in 2008 and, like Elvis, has now left the building then, well … maybe a slightly rising market is a good thing – it will get you going to act and achieve a good emotional outcome.

In three years, your 14-year-old is a 17-year-old and thinking of moving out (hopefully) or your spouse has left you because you are too boring (yes, you). It’s not all financial outcomes.

Hey! Life’s short.

In our business as buyer agents, we often get edgy comments left on our mobile, emailed to us and, for those that are slightly braver (usually through their agent), said to our face. The unpleasant ones are always from sellers and they go something like this: “Mal, what are you doing, you’re being difficult, who cares anyway, what gives you the right, it’s none of your business and…” It’s become water off a duck’s back but the issues behind it are not.

Many sellers consider it’s OK to follow a cycle of buyer abuse. It was done to them so they are going to do it to somebody else…

Well, it’s not OK.

The latest trick from sellers and their legal representatives is to hide the Section 32. It’s a wonderful game of deceit and misrepresentation and some seller’s representatives (and therefore the seller) are becoming masters at it.

Before we explain how their game works:

Homebuyers in Victoria get very little legal protection when it comes to purchasing a $450,000 or $1.2 million or $14 million dollar home; in fact, in most cases, a buyer of a $39.95 toaster is afforded more protection when they purchase from David Jones than a homebuyer.

So to the game:

Step 1: Don’t deliver a copy of the contract to the buyer till the last minute – in some cases, in fact, after the doors of the buyer’s legal offices have closed – eg after 5pm Friday before auction. That is getting rarer than last year but it still can happen.

Step 2: This is the 2007-08 doozy – post out a Section 32 and contracts a few days prior to auction AND make sure it’s nothing like the real contract the seller will expect the buyer to sign on Saturday at auction.

The absolute fav amongst some well known city agents and their legal representatives at the moment is apartments and the Owner’s Corporation Certificates. What the selling agents (who claim “know nothing – I see nothing – I hear nothing”) are doing is getting a large and complicated document emailed to a prospective purchaser at the last minute but minus the key documents such as those related to the body corporate and sinking funds.

An innocent oversight you say. No way, it’s a deliberate misrepresentation by both the selling agent and the legal eagles and therefore the seller.

Because, by Saturday, miraculously all the legal paperwork is there. It has to be – otherwise the buyer can walk away from the contract because it’s defective (in this market, some are – so sellers should check the competency of their legal advice).

But are the sellers and their agents outsmarting themselves? This favourite trick worked last year because there were so many buyers in such a frenzied state that many bid without bothering to check paperwork – and some are still suffering the consequences.

This year, buyers are walking away because they are already on edge and any excuse to not front is gratefully accepted. Sellers are losing buyers they can’t afford to lose.

Real-life case study – details changed for privacy:

Toorak apartment worth more than a million dollars. Beautiful apartment. High James Q Rating. Great spot. We have done all normal due diligence, including full price report, research into seller and agent and detailed negotiation options – however:

1. Legal documentation does not come until the absolute last minute and is read by a client’s chosen solicitor on behalf of our client.

2. Major defects in contracts – our client emails us a note on Friday evening pulling out of auction.

3. At 8am Saturday, I ring a partner of another well known legal firm and he agrees to go to his office and read the contracts. I do this because I believe this is a great apartment and perfect for our client. The legal partner does this because he is a nice guy – he’s not getting rich on the conveyancing fee.

4. At 9am, we deliver a copy of the contracts to the legal partner.

5. At 10am, he reads the contracts and agrees there are major defects in the contract and he makes two points: (1) if the contract remains as is, “your client can sign as they can easily pull out, however (2) if, as is increasingly happening, the missing pages having indeed been added in, then the contract will be valid and your client will be at risk.”

6. What to do!! Legal partner: “Mal, as a favour, I will come to the auction and bring a copy of the contract and look for insertions.”

7. 15 minutes before the auction was due to start, after the legal partner turned up, he discovered the owners’ certificate and other things had been inserted. However, in this case, the legal partner deemed it OK to sign. 10 minutes before auction, our client emailed us to proceed.

8. We bid and bought the apartment.

9. How many buyers can make that happen without help?

You know the funny thing – if our legal friend hadn’t cared enough for our client, the seller would have also been the loser as they would have had only one bidder and who knows? Maybe they would be none the wiser but $50,000 poorer.

Happy to give you the name of the firm if you want to know a quality and caring legal firm. We receive no money from them.

Finally, sorry about the soapbox, but as buyer representatives, we will continue to push for

1. Accurate and timely legal documentation
2. Pest and building inspections
3. Accurate quoting of price.

And when you see the funny James buyer agent man in the hat at auction with an armful of paperwork and he has assistants measuring up with measuring wheels (another story another day) and agents helping him check through wads of paper before his client signs, please try not to snigger too much, as he is only doing his job.

Make good decisions and buy well

Mal

PS: There is a solution – legislate that three business days before auction the paperwork that is going to be signed must be available at the selling agent’s office or else a further three-day cooling-off period applies after auction if the paperwork changes.

12 Mercer Road Armadale - needs your input but it has a real heartbeat, enjoyed my visit - James Q rating of 828

At 5pm today, the clearance rate from the 13 auctions we attended was 23%. Normal for late 2008. We expect a few will be bought overnight, bringing the clearance rate to around 1 in 2 or 50%.

Kew, Camberwell and Canterbury are no longer operating in isolation with regards to buying $1 million-plus homes. The past few weeks have seen significant drops in $1 million-plus boughts and the clearance rate is now the same as the Bayside area has been experiencing for months – very poor if you are a seller.

Around 1 in 4 are selling under the hammer; 1 in 4 are selling within a few days and the other 2 in 4 are taking longer and longer to sell, eg weeks or months if indeed they are selling at all.

Malvern, Toorak and South Yarra are now also the same.

It’s a very different tale for well priced, under a million dollars, homes. We witnessed two very strong auctions today, as we do each week. 3 Beaconsfield Road Hawthorn – big crowd – low agent quote – multiple bidders and an $810,000 sale. But even that was cheap if your mind was tuned to yesteryear, as this would have hit the million or close to in late 2007. The other auction was Outlook Drive Camberwell – even a slight surprise to us with four bidders and sold well at $960,000.

OK, OK, you get the message. Times have changed. The market has dropped 20% in a few months and, for some, 40% in a year; mainly for homes more than a million dollars. There’s been less dramatic drops for good $1 million-plus homes and even less for almost all homes under a million.

Is it going to drop more? The answer is yes, if you are talking about over a million and the short term (till March) – unless Adam Smith’s rules on supply and demand in relation to price are no longer valid. There’s possibly no significant drop if you are talking about Melbourne’s inner city median-priced homes, around say $600,000.

Go to any website and type in “$1m+” and type in a suburb – say Brighton – and see how many listings come up. Hundreds and increasing, as unsold homes clog the system and new ones keep coming on. There are simply not hundreds of buyers willing to act as there has been in previous spring gluts and so price must come down.

What do we as buyers do? Well, we try and make some decisions that will set us and our families up for life. These are the times of big, huge, gigantic opportunities and these opportunities – if you are buyers – will continue for at least the foreseeable future.

If you have been thinking of buying or trading up, or simply exchanging, then this could be, for you, far better than 2007, 2006, 2005 and possibly 2004. If you can get into the market, then do so and do so before everybody else does. And do so in a manner in keeping with your desired emotional and financial outcomes that will come from a home purchase.

Think happiness, land content, floorplan, light – don’t worry about horror stories, agents, doom and gloom. We’re not talking about rose-coloured glasses stuff; there are problems and stresses. Factor in those stresses, eg you get less when you sell. Yes, factor in all the bad stuff into your sensible decision and don’t let it cloud and finally stifle a move onward and upward.

Migration to Victoria is still positive and interest rates are going in the right direction. Children are still growing up and maybe that tennis court, period home, extra bedroom or sweeping view that is there will pass you by.

I love this job and it’s even more exciting than it was last year. There are better opportunities.

Set yourself up with a plan, take some calculated risks and buy well.

Opportunity yes; but it is different from reality – if at some stage you do not act.

Mal

31 Clowes Street, South Yarra.
This is one of the better inner city residences I have been to. Luxuriously appointed kitchen and bathrooms and very nice living spaces. The home was completely refurbished in 2007 by Nicholas Day and absolutely oozes class. We rated this property 638/1000.

Positives (apart from the building itself) – proximity to Botanical Gardens, Yarra River, sporting precincts, extra good storage and car garaging.

Negatives – south facing courtyard lacks light, road noise from the Monash and for me, no downstairs bedroom can be a negative (the study could be used, but no bathroom to support it), and there are flats across the lane way.

Agent Marcus Chiminello from Marshall White is seeking somewhere in the mid four millions. There is not a long list of recent comparable sales to draw a conclusion regarding the price, but emotion and appreciation of quality should see it sell in and around that level.

13 Edro Avenue, Brighton East.
This is a victim of tough selling times in Brighton East if I have ever seen one. This is a good part of the suburb and a good street. The street’s just off Hampton Street such as Sashta Avenue, Bright Street, Camperdown Street, Binnie Street  are, in good times, hotly contested properties given their proximity to Brighton. This property is land value only, but a good size north facing rear block. Agent from RT Edgar was quoting $950,000 – $1,040,000 prior to auction.

We rated the property at 749/1000, as a land only rating.

About forty people  turned out, weather was nice, but bidding was slow and weak. Bidding opened at 850, auctioneer had his half time break at 900, and announced the property was on the market – not all that common for this to happen well below the agent’s quote. Deceased estate according to the agent and all proceeds of the sale were going to a worthy cause, and in fairness he did announce during the speel that the property would be sold on the day. Two bidders battled it out in small increments and the property sold at $980,000. Based on land size and location, I thought this was a $1.1m property.

11 Osborne Avenue, McKinnon.
This is a very nice family home that we rated at 771/1000. Agent Trent Collie from Hocking Stuart was quoting 1.17m – 1.32m prior to auction and on a cold and damp afternoon, a good crowd of about seventy to eighty people turned out and there was a good vibe about the auction. Lots of agents and a few buyer advocates were amongst the crowd.

Auctioneer Nick Renna opened with a vendor bid of $1.2m, and there was competitive bidding from two parties to $1.35m and the property was passed in. $1.35m would not be a bad result even in a good market. The property sold after the auction for $1.46m, a strong result in this market. A similar, albeit larger home in Chalmers Street McKinnon sold recently for $1.535m, but in a better and quiter street.

Osborne Avenue has a wide variety of homes in it, and does connect with McKinnon High School at the end of the street. It is an area that a significant number of homes have sold to Chinese buyers so their children can attend that school. The area also has a number of good primary schools.

10 Anderson Avenue, Bentleigh East.
Very family orientated area, in the north western corner of Bentleigh East. Good family home, 4 bedroom, 2 bathroom and a great living area. We rated the home 743/1000. Nice feel, but not nice enough for any bidding. Auctioneer Nick Renna from Hocking Stuart opened with a vendor bid of $780,000, had the traditional half time break, but still no bidding upon his return. A crowd of forty of fifty people attended, but there was no buzz and the home was passed in on a vendor bid of $800,000.

The pre auction quote was $770,000 – $850,000 and there are scores of comparable Bentleigh East sales to suggest this is a good buy, even at the top of the range. The reserve was reported as being $879,000. This time last year, I would not have been surprised to see four or five bidders on this home and a result that may have seen something closer to the high $800,000’s, given it’s inclusion in the McKinnon High School zone.

902E/126 Rouse Street Port Melbourne.
This top floor penthouse has very special views across the bay and to the city from the huge wrap around terrace (about 24 sq. according to the agent). Inside, 4 bedroom, 3 bathrooms, ample living spaces and high quality kitchen and bathrooms. No downstairs bedroom may limit the market and the asking price of mid three million dollars could also offer a challenge to selling agent Selly Santoso of Ray White in Port Melbourne. REIV data does not give me any confidence to suggest a sale at that level will occur in a hurry; Rouse Street is a long way short of Beaconsfield Parade in terms of buyer appeal and you can see countless other high rise blocks from the terrace; something similar properties on Beaconsfield Parade may not have to encounter.

Nethertheless, the views are great, the living space is impressive, location is fantastic and I could put up with the view from the master bedroom each morning.
We rated this home at 593/1000.

The market is really in a very down frame of mind about auctions as we go to press with our latest market news. Looking at the results below of the 28 reported sales below (leaving out private sales) only 8 sold at auction or a reported clearance rate for homes over a million dollars of 28%. The general feel around the auctions was very negative and downbeat.

You can make life as negative as you want but the long term facts are our clients are still buying homes (at a lot better prices than last year) because if you believe oil is going through the roof owing to demand and supply factors then why wouldn’t big land in great spots be doing the same in the longer term.

Not that it is our job to interpret or defend or comment too deeply – leave that to the newspapers – We see our role to buy or pass on homes depending on the facts. There are not a lot of quality being offered at the moment (meaning now) but when they appear either on or off market we are buying for people who have a long term horizon.

Auction attended this week.

10 Norwood Ave, Brighton

This was a property that we rated as land only at 711 /1000. The house itself is very liveable but doesn’t flow well, however if you only had $2m and want to retire near Brighton Beach then it would be hard to not at least consider this. As a land site its main issues were its lack of depth and its south facing rear. The auction itself had about 50 people there and effervescent James Paynter started and finished it with a $1.8m vendor bid. The paper has reported there has been a later higher offer but it still remains unsold.

This sale also has ramifications for the very high quality but still unsold 18 Norwood Ave
Brighton which we rated at 816/1000 a few weeks ago. Land characteristics are almost identical with 10 being slightly smaller but they are both on the south side of the street. If 10 Norwood does eventually sell for around $2m does this mean the actually building at 18 Norwood is worth between $3.5 and $4million. The main issue we had with 18 Norwood was we thought it was overpriced and we still do.

21 Immarna Road Camberwell
This was a property that we rated at 754/1000. The house itself is your fairly stock standard developers or builders home of average quality on a good sized block in a OK part of Camberwell. 30 people at the auction and Geoff Hall did his best to excite an unexcitable crowd with no bids and a pass in on a vendor bid of $1.85 million.

With a reserve and now private sale asking price of $2m this property may also prove hard to sell despite its north facing rear. Our reasoning is 18 Gowar Avenue Camberwell (very similar home but sold a few months ago) had a similar auction and pass in auction strategy and reserve with Jellis Craig. The final result was considerably less than what is being asked for now.

123 Male St Brighton
Not the highest rating duplex you will see with no car parking and floorplan that has its problems. We rated it 117/1000. 40 people at the Hodges auction under auctioneer Jason Swift. Like many other auctions this weekend – no interest from the 40 people present and it passed in on a vendor bid of $730,000.

98 Rowell Avenue Camberwell
By the time we got the 98 Rowell Avenue Camberwell I was wondering if the sun was going to come up tomorrow. Thank heavens auctioneer Glen Courtinho from Hocking Stuart showed that it would. Another property they we did not rate highly 188/1000 and it was very surprising to see such strength in the bidding. 100 people at the auction –bidding opened at $1,050,000, was on the market at $1,160,000 and with 4 different bidders it was sold for $1,291,000. This result was surprising although it does show you that with a good quote – $1.1m and a good street (Rowell) that a less than great home can still sell in this market for a good result – for the seller.

8 Hawthorn Glen Hawthorn
We don’t normally get into the quirky side of real estate but if you want to show your children a fairy house then have a look at 8 Hawthorn Glen Hawthorn. We rated it as land only 681/1000 as the house is a bulldozer job and the block has a south facing rear. However,  great location for a new home site if you have an inventive architect.

24 Seymour Grove Brighton
This property sold on one side of the street (south-facing and no good for sunshine) for $2.92 million in December 2007. We assessed at land value only.

Date: Dec 2007
Landsize: 974sqm
Price: $2.92 million



29 Seymour Grove Brighton
Date: April 2008
Landsize: 1014sqm
Price: $2.16 million

This property sold this weekend for $2.160 million – having been on the market at $2.04 million – and was on the north side of the street (great for sunshine) and rated by us at a whopping 866 out of 1000 – so it’s a great property. There were three bidders – the market knew it was there and what it might sell for.

13 Wolseley Grove Brighton
To confirm the gravity of this market shift with some types of property. 13 Wolseley Grove, the next street up in Brighton (same James Home Rating 866/1000, same north-facing, same land size, same bulldozer house theory),  was auctioned a month or so ago with a price expectation of 2.9 to 3.0 million (we thought that was possible earlier this year when asked). It remained unsold at auction after a vendor bid of 2.1 million and a reserve of $2.85 million. We have since been informed that it may be for sale at 2.5 million; however, the price received for Seymour Grove may mean a further price alteration.

Are we saying the market has dropped all of its gains of 2007? In some ways, yes, we are saying that for the higher-end properties that are not “whiz bang wow!” That, of course, may turn around next week.

Are we saying that for all properties? NO. For example, for properties under a million dollars or properties that require little work and have the right “3 Ps” – Price, Property and Position – we see the market as having only eased slightly (up to 10 per cent off from Jan 2008). A lot of the sub-million dollar properties didn’t rise as quickly last year as the top-end properties.

At this stage, we are focused on making sure that we are paying the right price in the face of no competition, the right price in the favour of proven competition, or recommending we pass until we find another similar property within the right price range. However, if you are not experienced at auctions, your inexperience could be costing you hundreds of thousands of dollars.

Situation Two: two Hawthorn properties auctioned same day

11 Lawson Street, Hawthorn East – a property we rated at 775 out of 1000.
We viewed this property and rated it quite highly, but as land-only, at 775/1000. However, the quote seemed high with $1.8 million being the top end of the range. The home was built late 70s/early 80s but had some drawbacks associated with that era – dated decor, small rooms, less-than-perfect floor plan. We could not see how renovating the existing property made any sense and therefore overcapitalisation was a real chance if the buyer paid too much for the land and built again. The auction itself was attended by around 70 people and, in our opinion, it felt like there were buyers there, but nobody put in a bid. A number of vendor bids from Jeff Gole (who is a good auctioneer) and no interest from the street resulted in a pass-in at $1.6 million. It did sell in later negotiations at $1.687 million.

37 Illawarra Street Hawthorn – a property we rated 696 out of 1000.
Alternatively, another good property at 37 Illawarra St Hawthorn (on Scotch Hill) was rated at 696/1000 . It was auctioned by Tim Fletcher from Fletchers (another very experienced auctioneer), who had a very strong result at $2 million. The auction was very well attended, as it should be for a property on Scotch Hill without freeway noise. Being picky, you could say that, despite the land size, it was a trifle narrow for what will eventually be a $3-4million home. Also being picky, you could say that the neighbours dominated the site a little – however, Adam (James Architect) outlined an ingenious way to design for a narrow block and make the neighbours work for you in terms of street presence. Then a selling agent’s saying of “quote ‘em low, watch ‘em go” applied. At $1.5 million, the quote was always $200,000 to $300,000 under the minimum expected, even in this shifting market. We estimated the property at a minimum $1.8 million before auction (based on previous sales) and said it may get $2 million if it was a strong auction. It was a strong auction and it did get $2 million. So did the buyers get a good buy? We still think yes and we still think that a $1 to $1.5 million dollar home (needs to be well designed and finished) will go well in an area close to transport and a number of private schools and a street that has Kooyongkoot Road as its neighbour.

So why did a property we rated slightly lower get a better price?
The market. That is why you must have a two-pronged strategy – one if you really want to buy it and you have competition (Illawarra St) and one if you don’t have competition and don’t want to pay a huge price (Lawson St).

Situation Three: Kew, Yarra River Precinct

Land value only – a multi-million block of land that we were engaged in both purchasing (bought at auction) and selling (recommended the selling agents) recently saw an increase of around 50 per cent within a two-year period with nothing being done to the site at all. This was bought during a very hot market and sold during a cooling market time (recently).

It again emphasises the points:

1. 1. Properties that are quality sell strongly even in quiet times.
   2. Properties that are bought and sold well will stand up under almost any circumstance.
   3. In almost all cases. land and its position is the key to good investing, not the building.

We have not been specific, as our clients are private people but both transactions took place at public auctions.

The market seems to be stabilising at this stage although it’s a little too early to call as there are still many results that don’t fit into the expected boxes.

In general from a price point of view this is what we are seeing.

Around $1million – we are seeing some sales and a large number of pass-ins if the property is a low James Home Rating that is unattractive to buyers. However if the property is a high rating and no major negatives then it is almost at all times hotly contested. Two good examples this week are 37 Eglinton in Moonee Ponds which had 7 bidders and eventually sold for $880,000 and 17 Allison St Richmond which had 10 bidders selling for $1.32million.

Why is this happening? Even though the market has dropped and people are nervous at this level they still have to find a home – there is nothing discretionary about their needs – they need a roof over their head for their family. They have to buy.

Between $1.5 and $3.5 million – this has been the dollar segment hardest hit in terms of non sales and other trading difficulties. Evidenced by – look at our rated properties section at www.james.net.au or check the newspaper results each weekend. Poor properties are not getting any interest whatsoever and price becomes the only bargaining tool; however some good properties are also being passed over for what we see as reasons relating to the buyers not the home for sale.

Why is this happening? At this level, a number of homebuyers are affected by the interest rates and the concerns about selling their current home as they try and trade up or find a new home maybe in need of a renovation. However, unlike many first home buyers in the under $1m segment they have choices. They can simply do nothing, that is, stay where they are – delay – and many are.

$4million and over – this market is not really affected by interest rates – the main reason this segment has eased in 2008 has been the number of buyers willing to compete. There are less buyers owing to our recent stock market drop. However the buyers that are still competing are still doing so with some strength as properties of quality at this price level are rare and will forever and a day attract interest from those that can afford them without borrowing money (interest rates).

AUCTIONS ATTENDED THIS WEEKEND

Our opinion of the market at present is volatile but possibly stabilising.

Three auctions this weekend of some note – no photos this week as auctions were held inside (rain) and we respect privacy in those situations.

Moonee Ponds – 37 Eglinton St. This was a home we rated 728 out of 1000. It did have some negatives in that it was south facing and the floor plan had some issues. However it was a house with a great vibe – a real warm and welcoming feeling and its location was sensational being within walking distance of Union Road and Puckle St shops. The area is simply stunning with regards to period homes. Finally the views were panoramic, sensational and not easily built out. The quoting was always accidental at high 600’s to low 700’s. The campaign was well conducted by David Hutchinson of Nelson Alexander and the auction held  inside by Milo Rasinac was strong and well conducted. Property opened with a vendor bid at $680,000 –was on the market in the high 700’s and there was a fury of bidding from 7 bidders until it sold at $880,000. There were still 3 bidders at $870,000. We don’t think this sets new standards for all single fronted homes in the area but it does send a message to many that Moonee Ponds has some great properties. Many of the bidders we believe would have been ones from outside the area such was the pull of this home.

As we said the result was expected and continues along the strong,  sub million theme for good quality period homes that we evidenced at 9 Malakoff St St Kilda East last week.

Hampton – 19 Hoyt Street. This was one of the highest rating homes we have looked at and despite not being everybody’s cup of tea it was from a practical point of view and therefore our rating a great family home. We rated it 936 out of 1000. The auction was held inside and conducted by Phillip Kingston of Gary Peer who is one of the best auctioneers going around in terms of getting bidders into rhythmical bidding patterns. There were only 25 people being the shocker of the day that it is was, but 3 of the 25 were bidders. Opened at $1.6million with a real bid and with the three bidders this was one of the longest auctions of the day rising in $5000 increments with an eternity between bids to sell at $1,905,000, Sally Zelman conducted the campaign with her usual efficiency with a good result for all parties.

Camberwell -  2 Lorne Grove – We rated this 702 out of a 1000 with its main negatives being closeness to railway line and volume of renovation required. We estimated renovations in excess of $1million dollars. However it was a home with magnificent potential- a grand lady in need of some work, but the buyer who nurtures this home with love and care (and money) will be rewarded. Lorne Grove is a Camberwell Top 10 street with a recent $3m plus sale and even after $1million or more is added to the sale price (in excess of $2.6 million -we were asked for it to be undisclosed) we don’t think you will be in any way over capitalising. The campaign was run by Helga Fialides of Noel Jones and the auction was well conducted by Geoff Hall. 80 people present Lorne opened at 2mil then was followed by a vendor bid of $2.2m. Two bidders fought this out to sell for (undisclosed) and it was on the market at $2.4million.

As we have been stating for some time and was again confirmed this week, the market is still continuing to fall in the order of 10 to 20% for most homes in inner Melbourne since February. Reading recent stats from the various authorities the fall has been greater in inner Melbourne than outer Melbourne however behind those stats we think you will find that at least inner Melbourne is still transacting at a relatively strong rate.  We still have an incredible amount of homes on the market compared to last year and with lower clearance rates the numbers of unsold properties are building each week.

Six auctions at million dollars and above we attended this last Saturday

8 Churchill Grove Kew (Rating 543 out of 1000). Nice period home in a great position but had three big negatives – south facing so poorer light, no car parking and no obvious room for it and smaller rooms. Auction was attended by around 70 people and started with a vendor bid at 1.1m – two bidders took it to 1.13 and it was sold afterwards between 1.1 and 1.2m



39 Alfred St Kew (Rating 859 out of 1000). Good Strong Auction well conducted by Iain Carmichael of Bennison Mackinnon. This is a great block (north facing rear and sitting proud) in a great street with its only criticism being not deep. It was expected to go well and it did with 3 strong bidders taking it from 1.6million to ‘on the market’ at 1.75million, to sold at $2,040,000. Making land value for good house building blocks in the Sackville Road area $2400 a square metre and again reinforcing that irrespective of the market quality attracts.

47 Donald St Prahran (Rating 691 out of 1000) and we may have been a little harsh with our rating. This lovely Victorian with a great feel had very strong bidding – as it should and achieved $1,505,000 after a number of strong bidding duels between several interested parties. James Redfern of Marshall White was in charge of proceeding and a strong but expected result was achieved for the vendor.



13 Goodall Street Hawthorn (Rating 884 out of 1000).  A lovely Victorian with oodles of space, very well renovated and last year would in our opinion have sailed past $3million. After a big turn out of well over a 100 people and some strong bidding the property was passed into the highest bidder at $2.8m and later sold between that and $3million (exact amount undisclosed). Well conducted campaign by James Tostevin.



9 Arthur St Brighton. Cutting edge design that just didn’t fire at auction and with good reason. This property was originally advertised at 2.9m private sale and was then auctioned. It is very difficult to sell a property at auction after you have told the market the price you are chasing. Consequently it didn’t sell. A vendor bid was announced at around 2.45m then 2.5m saw it passed in with no expressed interest despite 80 people being in attendance.



14 Forbes St Essendon, (Rating 781 out 1000) As expected was passed-in. A big ticket was wanted on this property and despite our high rating (based largely on the brilliant quality of the home), it didn’t sell because in our opinion, the home and asking price didn’t match the street. When looking at property we always need to consider the 3 P’s and two of those P’s on this one (Price and Position) didn’t match up with the other P (Property).

Overall you can see many of the results below and some million dollar suburbs are really continuing to struggle –  Bayside in Hampton and Sandringham and then on the eastern front Balwyn and Nth Balwyn.

One final word – with Melbourne now being the 4th most affordable capital city and a big drop in real terms having been experienced in the last few months, now might be the time to consider hopping into the market – after all it won’t stay this way forever.

Pre Xmas 2007 and Post Easter 2008

24 Seymour Grove Brighton
This property sold on one side of the street (south and no good for sunshine) for $2,920,000 in December 2007. We assessed at land value only.

Date: Dec 2007
Landsize: 974sqm
Price: 2,920,000



29 Seymour Grove Brighton

This property sold this weekend for $2,160,000 – having been on the market at $2,040,000 and was on the north side of the street (great for sunshine) and rating a whopping 866 out of 1000 (click here for full rating) – so it’s a great property. There were 3 bidders – the market knew it was there and what it might sell for.



13 Wolseley Grove Brighton

To confirm the gravity of this market shift with some types of property – 13 Wolseley Grove, the next street up in Brighton (same James Home Rating 866/1000, same north facing, same land size, same bulldozer house theory)  – was auctioned a month or so ago with a price expectation of 2.9 to 3.0m (we thought that was possible earlier this year when asked) . It remained unsold at auction after a vendor bid of 2.1m and a reserve or $2.85m. We have since been informed it maybe for sale at 2.5m, however the price received for Seymour may mean a further price alteration.

Are we saying the market has dropped all of its gains of 2007 – we in some ways; yes we are saying that for the higher end properties that are not the wiz bang wow. That of course may turn around next week.

Are we saying that for all properties? NO. For example, for properties under a million dollars or properties that require little work and have the right 3p’s – Price, Property and Position, we see the market as having only eased slightly (up to 10% off from Jan 2008). A lot of the sub million dollar properties didn’t rise as quickly last year as the Top End.

At this stage we are focussed on making sure we are paying the right price in the face of no competition or a different right price in the favour of proven competition or recommending we pass until we find another similar property with the right price. However if you are not experienced at auctions your inexperience could be costing you hundreds of thousands of dollars.

AUCTIONS LIVE
We attended a number of auctions over the weekend – below are 2 auctions

29 Seymour Grove Brighton (866 out of 1000) – Quoted had dropped during the campaign from $2.5m down to around $2.25m. Bidding opened by the crowd at $1.7m and with two bidders and some vendor bidding rose to $2,040,000 before it was put on the market with a third bidder and eventually sold to the first bidder for $2,160,000. In the end and even in this market we think that was a brilliant buy and congratulations to the purchasers for their bravery and foresight.



42 Sussex Street Brighton auction – which we rated quite highly  – the only real faults were perhaps one living area short downstairs and upstairs was less than average but we assessed it could be easily fixed. This property was subject to an offer late last year well above what it was passed in for today and is a further reminder that sellers are facing tougher times right now. Two vendor bids by James Paynter (a strong auctioneer) at 2.35m and 2.45m saw no bids, no action and a pass in.