More big crowds this week, such as this one at 27 Auburn Pde, Hawthorn East, which stopped traffic! Under the hammer, $1,360,000, Peter Batrouney (Jellis Craig), 4 bidders

At 6pm on Saturday the James $M+ Clearance Rate on the 32 auctions we covered dipped to 59%. For the second week in a row there were around 150 new $M+ listings in our main coverage area of Bayside and the Inner East. Buyers have firmly said to sellers – “if it ain’t priced right we ain’t bidding, because we can see plenty of other homes coming on”. This attitude was particularly evidenced by the ‘duck’ rate (auctions with no bids and no sale afterwards) which was almost 1 in 3 this weekend  – well up on last weekend.

However there were exceptions – such as in Stonnington at the top of the Top End where there was almost no stopping the market and it made its strongest statement of the year so far.

Where is the Market At?

Last week there were indications the early $million+ market could be warming up a bit. But a second strong week of listings has taken some heat out of the market.

The strongest “take notice of me” stat was this weekend’s Bidderman dropping back to 1.5 from a more healthy 2 last week. What that tells us is that buyers are seeing stock choices going forward and the urgency has dimmed on some homes.  If Bidderman continues like this to Easter, prices are unlikely to rise.

This weekend we did see price pressure on quality homes, with quite strong bidding at a number of auctions (including several $3m+ auctions) and five ‘volcanoes’ of 4+ bidders per auction.

What we’re saying is that this first market period, up to Labour Day, has started healthy and balanced. But the second market (up to Easter) is no longer a shoo-in positive for would be sellers.

For buyers, this two week stock surge presents an opportunity for good prices on some good homes that the market may miss – at least until Easter. But things can change quickly – while May last year saw oodles of stock coming onto the market, that may not happen again this year. Given we’ve got such a late Easter in 2011, we may already be seeing the stock surge we saw in May last year, which could mean we don’t get strong stock levels this May.

Crowd Numbers: Again we had big crowds at many auctions, indicating a strong level of interest in results. This weekend we reported one in three auctions with 80 or more people in attendance. All others had good numbers watching.

Our $M+ Supply Indicators:

New Stock: This has been the second huge week in a row for listings with around 150 $M+ homes newly listed for sale in the Inner East and Bayside areas that we cover. There were around 200 $M+ listings across Greater Melbourne.

Actual Numbers Sold: There are solid numbers of $M+ homes changing hands, which is in part why we are not yet buying into any  cries of  a “weak market”.
Agent Market Comments:
Gerald Delaney (Kay & Burton): “I can’t see anything wrong with the market at the moment. We have seen good interest on good properties. I definitely think the market is a healthy one.”
Justin Long (Marshall White): “I feel the market has a bit of upward pressure at the moment. The well priced properties are going beyond expectations and the overpriced or not so good can be very hard work.”

James Marketnews Big Issue:
A few Expressions of Interest and Forthcoming auctions are coming back – a possible sign the pre-Easter auction market is viewed as oversupplied. Watch the discussion on Market News TV.

‘Round the Grounds Snapshots
Boroondara -  Stock Surge in Boroondara – Clearance Rates are definitely not as good as we are used to, but nearly 40 homes at $M+ were bought this week
Bayside – Bayside still shining the brightest – more stock coming on pre Easter will re-test its underlying 2011 strength
Port Phillip – So-so weekend, but stock wasn’t that exciting. Wow on Howe – Big $6m+ sale.
Stonnington – Where the big action was this weekend.
Rest of Melbourne – Just not a lot of $m+ auction action happening so we held over this week’s report
More Detailed Analysis in our Weekly Local Council Market Wraps

$3M+ Markets:
New Homes: Definitely weaker than last year particularly in the Balwyn and North Balwyn heartland.
Period Homes: Solid interest continues
More News and Specific Results can be found in $3-Million-Plus Market articles on the home page

MALVERN, 66 Claremont Ave: Iain Carmichael (BenMac) led a cracker auction - on the market at $3,300,000 and selling under the hammer $3,700,000, 3 bidders

Biggest Sale: 19 Hamilton Rd, Malvern, Justin Long (Marshall White): Under the hammer $4,357,000
The auction opened on a bid of $3,820,000, was on the market at $4,250,000 and bought under the hammer for $4,357,000. There were two bidders and a crowd of around 150. A solid result for this 1930s reproduction home on 668sqm of land.

Biggest Pass-In: 279 Beaconsfield Parade, Middle Park, Gerald Betts (RT Edgar): passed in $4,250,000
“Auctioneer Gerald Betts opened with a vendor bid of $4,000,000 and closed with a vendor bid of $4,250,000 in front of 40 seemingly uninterested observers.” (Mal James)

Bidderbuzz Auction: 11 William St, Brighton, Rod Richardson (Hocking Stuart): Under the hammer $3,100,000, 5 bidders
“The epic 45 minute auction of 11 William Street had a mix of elements to entertain those spectators watching on – intensity, drama and tension with a few awkward silences thrown in.  In the end it was a battle of the property developers for this generous block of land, in the heart of bayside Brighton.  Auctioneer Rod Richardson showed composure in the face of heckling and the patience of a saint during this long auction, working tirelessly to achieve a solid result for the vendor from the opening bid of $2,710,000 to the winning end at $3,100,000.  All in all, it was an entertaining auction to witness!” (Nikki Hills)

Auction Video: This week Architect Adam heads to Hawthorn to witness James Tostevin and the Marshall White team auction 66 Manningtree Road. Click on the live action.

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

Buyer Masterclass: A change of pace with Architect Adam telling us why we love Victorian homes – with plenty of facts and figures.

No Marketnews next week with Labour Day Long Weekend.

We Only Buy Homes

51 Murray Street, PRAHRAN: This original double-fronted Victorian home has been well renovated and extended to the rear and well suits modern living. Bought under the hammer at auction on 19th June 2010 for $3.74M with 4 bidders.

More than a hundred and twenty years since they were built, Victorian-style homes continue to rate highly among homebuyers in Melbourne. Why is that?

Let’s take the example of the double-fronted Victorian at 11 Primrose Street, Prahran, scheduled to go to auction on March 19. It has a lovely symmetrical facade and good building bones – a wide central hallway leading to a large open plan living area at the rear. The ceilings are high and, because of this, the house sits prominently up from the street.

And though it is beautifully renovated to the rear of the house, with a lovely light spacious living area opening onto the back garden, the renovation work cannot be seen from the front.

It is this ability to adapt Victorian-style houses to a modern lifestyle without compromising their original facade and character that makes them keep and grow their value so well, where many other home styles do not. It’s not just about complying with heritage requirements: a Victorian facade gives a house its all-important emotional appeal to buyers, and underpins its capital growth. The best and most sought-after streets in Melbourne are often the ones with original homes in uniform character.

One of the key features about Victorian homes is that they traditionally have big formal rooms at the front, with all the service areas, such as kitchen and laundry, at the back, well away from the living and entertaining areas. What that means today is that you can easily demolish the back of the home and put on a new living area. If the ceiling heights are retained throughout the renovation, the rear new spaces can often be very light and bright. And because only the front portion of the house is retained, updating the house for energy efficiency is relatively easy.

That flexibility translates into big dollars. Take 51 Murray Street, Prahran, a beautiful Victorian with a stunning ultra-modern two-storey rear renovation that would have cost several hundred thousand dollars. But this is the kind of house worth spending that kind of money on. James Home Ratings scored it at a whopping 926 out of 1000.

43 Motherwell Street, SOUTH YARRA

Going to auction last year, the property, which had been quoted at $2.9 million plus, sold for $3.74 million after furious bidding between four bidders, which is twice the Bidderman^TM we currently see in the $million plus auction market.

Unrenovated Victorians are just as highly sought after. A Victorian at 43 Motherwell Street, South Yarra that went to auction late last year had a beautiful ornate facade, but needed some serious work. On auction day, seven bidders battled it out to push the original quote price of $1.3 million to $1.86 million.

Compare that to houses of a more recent era, from the 1930s onwards. Even though this was a time where houses were beginning to incorporate mod cons such as electric kitchens and internal laundries, their layout doesn’t work that well for our modern lifestyle. We like to have living and entertaining areas opening onto the back garden – but, until the 1980s, houses tended to be designed with living areas and kitchens towards the front or middle of the house, which makes it difficult and expensive to make structural changes.

11 Olive Street, HAMPTON

The property at 13 Olive Street, Hampton is a good example. Built in the 1950s, the house is an average size but the block of land is generous. Like many homes of this era, the house has a tricky floorplan. It lacks a wide central hallway, and the flow through the house is indirect and a little confusing. The bedrooms are relatively small and ceiling heights are low – around 2.7m, compared to 3.3m for the Primrose Street house.

Added to this is the fact that the facade is basic and has no real redeeming features, which means there is little or no emotional attachment from a buyer’s perspective. That lack of an attractive facade also means that houses in streets from this era are often part of an ever-changing streetscape – there is generally a lot of building activity happening or about to happen, bringing the noise and annoyance of a constant construction site and the potential risks down the track in terms of privacy.

The house might be cheaper to buy in the first place but, unlike the classic Victorian in a street of other similarly gracious facades, it is unlikely to keep and grow its value over the years.

Valuing land is difficult enough, but there are even more variables when it comes to getting a consistent opinion of the market value of an actual building.

We always counsel long term passive investors to buy purely on land value, or to buy proven populist homes like Victorians and Edwardians as opposed to new homes.  Why?

Buildings are very much like clothes: they are fashion statements and, as such, various styles go in and out of fashion. Many of us love period homes now, but in the 1960s the thinking was to modernise them and in the process a number of classic buildings were destroyed. Similarly, Art Deco was loved in the 1920s and 30s but now has a limited following  – a very passionate one who will pay strong prices, but limited nonetheless.

The value of a home depreciates just as a new car does the moment it is driven from the showroom.  If half your money is spent on the home (the other half on the land) and that home goes out of favour as many do (such as the recent fad to Georgian reproduction homes), then while the land component may be growing in value, the other half of your money is working in a negative direction growth-wise.

To demonstrate the various ways different people can regard the same building, here are the opinions of four famous agents on the value of a 25 square 1970s home, with an ensuite and double garage, on a nice block in Inner Melbourne.

Ms Artina Deco: $400,000. “I think this home will be bought by an overseas buyer who would consider this a good solid home.”

Sir Eddy Wardian: $300,000. “I think this home will be bought by a new home buyer and renovated to new. My estimate of its value when renovated is $700,000 and I think it will cost $400,000 to renovate – therefore it is worth $300,000.”

Mr Victor Rian: $200,000. “I think this home will be bought by an investor who will get a 3% rental return so I have based my calculation on that.”

Cal Bung: Zippo – $0. “I think this home will be bought by a developer who will bulldoze and put up units.”

As for me – my opinion of the market value of this home would depend on where it is located. If it was Balwyn I’d say $300,000 to $400,000, because that’s how overseas buyers from China and India have been assessing similar homes recently.

But if I was in Brighton or Toorak, I’d say between zero and $200,000 because it is more likely to be bulldozed and the site developed. Many great homes in Toorak have no value because they are bulldozed by a new owner with plenty of funds who want to make their own footprint.

While there are no set in stone rules in building value assessment – here are a few guidelines that we follow

1.       New homes we calculate at replacement value

2.       Near new homes we calculate at replacement value minus a cosmetic update cost

3.       Homes 20 to 50 years old depend on the suburb. A way of getting a handle on values on these buildings is to build a database of comparable (similar) sales, subtract what you consider to be land values, and build a range of how the market values homes.

4.       1940s to 1970s homes without architectural merit – zero. With merit – difficult!

5.       Pre 1940s period homes that need to be completely gutted – a token amount depending on size

6.       Pre 1940s period homes that need some work – completed value less estimated renovation value

7.       Pre 1940s period homes completely renovated – compare to others in area and if that is not easy we value at replacement cost as if it were a similar quality and sized new home.

Valuing homes and land and emotion is the pursuit of perfection by the imperfect – but the closer you get, the better your decisions and strategies can be.

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

Market value is useful when considering capital growth, however unlike with the share market, the market value of a property is often more a concept than an exact figure – and everybody has their own ‘recipe’ for how to go about it. But there are three consistent ‘ingredients’, that agents use to get a sense of the likely market value of a home: Land + Building + Emotion (or X factor).

So how do we put a price on these different components?

Let’s start with land, in many ways the most straightforward component.

For canny investors land is the key ingredient. Certainly, when we are buying for $M+ investors we look closely at the land value to price ratio as a pointer to growth.

By way of example, imagine three identical blocks of land up for sale side by side. If two were vacant blocks that sold for $1,600,000 and you bought the other one, which had a home on it, for $2,000,000, then your land to price ratio would be 80%. That’s an exceptional ratio, a pointer to good capital growth and a common ratio for period homes.

But if, on one of the vacant blocks, a neighbour spent $1,600,000 to build a nice new home with a pool and a lift  and a whizzbang kitchen, then their land to value ratio would be 50%: Land $1,600,000 + Building $1,600,000 = Price $3,200,000.  Next to your property, that is only OK (financially), but a lot better than many apartments which have land content as low as 10%.

Back to values – if the three blocks were each 800 square metres in size, the land would be assessed as $2,000 per square metre. Say if you were interested in a block nearby that was 600 square metres in size, what selling agents would do is multiply the size of the block by the $2000 square metre unit price (in this case), just as we do when buying cloth at the market or meat at the butcher. So, in this case 600 sqm x $2,000 per sqm = $1,200,000.

Seems simple.  But remember that it is rare to find such a scenario. More often than not, in inner cities such as Melbourne, vacant blocks are rare or they’re not all the same size or recent sales are limited (and given how the market shifts every week, the more recent they are the more relevant). Or they are in different areas with different characteristics, say on a main road or with water views or they’re bigger or smaller or you can develop them or you can’t. But with some diligent study, with all the sales and facts in front of you, you as a buyer could with hand on heart say that this 600 square metre parcel of land currently has a market value of $1900 to $2100 per sq metre or $1,500,000 to $1,700,000.

It is important to get this figure as close as you can to “right” or “market” value, by gathering many recent sales of similar blocks in similar areas of similar sizes bought in similar market conditions – and then taking an average or range as your result. If you cannot easily do that, you may be best advised getting professional buying assistance. This is what we do on a daily basis.

If your information is inaccurate, and leads you to believe that the land we talked about above should be $1600 per square metre, it’s likely you will think it is overpriced and you won’t buy it. Similarly, if you think the land is worth $2,500 per square metre you will happily buy it at $2,000,000 – but long term you may struggle for growth.

So these are the nuts and bolts of valuing a vacant block of land. If you think that was complicated, prepare for the next part  where you work the value of the building. That’s where it gets really interesting – as we’ll hear about next time.

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

Some of our buyer prayers have been answered

Market: Even with significantly reduced auction numbers this weekend (owing to a more important event which finally delivered a result that proved there was justice in the world), we still saw a pretty healthy market result for sellers – with a 74% Clearance Rate on the 55 $Million+ auctions we monitored. Of those 55 auctions, 9 results were not reported. But even that is not unreasonable under the circumstances of the GF Replay.

There seems little doubt that the market is on the rise. The big interest now is how the market will absorb the stock surge that will culminate in Spring/Summer’s first Super Saturday on October 23rd.

And it really is Super Saturday - with a massive 81 $M+ auctions booked for Boroondara alone, and around 200 $M+ auctions booked in our key focus $M+ areas – Bayside and Inner East. Check out the size of the Weekly Review this week (it’s as big as a phone book). By comparison this weekend saw only one quarter of that number of auctions. So if you were at an auction this weekend, those four bidders you competed against may well be spread across four homes in a couple of weeks. Well that’s the “buyer-hope” theory anyway.

This Week’s Highlights:

• Two land sales showing vastly differing land values
  a) Land at 101 River Avenue Plenty (39,500 sqm), which can be subdivided, was auctioned  by Rob Stefanovski of LJ Hooker Greensborough and  bought for $3,830,000 or $96 per sq metre
  b) A large land parcel (1,813 sqm) at 3-5 Heath St Sandringham sold after a failed auction by Bill Jowett of Buxton for $2,800,000 or $1,544 per sq metre
• The major stock inflows that took place on Monday, Tuesday and Wednesday when agents began their marketing campaigns for the next Super Saturday – October 23rd.
• The continued improvement of the $3M+ market – two examples below
  a) Off market in Black St Brighton (Peter Bourbaud and Barb Gregory) – bought for around $4 million
  b) 27 Moorhouse Armadale with Gowan Stubbings of Kay and Burton – bought after an Expression of Interest campaign for more than $5 million
• The Pies Forward Line pressure (whoops, sorry – I got distracted)

Auction Snapshot from this weekend: 133 Rathmines Fairfield: Michael Fry and Grant Leonard of Nelson Alexander. Bought under the hammer for $1,116,000. 5 bidders.
There was a buzz about this well located timber period home, which had had its quote lifted to $930,000 during the campaign. It was a surprising development given Grant’s comment that the property failed to attract any interest in the high $800s a few months ago with a quiet sale campaign. It was on the market with the first bid at $900,000. Second bid $950,000. Third bid $970,000. Fourth bid-  bang $1,000,000. Three more bidders joined in before the action stopped at $1,116,000. It was a well run auction campaign. I always enjoy a Michael Fry auction. He has a sophisticated grace about him incongruent with the fact that he is yanking the dollars from buyers’ pockets. Enjoyable to watch unless you’re an underbidder – which unfortunately this time we were.

Bumper Market Insight: We have an information packed Market Insight this week; even though there are no Market Wraps, Bidderman, reports or videos.  The footy replay threw this auction weekend into a bit of chaos, with a few auctions even changing days. But it was a very low stock weekend anyway, so no major damage. All $M results are at the end of this Market Insight. But the big news now is the next three weekends that will lead full bore into the Melbourne Cup Long Weekend.

Stock Levels and Price Assessment:
The big question the market will be asking now is: What will happen to prices on October 23rd? With this big stock influx, how is the price game of snakes and ladders going to pan out? Are we going to see the slippery snake and big price slide of May 2010 or will the market just take this in its stride, as it did this time last year, with prices climbing further up the ladder? Time will tell. Importantly as buyers you need to get yourself organised – and don’t count your chickens before they’ve hatched.

With this apparent largess of choice, perhaps you don’t need brilliant home-seeking skills right at this moment. But you will need first class assessment procedures (e.g. sorting the goodies from the baddies in terms of capital growth prospects, and working out which one is best from a “happy wife = happy life” point of view). You will also need good negotiation strategies – because while you may have more choice, you will also have competition. Remember, our bidders per auction indicator Bidderman was strong on lower numbers in September, especially on good homes. On the flipside, some sellers expectations may be disappointed, so planning good negotiation strategies will improve your chances of grabbing a bargain when it presents.

Have a look at our Forward Auction Booking graphs below to get an idea of what is ahead of you: (click on a graph to enlarge)

There are also some exciting trophy homes on offer through private sale and off market – especially in the $3m+ segment.

Have a look at the New Stock Graph at the top of Market Insight – which compares the last week in September to the last week in June, (private sale and auction weekly new stock numbers are combined).

Special Report on the $3m Market

The $3m+ is back, after the self induced May hiccup that led to a very quiet winter.

There have been over 50 buys in the month of September at this level, with buyers coming from all quarters. Let’s pick one of the segments – around $4million. We have bought 3 homes at this specific level in the last few weeks. All were classic period homes with land of over 1000 square metres. Two were bought post auction (eg after a pass-in) and one was off market (Black St Brighton). However, the interesting thing were the buyer profiles. One buyer was a change of life family, one was a growing family that needed more space, and one was an expat family returning from overseas. This is a fairly accurate representation of the range of people we look for homes for. Of the last case – expats returning from overseas -Brighton high end agent Peter Bourbaud believes “this group will push the market along for the next few years, after a couple of very quiet years from the expat community”. We concur. Last year we conducted very little in business terms last year for expats. However in 2010 there has been a distinct pick up in action from expats returning home.

The James September $3m+ Report with all reported $3m+ boughts and solds can be viewed from the Home Page (next to Market Insight and below Buyer Masterclass) or click here

If you are new to the $3m market you may find the charts below (using 2007 to 2010 Valuer General, REIV and our own James Databases) of some value, as they help to show how the overall $3m+ market works. Note particularly that:

• The two powerhouse $3m+ suburbs are Brighton and Toorak (see 2009 results graphed below). However these two suburbs behave quiet differently from each other (see median graph). More on that another time.
• More $3m+ is bought later in the year than early. (2009 graphed below)
• There are some real name streets around and there are some falsies (where if you pay top dollar you will stand out like a beacon)
• Less than a quarter (25%) of $3m+ homes sell under the hammer at auction (click on September Graph below)
• A lot more activity is off market (not advertised) at this $3m+ level than any other price point, e.g. sub $3m.

Click on any of the graphs below to bring them up to full size

Agent Comments on the current $3m+ market

• “Prior to the school holiday period there was some renewed strength in $3m+ market due to things stabilising after the election and to the shortage of good quality homes. With the spring market in full swing it will be very interesting to see what happens with the increase of volume. But if the enquiry rates are anything to go by, October will be a strong month of sales.” Andrew Hayne of Marshall White Malvern
• “The $3 million plus market is strong, and we are expecting a big finish to spring in this market for good family homes.” Nick Johnstone of JP Dixon Brighton
  
• “There seems to have been a resurgence of buyer enquiry for the upper end properties recently.  It will be interesting to see if this follows through once we see increased stock levels after the school holidays and round 2 of the Grand Final.” Julian Augustini of Hodges Brighton
• Andrew Baynes from Kay and Burton South Yarra “Last Monday was the busiest auction sign up day for me in 10 years.”

Media Monitor: Domain – The Age 2/10/10. Headlined: “Hands up if you don’t have a clue” by Josh Jennings. Basically a solid article – but Josh, how many homes has Dr Damien Eldridge, Economics Lecturer from La Trobe University, bought using his quoted bidding advice this year? Would it have been 5 or 10 or 50? Going by his auction comments we were unclear as to whether you were holding him out as an expert – or simply providing supporting evidence to your headline.

We are not all brickbats here for the mainstream press. Congratulations to Chris Vedelago from The Age who this year has been consistently reporting the market as it really is and who actually seems to get out of the ivory tower (that so many property reporters are stuck in) and goes to auctions and talks to agents. We mightn’t always agree with you Chris, but we respect your work. Keep it up and keep getting out into the market.

Market News TV: On Tuesday of this week we ask the question: Is the ACCC or CAV the right watchdog for the real estate industry? Check out our Agent Opinion Videos.

Buyer Masterclass: We conclude our Negotiation Masterclass series with an article on Backward Bidding. From next week until Christmas we will be looking at “Pricing and Values” in Million Dollar Melbourne

Reported Results:

Malvern 24 Somers: Jeremy Fox of RT Edgar: Bought for $6,160,000 under the hammer: 3 bidders: Crowd of 90.

Special Report on the $3m market: The $3m+ is back, after its self induced May hiccup which lead to a very quiet winter.

There have been over 50 buys in the month of September at this level and the buyers are coming from all quarters. Lets pick one of the segments – around $4million. We have bought 3 homes at this specific level in the last few weeks: all were classic period homes on land sizes over 1000 square metres  – two were post auction (eg after a pass-in) and one was off market (Black St Brighton). However the interesting thing was the buyer profile. One was a change of life family; one had a growing family and needed space and one was an expat family returning from overseas. If you look at our client lists this is a fairly accurate representation of whom we are looking for. In the last case – expats returning from overseas – Brighton high end agent Peter Bourbaud thinks “this group will push the market along for the next few years, after a couple of very quiet years from the expat community”. We concur, we conducted very little in business terms last year for expats, however there has been a distinct pick up in action from expats returning home in 2010.

The James September $3m+ Report, with all reported $3M+ boughts and solds can be viewed from the home page (next to market insight and below Buyer Masterclass) or click here

If you are new to the $3m market you may find these charts below (using 2007 to 2010 VG, REIV and James Databases) of some value as they help to show how the overall $3m+ market works.

• The two powerhouse $3m+ suburbs are Brighton and Toorak (see 2009 results graphed below); however they behave quiet differently from each other (see median graph). But more on that another time.
• More $3M+ is bought later in the year than early. (2009 graphed below)
• There are some real name streets around and there are some falsies (where you pay top dollar and stand out like a beacon)
• Less than a quarter (25%) of $3m+ homes sell under the hammer at auction (click on September Graph below)
• A lot more activity is off market (not advertised) at this $3m+ level than any other price point eg sub $3m.

Please click on the any of the graphs below to bring them up to full size

Agent Comments on the $3m+ market

• “Prior to the school holiday period there was some renewed strength in $3m+ market due to stabilisation of things after the election and the shortage of good quality homes. With the spring market in full swing it will be very interesting to see what happens with the increase of volume, but if the enquiry rates are anything to go buy October will be a strong months of sales.” Andrew Hayne of Marshall White Malvern
• “The 3 mill plus market is strong, we are expecting a big finish to spring in the 3 plus market for good family homes.” Nick Johnstone of JP Dixon Brighton
  
• “There seems to have been a resurgence of buyer enquiry for the upper end properties recently.  It will be interesting to see if this follows through once we see increased stock levels after the school holidays and round 2 of the Grand Final.” Julian Augustini of Hodges Brighton
• Andrew Baynes from Kay and Burton South Yarra “Last Monday was my busiest auction sign up day for me in 10 years”

We only buy homes

Nick Renna Of Hocking Stuart in action on 14 The Highway Bentleigh. Bought $1,301,000. 4 Bidders.

The Melbourne $M+ market outside Inner East and Bayside performed pretty well today with 25 of the reported 30 $M+ auctions or 83% selling. This figure is a little generous, with a few unreporteds, but it nonetheless shows a strong “fringe” $M+ auction market.

Highlights

• 18 Carn Avenue, Ivanhoe with Sue Lacey of Miles selling for $2,040,000 after auction.
• 42 Barkly St, Fiztroy with Nathan Waterson of Benmac selling on auction day for an undisclosed amount believed to be in excess of $1,500,000

BidderBuzz Auction: 14 The Highway, Bentleigh: Calvin Reid of Hocking Stuart: 4 bidders
James Auction Report: Nick Renna usually entertains the crowd and he didn’t fail on this occasion. After a low opening bid of $1,000,000, Nick quickly topped this with a vendor bid of $1,100,000 which produced quick fire action from at least 3 other bidders. When the reserve price of $1,290,000 was announced, this fine property was quickly bought under the hammer for $1,301,000.

James Home Rating: a very impressive 792/1000: This part of Bentleigh is increasing in popularity all the time – we call it the sporting precinct owing to the brilliant sporting facilities on Jasper road – add to this walking distance to train, coffee (Centre Road) and Safeway and this area is becoming highly sought after. The Highway is one of the better streets in Bentleigh due to its consistency of offering – almost all are period homes and Calvin the agent states there is a council overlay restricting development to some extent. The home itself really does tick all the boxes – good garaging although tandem, two street frontages, good home flow. Being picky the upstairs could do with an extra 6 inches in ceiling height and as is the norm the front formal rooms are standard size for this period but in today’s market are regarded as borderline in size. The renovation is first rate out the back and built with some class and foresight and the window tinting and placement are nice touches. You could slip in a pool fairly easily or simply enjoy the backyard as is. Overall for a homebuyer with a budget in the the low to mid ones this warrants thought and if you are lucky it also warrants your signature. Rock solid family home. More Information and see our Full Rating: http://www.james.net.au/rating/14-The-Highway-BENTLEIGH

97 Locksley, Ivanhoe: Greg Taylor of Miles: 1 bidder: Bought Afterwards

James Auction Report: Auctioneer Greg Taylor was concise and to the point in front of a smallish crowd of around 25 people. Understandable as this was a nice property but it had a few issues. The auction opened with a vendor bid of $1,200,000 – followed quickly by a lone bidder at $1,225,000 and a pass in. Bought afterwards. Full Auction Report at http://www.marketnews.com.au/auction-reviews/8713/97-Locksley-Road-IVANHOE/

Greg’s Market Comments: The market is light on for $M+ homes compared to earlier in the year and this time last year. Most homes are going within the quote ranges except for those with a real WOW factor – eg family homes. Some of these are shooting past expectations.

Clearance Rates and Results:

Greg Taylor of Miles: 97 Locksley, Ivanhoe: Bought After: Undisclosed: 1 bidder: Passed In $1,225,000.

We only buy homes

39 Park Road Middle Park: Hey what's this guy doing back here with a different guernsey on? Greg Hocking formerly Captain Coach of Hocking Stuart now playing full forward for TBM. No bidders though and passed in $2,600,000. Is this a Welcome Back?

Key Points

• Market continues to be very quiet on low stock turnover but this as expected this time of the year in Port Phillip.
• Biggest sale was in Elwood – 4 Pozieres Avenue -  Leonard Persichetti - TBM – $2,345,000 – 3 bidders

Five single fronted period homes went to the market today.  They sold between  mid $900,000′s and mid $1,200,000′s

• Albert Park – 80 Moubray Street  – under the hammer
• Port Melbourne – 247 Ross Street – post auction
• Port Melbourne – 222 Ross Street – post auction
• Port Melbourne – 49 Farrell Street – passed in
• Port Melbourne – 47 Raglan Street -under the hammer

See our reports below and how each one fared – and maybe ask yourself why

• Position
• Land Size
• Floorplan
• Quality
• Campaign

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

Sam Gamon, Chisholm and Gamon: “Sellers going post election but not stopping selling; Best buying week in last 6 weeks; Prices are now becoming clearer to sellers and buyers around 5% lower than April; New buyers are coming into the market instead of last year’s buyers; Buyers are sensing opportunities now as some feel things may improve post election when everybody realizes nothing is going to change.”

Vanessa Gillon, Buxton: “For us, the election hasn’t made a difference as we do more private sales than auctions. But (overall) I haven’t heard that there has been much of an affect.”

David Lack, Biggin Scott: “All our vendors have elected (pardon the pun!) to avoid auctioning on the weekend of the election, citing that they didn’t want their prospective buyers distracted. The following weekend, however, will be busy, as sellers try to get a sale in before the AFL finals begin;  Listings are down on the same time last year, and many prospective vendors are adopting a wait and see approach;  Buyer levels have dropped off by a minimum of 30% on properties priced over the magic million mark, though there are still many buyers in the $600-$800,000 range chasing well-presented 2 bedroom apartments and period-style cottages;  Family homes on reasonable blocks of 250 to 400 sq m are in huge demand, and it will be interesting to see how this segment of the market will perform in the coming weeks with 3 such properties being auctioned in Port Melbourne;  Beacon Cove pricing has held up, particularly with the apartment market, with 5 sales in the last month between $1.3m and $1.8m. Turnover in Garden City has also been steady, with 4 sales of un-renovated ex-Ministry homes all achieving in the early $800,000s to $900,000s range.”

Andrew Stuart, Hocking Stuart: “The election hasn’t been holding people back, that’s for sure; Stock levels are good – There were more than 40 properties auctioned around here today so stock levels are normal; Properties are always scarce around here as no one wants to sell or move away.”

Kaine Lanyon, Benninson Mackinnon:”Whilst there were not many auctions today, the vibe was better than the last few weeks; (Our) office sold 4 from 5 with multiple bidder at all  auctions; Perhaps some vendors may be holding back because of the election, but buyer sentiment remains positive.”

Clearance Rates and Monitor Table – always a little unreliable on such small numbers this time of the year.

Buying Activity – A significant drop off in activity – in part expected as it’s winter.

We Only Buy Homes

McKinnon 40 Wheatley Road Nick Renna Passed In. Huge crowd of 200 saw 3 bidders fight strongly for the right to go toe to toe with Mr Renna post auction. We await the final outcome.

Unless you have been in a cave you would know that property prices in Glen Eira have been increasing for some time now. However in the past two weeks, after the Easter break,  million dollar prices have been common as common as Bagels in Glenhuntly Road; as common as Gary Peer signs on Bambra Road and as common as Collingwood premierships (woops that’s wrong); anyway (25 in total) in Elsternwick (5);  Caulfield (12), McKinnon (3) , Bentleigh (1), Ormond (2) and Murrumbeena(2). That is very strong and unlike early 2009 or all of 2008.

Caulfield North $2m+ private sales: 3 in fact at 5 Rowena (Rodney Morley TBM), 8 Craddock (Gary Peer) and 8 Fosbery (also Gary Peer) averaging out a tad over $2.5million. These were all new homes and shows that in Caulfield if you build it in 2009 they will buy it in 2010.

The market didn’t show a similar strength today on the 6 homes we chose today. Three had issues and they all passed in – the other three were bought. However there were bidders atall bar one auction.

Some land sales for values:

66 Shoobra Elsternwick with Bill Stavrakis of  Biggin and Scott. 668 sqm for $1,300,000 or just under $2,000 per sq metre. Seriously across Melbourne this far out from the CBD in that caliber of precinct it sounds cheap. The sale  is good – that is land value in the are – we are saying the precinct for what is offer is cheap. Glenhuntly road shops, synagogues and churches, rail and tram (sounding like a selling agent, but its true). It’s almost a hidden treasure except everybody knows – sort of.

20 Marriott St Caulfield with Mark Rogers of Buxtons. Nice north facing rear block of 73o sqmetres sold for around $1800 psqm. It’s a little bit away from the action but after a good home goes on it you are looking well north of $2,000,000 which supports those 3 new home sales mentioned above

So far this year we have seen regular crowds of up to 70 to 100 people; far bigger than in Stonnington and Bayside. Why I’m not sure – there maybe even greater buyer depth here than we first thought and many are not getting the chance to put their hand up on the goodies.

The median price trend chart below, courtesy of the REIV, shows as we are finding, a solid recovery in prices began around the middle of last year and has continued on into this year. We think these charts accurately reflect what is happening in the Glen Eira $M+ market.

All this is showing the potential of buying in Glen Eira for those that can’t afford Malvern or Brighton and for those who simply want to live here for the family life and period homes on offer.

If you haven’t noticed Glen Eira before then just take a drive around the suburbs and you will be pleasantly surprised.

Stay Focused, Stay Happy

Balwyn North: 60 Tuxen Street; Toby Parker of Hocking Stuart trying to see all the bids from a crowd of over 300. The story of the day. Huge crowds. Very strong Bidderman. Bought for $4,300,000

It is 6pm Saturday and the James Million Dollar-Plus Clearance rate for the 39 Auctions we attended today was 77 per cent and we have no late REIV results so could be higher.

Bidderman was well up at 3 bidders per auction and any talk from us of the last two weeks looking a bit soft has been well and truly proven as wishful thinking. 

The market of today is showing no signs of any weakness as proven by Bidderman and the $m+ clearance rate.

As a buying group we had nine auctions/buys on today and in my opinion we had an element of luck to buy the five that we did. 

Market Mood

The market according to Gerald Delany from Kay and Burton was astounding today. Rock solid says John Bongiorno from Marshall White. Scott Patterson from Jellis Craig expanded even further with these facts and comments

Strongest day he has ever seen in his 20 years of real estate with 62 of Jellis Craig’s scheduled 75 auctions selling under the hammer or shortly after. Easily their biggest day in real estate dollar wise – ever. In fact at Jellis Craig 88 million dollars of real estate exchanged hands during the past week including around $7 million for Paterson St Hawthorn (Nick Elmore/Tom Aylward) and 5 Moore St Hawthorn (Paul Keane/Alastair Craig) was bought under the hammer for $6,435,000 with 6 bidders. This is 2007 bidder strength.  I think Scott made another salient point when he said it was local not overseas buying strength today.

We mentioned that the last two weeks were down in terms of Bidderman and that it may have been a turn or it maybe due to stock quality. Today seems to have proved it was stock quality. Today was as strong as the other 2010 Super Saturday (February 27 th), as strong as late last year and as strong as the December 2007 peak. It was all about quality and buyer depth and local not overseas buyers.

For every buyer there were two who missed out. Best evidenced by our  trips in the last fortnight to The Boulevard Aberfeldie for no result. 110 The Boulevard,  on the Maribynong river, was sold last week for $1.77m on a $1.2m+ quote with no recent sales to give any guidance. This week a similar knockdown 118 The Boulevard (Fabian Rosin of Nelson Alexander) which may have sold for a tad less actually had 4 bidders over $2 million to eventually  be bought by a most determined bidder for $2,189,500. 4 bidders over $2 million and 20% or $400,000 more than last week’s benchmark. It re-emphasizes the incredible power and momentum of the market on properties that are considered quality.

Stonnington the same – 16 Mercer Road Armadale (John Bongiorno Marshall White). $6,240,000. 4 bidders.

Bayside and Port Phillip was no different. Buy after buy. $2mllion, $3 million. 3 or 4 bidders.

Easter Reflections: You’re young and you maybe panicking. Please don’t give up!

Now that the Easter break is upon us, and the temporary madness of two Super Saturdays (wedged between Australia Day and Good Friday) is abating, it it a good time to have a quiet moment and reflect where you, as a buyer, are at. Even the most balanced and resolute buyers can be thrown off-track by the highs and lows of this year’s property market: it’s overwhelming (when lots of new stock comes onto the market); it’s intense (Super Saturday auctions on February 27 and March 27); and it’s emotional (especially the let-down feeling if you miss out at auction).

This piece aims to (to use the word of the moment) “recalibrate” your thinking back to where, for many, it perhaps should be. In particular I have focused on the young.

I want a home with solar heating – I want a home with no renos – I want a home with a courtyard – I want a home with a nice kitchen and pine floorboards. I want a home next to my latte shop. Fair enough.

But if I can shake your thoughts up a bit, that’s small beer and perhaps overly focused on a narrow set that may lead to a short-term fix but a longer-term problem or it may, in fact, lead to nothing at all – meaning, in this current market, you don’t buy.

Our question to our clients is the same on each property. It’s the same at the start of the process and it doesn’t change as we work through every one of our  pre-auction  and private sale meetings. That question is: what will make you and your family truly happy now and also truly happy in the longer term? What financial and emotional outcomes do you want to achieve when buying a home?

Since Christmas, we have had at least 10 families come and see us to help their kids get a leg into the housing market. Housing is the new private school fees; the new club membership that you introduce your child to. For many, if you don’t help your child into home ownership, then they ain’t getting into it anything short of Bairnsdale East and 2025. And please don’t sit there and say “I did it, why can’t they?” The current state of your wealth – most of it in your home – is one of the reasons you are wealthy but it’s also the main reason your children can’t easily get into the housing market without help.  But I digress. 

Buying any home at any level is PPP: Price, Property and Position. They are the three choice levers you, as a buyer, have some control over. How much, type of home and where? Price, Property, Position. 

You buy a home for emotional and financial happiness. Whether you think through it consciously or not, all your outcomes relate back to financial or emotional happiness. 

What should you buy? What makes you truly happy. It’s the Christian, Buddha, Muslim home philosophy all rolled into one. What really makes you truly happy now and in the future?

When buying a home, two things make you truly happy: good decisions and land.

Good decisions come from luck and goals (financially and emotionally). Bad decisions come from the same places: luck (lack of) and goals (or lack of).

You’re in your late 20′s and early 30′s and you need a home. Relationship pressures are usually the spur – your parents may be helping a bit and you have a good job.

Your name is Freddy and you are sitting down for a coffee with me, because your dad told you to.  

Freddy: I’ve got $500,000 and I want to buy a home in Hawthorn.

Mal: Nice meeting you, Freddy. Waiter. Bill, please.

Freddy: What are you doing?

Mal: I’m leaving because I can’t help you.

Freddy: I could buy an apartment

Mal: But you are getting married and said you wanted some kids. Space, Freddy, space!

Freddy: OK, what about going further out?

Mal: What to Officer or Coolaroo or Tecoma? Freddy, you don’t even know how to use your sat nav.

Freddy: You’re a snob and a very rude man, Mal. My father was right.

Mal: Freddy, homebuying is not about me, it’s about you. Today in 2010 you need to find $900,000. Sell your car; get your wife to get a second job; hold back on the kids and get that big-noting dad of yours to throw in a few bucks and show me the money. Freddy, your life is in Hawthorn or inner Melbourne; your friends are here, you’re happy here and, if you move out to Pakenham, then I’m afraid you may never come back. And I’m also afraid that is not where you want to be. Freddy, I’m telling you what you need to do. You need to fight, scrounge, cajole, weasel and push, push, push with all your might and you need to get as much money as you can manage together and you need to do it now.

Freddy: You’re an old fart, Mal. I don’t want those pressures. I don’t want to encroach on my lifestyle. I would rather be among the trees and without the pressures of an all-consuming mortgage.

Mal: Then, Freddy, that’s fine. If that is truly what you want, then, as Nick Renna says at all his auctions: I respect that and good for you.

Freddy: Who’s Nick Renna?

Mal: Don’t worry. Hey, Freddy. Does your wife Christine want to live in Upper Ferntree Gully among the trees? It’s a beautiful place.

Freddy: No, she wants to live in the inner city and she is applying the pressure to me big time. She wants kids, she wants culture and she wants Hawthorn. The only thing I’m not sure she wants is me! I hate this pressure.

Mal: This is good.

Freddy: Good? – are you a sadist as well, Mal?

Mal: It’s good because it shows you are getting some clarity on what you want and what your family wants. Now we need to be smart. Do you really want to live in Outer Melbourne?

Freddy: Not really and not because I don’t like the areas. It’s just it’s a long way out from work and it’s away from my friends and family and it’s not where Christine feels comfortable.

Mal: OK, well, we have one P worked out and that is Position (sort of). Only I think it’s not going to be Hawthorn, initially,  because we agree an apartment is not a goer with kids on the horizon and we don’t have the cash for land and a home there. What is important for now and your future is that we look for as much land in an area we can afford.

Freddy: What, like a knockdown?

Mal: Well, not really, because quite often that can be overcapitalising financially. Have a look at this diagram – you should have bought either of the renovated ones for a little bit more.

Freddy: So we go for big land?

Mal: No, it’s quality land – size isn’t everything, Freddy. See good land in Albert Park can be 180 sqm and conversely bad land in Swan Hill can be 1500 sqm. Quality land is about the combination of position and size.

Freddy: But in Hawthorn a good block costs $1.6 million and I’ve only got $500,000.

Mal: Actually, right now it is more but, in time, if Hawthorn, Grace Park, the Urquhart Estate or Scotch Hill is what you want then you will be able to get it, but you need to start right. Let’s look at Alphington – only 10 minutes from Hawthorn (outside peak); you said Christine’s favourite sister lives there; it has a really good cosmopolitan feel and has a number of period homes that have that good land content. 

Freddy: I get what you said about land quality but not land content. What do you mean by land content?

Mal: See this chart. All three of these homes have land but only the period home on the right has good land content. Land (the capital growth driver) is a lot less in new homes than older homes and even less in apartments – this example assumes you buy at market value all at the same price of say $900,000. But it’s also true at $2,000,000 even $5,000,000.

Freddy: And as you keep saying, they don’t fight wars over homes, they fight wars over land.

Mal: True. Land goes up and buildings go down.  It’s all about demand and supply. That is where growth comes from and another real pointer to show where demand is, is the Chinese.

Freddy: The Chinese!

Mal: When the FIRB rules restricted overseas buyers to new apartments, they bought new apartments as they had no choice. Now last year with the FIRB rules changing and Chinese nationals having choices as to what they can buy in Australia, many are choosing land over apartments and that is evidenced by apartment prices remaining lackluster and land prices, especially in your Hawthorn area, going through the roof. The price increases must surely be giving many people a message. Quality Land is a world language.

Freddy: So I’m getting the second P (Property) worked out. Type of home? Should have as much land content as possible.  What about the final P? Price. I’ve only got $500,000. That’s all the banks will lend and you reckon I need a million.

Mal: Freddy. You can do it. Make the lifestyle changes; get Dad and Mum to lend you some. Talk to the bank about a restructure and let’s see if we can’t find something a bit under a million and you put some sweat into the property – not a major reno but you fix it up a bit. I do think you can make $900,000 work if you want to.

Freddy: It’s a big ask. I want to go on holidays and my new Merc and ……..

Mal: You have choices. The choices you make now are what sets you up in your life. A new car and a holiday and its Frankston South or Aspendale and granite benchtops or none of these; hard yards and Alphington. One of these two has proven financial growth and for you emotional happiness, which you need for choices going forward eg better home, near better schools, a culture you prefer and seem comfortable with and the ol chestnut a happy wife = a happy life – the other has a two strikes policy.

Freddy: Two strikes?

Mal: If you are young and you buy a McMansion as home 1 and then home 2 in an  outer area new estate, then we feel that is where you will live for the rest of your life. Home 1 and Home 2 has to be on the ladder upwards if where you want to get to is where you are dreaming of now.

Freddy: I still think you’re rude and prejudiced but how will I convince the wife of this land content stuff?

Mal: Don’t worry, Freddy, my fourth wife said I was an expert on women and relationships. You start by telling them this …………………

Next market news in 3 weeks (school holidays and Easter)

Buy Well

Mal

Malvern: 39 Horace: Sold under the hammer for $1,670,000. Bidderman 5. Andrew Hayne asking the bidders to speak up over the crowd noise. Solid Result.

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

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.

Another big sale was 15 Sargood St Toorak at $3.87 million. http://www.domain.com.au/Public/PropertyDetails.aspx?adid=2007923669

This does have a floorplan you could update but it is also a bulldozer job for many buyers as well. North-facing rear and in a good spot but one that at times has struggled to get the huge dollars of nearby Clendon and Irving Road areas. If the buyer bulldozes, then they placed value at $5528 per square metre. Nobody can say that was a steal.  Tim Derham and Lisa Jarrett of Abercromby’s were the agents on this property.

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

Richmond, 2 Gipps: I'm Chris Murphy and don't mess with me (please). Three bidders did not, buying at $1.878 million under the hammer. Good quote at $1.7 to $1.8 million. Good result. Good agent.

It’s 6pm Saturday and the James Clearance Rate for million-dollar-plus auctions is 60 per cent on the 20 auctions we attended but that may change by Sunday.

The market today (Saturday) was again strong across the board but crowd numbers continue to drop and there was a 40 per cent pass-in rate at auctions we attended (and higher if you remove the bought befores) – this is obviously related to the number of homes on offer. The jury is out as to whether this will lead to a price leveling, because today says quite clearly it is strong and steady as she goes, despite big stock increases. It was a shocker of a day weather-wise; well done to our photographers on getting a few good snaps and thank you to the auctioneers for allowing us to take those snaps inside.

Sunday note: The Sunday James clearance rate is now 70 per cent clearance and the norm and we’re not seeing any stat today that says the market may be leveling. Auction stock levels have increased dramatically and our Bidderman (bidders per auction) actually moved upwards. There are three big weekends of auctions to go until the footy is over and this is the real test of market depth and strength. If sellers get through this unscathed, then it may be next year or another GFC before we see any meaningful price leveling. The past few weeks may have been no more than a lull. But let’s wait and see, as a month is a long time in this market.

Markets

How do we know what is happening in the market and what do we think the market is doing? Why are markets  important to read?

We, as buyer agents, need to read markets because our clients expect us to be able to offer information on expected price, reasonable value, expected competition, negotiation strategy and so on.

To be able to read markets reliably, we have found that, for us, Bidder Depth or Bidderman is the most reliable market reader. It is, in fact, the market’s DNA. It shows healthy and unhealthy, rising and falling, strong and weak markets. And, in our opinion, it does it better than clearance rates – although we still like this a lot as a measure.

The Bidderman measure is better than how you went against agent quote or median price or other measures that are either artificially manipulated or well out of date.

Our pre-auction offers and post-auction offers rely on Bidderman data also. We keep Bidderman records on agents. Some agents have lots of bidders because they communicate well and others have smaller numbers. We also keep records on types of homes – eg Bidderman is strong and alive for family homes in Hawthorn but has gone missing on high-end apartments.

We are finding the media are now starting to talk about a very strong rising market. That was true from February to July, when people were reporting doom and gloom. We are now not so sure that the market is in a strong rising phase. Our bidder depth per property is dropping (except today) and this may be telling us that the market may be in a leveling phase, price wise. But it is still too early to call and, of course, may change direction again anytime soon.

So, just repeating: we are not saying that the market is falling in price or will fall soon, and we are not even convinced that it is leveling, but the price increase incline could be flattening after an incredibly steep rise in the past six months of anything between 10 and 20 per cent. In the case of Boroonadara, that represents a return to the peak; in Stonnington, a return to near the peak; and, in Bayside, a return towards the peak but nowhere near as strong as in Boroondara.

As stock levels increase – and they have dramatically in the past two weeks, as sellers seem to need to get their home auctioned  before the Grand Final, when all Melbourne stops to witness a Collingwood victory. Whoops! Got sidetracked – sorry! Stock level increases in the past few weeks are, in our opinion, the biggest this year, and this is having a significant effect on crowd numbers per property. We have recently been below (but above today) two bidders per auction on our 20 Auction Basket we review each Saturday. In July, we were above three bidders per auction average. By way of comparison, in late 2008, we were below one bidder per auction on average.

We need to see how the increased stock levels are taken up before the Grand Final (the last Saturday in September) and what happens immediately afterwards before we can say the market has altered course (if indeed it has). We may be just having a slight breather in bidder numbers as bidders assess the lay of the land and they may return to average more than three per auction, thus pushing up prices.

It was bidder depth that first alerted our clients to a possible market change in February 2009 and it was a significant increase in bidder depth that led us to push harder for our clients in May. It became clear the market was about to explode and it did.

There are two slides in The Million Dollar Price Worm to the right of this article that hopefully explain bidder depth a bit more of, as we say, Market DNA.

The first slide shows where we think the market has gone most recently. The gyration at the pointy end in August is meant to represent a possibly changing market. It may also represent a false point, as there is so much stock on the market and buyers are there, but are more neutral in their actions at present because they can see more stock coming on. However, they may go back to stronger bidding once stock levels are clear, take up all that stock and then demand more.

Slide 2 shows the MARKET DNA. This example is our Saturday Key Auction basket (the 20 auctions that we report on each weekend). A stronger market’s DNA in July 2009 is at the top and a weaker market’s DNA in November 2008 is below. What does this tell us? It tells the trained observer plenty and selling agents also keep records on numbers through opens, contracts sent out, second inspections etc. All are pointers as to whether to take an early offer, to run to auction, to adjust price etc. Similarly, accurate bidder depth number on markets, on specific parts of markets – eg Kew land or Malvern period homes or inner city apartments – and on agencies really help cement negotiation strategies going forward. But this information needs to be up to the minute. The line, in our opinion, is market balance. It’s very approximate but when we average between one and two, or around 30 bidders per 20 auctions, we think the market will remain even over the next short period. Above the line of, say, more than two bidders, the market is strengthening and prices should go up. Below the line, on average, the market seems to be weakening and prices should ease.

PRICE INCREASE

When there is good bidder depth, the market is strong because, if one or two bidders drop out, then the bidding is taken up by others and almost all homes sell and some sell well above market.

PRICE VOLATILITY

When the bidder depth starts to wane, there are spasmodic results as some homes simply do not have the bidder depth to push the top bidder higher or, in fact, get a deal done but some homes still sell incredibly well even with one bidder because that one bidder didn’t know the market is changing or had changed and they were the only bidder – a good selling agent was also involved.

PRICE DECREASE

And, finally, the market starts to fall across the board when everybody knows the bidder depth is simply not there.

Quoting

The heat has gone out of the issue of quoting. Why? Because there are properties to buy and lots of them – buyers have more important things to do! We acknowledge that we have changed our views during this debate. We no longer support mandatory declared reserves, just as we would not support mandatory declared maximum buyer offers (it was Iain Carmichael and Jeremy Desmier who turned us on this issue). But we are seeing a few publicly declared reserves now and we definitely think that voluntarily declared reserves is a plus. We acknowledge that there is a selling agent mindset of conservatism, which we still find hard to fathom. Why can’t an agent say something along the following: the land size of this home is 720 sqm and land goes for around $2300 per sq metre, so that says around $1.6 to $1.7 million for the land. We think this building is worth around $400,000, because people do keep these buildings, and it would cost around $600,000 to renovate to bring it up to a million-dollar building. There are renovated homes (building + land) selling in this area for $2.6 to $3 million and therefore we think that $2 to $2.2 million is a good basis to start your thinking on this particular home if you are going to renovate this building.

But, with a bit of tongue in cheek and hopefully some humour, here is a representation of what some buyers are hearing more of lately. It is a compilation of things and I have exaggerated it a little to get a point across, but it is not without some validity:

Set the scene at 12 Great Street Canterbury: picture yourself walking in the front door at a quiet midweek open-for-inspection a few weeks into the campaign and being greeted at the door by an impeccably groomed and badged agent. Below is all the agent speaking – like in a Bob Newhart or Monty Python skit.

“Hello, my name is John from agents Conti and Bostock. Can I take your name and number? Thank you, here is a brochure. Sooorry I didn’t hear the question. You want to know pppprice? Mmmm, that’s a tough question. It is company policy to not declare that. Sorry, what was that? You’d like to buy and you want to know the price? Yes, well, we are not allowed to say price. You want to offer. Are you sure? You don’t want to go away and think about it, talk to another agent? Oh, you want to offer now? Oh, great. $1,630,000 – that’s your offer? No, it’s too low. Yep, too low. You’re telling me you would like to know what offer would be satisfactory? Can’t tell you that – I don’t know it. Sorry, you want to know how I can refuse the offer of $1,630,000 if I don’t know what is an acceptable offer? Sorry, I mean I do know the price and that offer is too low – it’s just that I can’t tell you. Madam, this is unfair to ask me these tough questions. After all, I’m just the agent selling the home. I have other people to hand out brochures to and calls to make. Look, I’ll be honest, lady, this is how it is. I don’t know the price and, even if I did, I can’t tell you and that is why your offer is not enough. I’m sorry, I can’t talk to you anymore. You’re a buyer and I’m just not authorised to discuss price or buying this home with buyers. Now, next person. Hi, my name is John, here is a brochure, can I take your phone number …”

It’s like going to a coffee shop but you can’t get a coffee as the barista only makes sandwiches. The uproar was not that agents quoted – no, buyers want agents to quote – it’s just buyers would like agents to quote professionally. And, yes, buyers need to understand that selling agents represent sellers and that price is a a living, breathing thing and price quoting, even with experts who are genuine, is not an exact science. Let’s continue to ask questions of those that have gone missing, that have become so estranged from dealmaking that they can’t TALK PRICE TO A BUYER (PROFESSIONALLY).

Late, Disputed and Non-Bidding

In our Negotiation Section below, we have an interesting discussion on late and no auction bidding with expert auctioneer Phil de Fegely. This topic has had some ongoing interest, especially with Marika Dobbin’s page 3 article mid-week in The Age and I got the “interesting Market Insight Mal” comment  from Peter Bennison of JP Dixon when I was through one of his opens recently. I didn’t read this as a compliment. I read it as code for “You’re wrong on late bidding, Mal”. So I thought I’d better investigate further and, while it’s not that common at auctions (perhaps one or two deals out of 1000 have late bidding), we thought it would be good to hear the issues from an expert. Phil de Fegely coaches a number of Melbourne’s best auctioneers, as well as those who are up-and-coming. Yep, that’s right, auctioneers have coaches, go to training sessions and do courses, and yet many buyers still think they can just rock up at auction and they are taking on somebody akin to a first-day cab driver. Occasionally you are, but if it is an auctioneer from Marshall White or Kay and Burton or Jellis Craig or Bennison Mackinnon or a Phil de Fegely-trained auctioneer, you are taking on somebody akin to a skilled league footballer (granted, with a physical fitness cloud). But we digress. Phil’s Q&A and audio is below in Negotiation Corner.

Buy Well and Make Good Decisions

Mal

East Melbourne: 130-134 George St East Melbourne. Lovely scene for an auction and Sean Cussell and Marcus Chiminello of Marshall White get things away at $3.81m

With a big market wrap last week and few sales to report this week, we thought we would ask two of Stonnington’s leading agents for their take on the market right now. We spoke with Kay and Burton’s up and comer Michael Armstrong and RT Edgar’s veteran Michael Ebeling.

Kristen: Hi Michael’s are we in a real estate bubble?

Michael Ebeling: I think the very low levels of stock is pushing the market up strongly and we may even see another 5% increase on top of what we already have had – however a marked increase in stock may see a drop in prices.

Michael Armstrong: I don’t believe we are in a bubble and although many of us have had incredibly strong months in May and June I don’t see demand abating at all, as buyers seem to have let go many of their negative thoughts.
Kristen: And to specific markets – let start with you Michael Ebeling – what about townhouses and apartments.

Michael Ebeling: I have had a number of sales over $3m in both townhouses and apartments in the last month (Michael named three in South Yarra) and the only resistance I am seeing to any properties is main road properties and homes that have overlooking.

Kristen: And the hottest of hot is?

Michael Ebeling: Renovated period homes.

Kristen: Michael Armstrong – and your thoughts on markets.

Michael Armstrong: If I had to nominate a weaker area at the moment I would say resales of 2007 new developments, however demand for almost all properties and in particular houses is incredibly strong, especially when compared to late last year.
Kristen: And tell us about sellers

Michael Ebeling: A number of them are out there but are saying they won’t sell until the prices are above 2007, which in many cases they are still not.

Michael Armstrong: The only reason some owners are not sellers is price. At the very high end some have not accepted that their property right now is worth less than the 2007 peak.

Kristen: Stock Levels now and up till Christmas

Michael Ebeling: Low and no obvious large increases coming.

Michael Armstrong: Low and no obvious large increases coming.

Kristen: Who are your Main Buying Groups in $M+ Melbourne

Michael Ebeling: With the FIRB softening it’s rules – Chinese buyers.

Michael Armstrong: Expats and Chinese buyers who I think are 1 in 3 at Top End.

Kristen: And what about Prices to Christmas

Michael Ebeling: Unless a large increase in stock, which I don’t foresee, I see prices continuing to rise gently.

Michael Armstrong: Even if there is a supply increases I think there is a strong pent up demand from buyers which would easily absorb the stock.

If you are selling and want some sound advice call either or both Michael Ebeling 0418 338 811 or Michael Armstrong 0407 063 263

Which auction is this? No auction, it is a normal open for inspection at 24 Kingsley St in Camberwell. Selling agent is Jeremy Desmier of Fletchers.

It’s 6pm Saturday and the James Clearance rate for $1 million-plus auctions in Melbourne is 70 per cent from the 20 auctions we attended.

There are very few quality $1 million-plus auctions or private sales of note to report this week. Please note the Chinese translation to the right.

Auction behaviour on both sides is slipping and there will be issues if it is not addressed. The heat in the current environment is being fuelled by many and things will continue to hot up as homebuying is a passionate pass-time; shelter is a basic need and lots of money is involved. So, will we see threatening behaviour as well as the stress? Will we need security guards at one of Australia’s favourite Saturday outings – outings that on many Saturdays in Melbourne have more followers than the footy.

The temperature is rising, in part caused by agent quoting, and it’s not because the media is highlighting it unfairly. Reading Neil Mitchell’s article in the Herald Sun and listening to Monique Wakelin on the ABC, they both made valid points and did it in a non-inflammatory and balanced way. As an aside, I truly hope Enzo Raimondo’s (from the REIV) comments stating that underquoting was rare was indeed a misprint or taken out of context because ………well, what hope is there if indeed this comment was correctly quoted?

In our Market Insight article May 30th on Quoting – we asked the question what are selling agents quoting. There is no definition and Government guidelines are well intentioned but very, very confusing!!! Are we quoting

• what the seller or vendor wants?
• what the seller or vendor will take?
• what the agents think buyers will pay?
• what the agents hope buyers will pay?
• what offers they have had?

Full article at http://www.jamesbuyeradvocates.com.au/marketnews.html?newsid=54

But this is NOT another article about bagging agent quotes. Being optimists (we are buyer agents), we hope that, like dummy bidding legislation (which really does work), somebody smarter than us will find the magic pill that shows:

• selling agents, some who continually misrepresent, just how destructive their quoting mindset is to buyer relationships;
• sellers that they cannot have a last-minute greedy tablet and hide behind their selling agent without some consequence;
• buyers that selling agents are truly not there to act in your best interests at the expense of their “master” and income provider – the seller; and
• buying agents that we cannot, with good conscience, land cheap shot after cheap shot when we know that quoting is not a perfect science and, at the moment, is extra difficult especially in the early part of a campaign.

Then it would be great if that same magic pill could force or encourage behaviour through clearly defined rules that returns a common decency and respect equilibrium to the home buying and selling market.

The real question is not agent quoting or the agent quote range! It is HOW CAN YOU WORK OUT THE REAL ESTIMATED MARKET PRICE RANGE?

Remove the selling agent quote from your mind, as it is currently not a reliable indicator in Assessing Price. Replace it with one or both of the below:

• Engage a professional buying adviser such as a buyer agent (of course we’d say that) or valuer or even an experienced friend. This in itself it not an answer unless they can get the essence of price assessment right – at least 80 per cent accuracy before the day (forget those hindsight experts).
• Adopt a regime of personal research that includes:
  a) the latest comparable sales in the area of similar homes;
  b) the latest land values (price per sq m) plus building costs;
  c) the recent record of the listing agent and auctioneer on similar homes; and
  d) auctions, auctions and more auction visits in your area and surrounding areas to ascertain prices, bidding strengths and buyer depths.

Please note Assessing Price is Step 2 of Three Steps to Smart Buying and is an important foundation on which to build a buying campaign, but it is not the only step you need to take. You still need Step 1 – Clarity of Options and actually finding the right home, and Step 3 – Negotiate, which is a lot more than a few lines of theory. But I digress.

We mentioned Comparable Sales. What are they? At James Buyer Advocates, we look at hundreds of sales to find four to six homes that have as many similar characteristics to our target property as we can find. Homes with multiple similar characteristics we call Comparables. Some similar characteristics we look for are:

1. Same Market – Houses bought in December 2008 were bought in a different market to now but houses bought last month were not.
2. Same Area – Houses in different suburbs command different prices. Houses in the same suburbs but in different precincts command different prices.
3. Same Land Size – eg 500 sq m is a big difference in value from 700 sq m.
4. Same House Style – Period homes command different prices to New Homes.
5. Same Size – Bedrooms, Bathrooms, Living Areas, Car Spaces. Different numbers means different values to many.
6. Same Condition – Renovation, Quality.
7. Same Features or WOW – Views, Road Types, Neighbours etc.

The more similar characteristics between the properties and your target home, the better the comparables. The higher the number of GOOD comparables, the more accurate your price assessment is likely to be in, say, eight out of 10 cases. Comparables and price assessment in general is not a 100 per cent exact science like mathematics; it’s more an 80 per cent science like medicine.

Good comparable: Similar sized home in same condition sold around the corner four weeks ago, especially if it was at auction and there were five bidders. It tells you what your market competition (other buyers) thinks a similar home is worth and history often repeats itself.

Poor comparable: A very different type of home sold last year on very different land size, in very different condition at a private sale scenario and, with further research, you find it was a private sale and one “wood duck” buyer paid 30 per cent more than anybody else thought it was worth.

Why are Comparable Sales important? Because, in property you cannot predict what each individual is going to do (eg spend) but you can predict what a large number of people will do based on well researched recent history. Alternatively put, you cannot predict every result correctly; however, you can predict what will happen in a large number of sales (before they happen). In a rapidly changing market, the less skilled you are in the research, the lower your correct price prediction percentage will be.

Our client ratings system goes well beyond our public rating system and addresses each potential property and narrows the search down to four or six best comparables.

These “best comparables” are rarely perfect matches and, in some cases, there are few or no comparables or ones that tell very different stories. This is where you either bite the bullet and hire a professional or you learn from experience (missed opportunities) until you can distil the relevant points, estimate a range of possible price estimates and determine your own price quote or price foundation with which to proceed. If you have done this well, then “your quote” will be a lot more helpful to you than the agent quote.

Knowledge should encourage you to feel more confident to make the right decisions under pressure. Of course, you can always just turn up or override the financial logic you arrived at and buy anyway if emotion so directs you. At least your decision to either hold ‘em or fold ‘em was an informed one.

Of course Happy Wife, Happy Life in many cases still overrides “but Darls the Comparables say…..” .

Think of a selling agent quote like you do a council valuation or a bank valuation: it’s one more piece of information of interest but it usually in no way relates to your reality and this is especially true in a moving market such as we are in now in July/August 2009.

STOP PRESS: ACCC’s Graeme Samuel in today’s Herald Sun has said he will get involved in underquoting. In our opinion he along with buyer advocate David Morrell of Morrell and Koren and some good Victorian government legislation were instrumental in changing key real estate directors’ opinions in 2003 that dummy bidding was OK. I also notice Graeme Samuel has placed a focus on owners. Let’s hope this previously successful trifecta can put in a repeat performance and our industry cleans up it’s act. Please also note that in this rapidly rising market it is difficult to be 100% accurate. How can an agent control or predict how far over the reserve the market will take the final price (every time)? All they should be able to control (every time) is where a price range is declared, that the seller’s reserve, is within that range. Anyway ACCC’s involvement is seriously good news; if it’s true and they can make a difference. Most real estate directors (who are hard to scare) would be genuinely concerned (if they had done something wrong) about a call from an agro Mr Samuel – I for one, certainly would be.

Buy Well

Mal

Hawthorn: 13-15 Harrison Crescent. Quote $1 million. Vendor reserve $1 million. Opening bid $1.1 million. Sold for $1.52 million. Auctioneer - Bruce Severns of Noel Jones.

Some parts of the market may have risen by more than 10 per cent and up to 15 per cent in eight weeks, says Tim Picken of Jellis Craig.

By the way, we saw Tim sell three from three very strongly and all well above his quotes. But we digress. To be honest, we are not batting at 100 at James on home estimates in this rising market.

9 Carrington Hawthorn. This home told us just how few timber double-fronted period homes are available in Hawthorn and how much people still like them. Last year, this would have struggled at under $1.4 million, but it was a superior offering, so would still have sold. Today, it got $1.685 million and it was not a surprise to us. Brick versions of this in Malvern and Armadale have been on fire for around two months and selling well over expectations. Couple this with the Leslie St Hawthorn sale last week – not as good a home or position and it went mid-$1.3 million – add the facts that it reset the benchmark, that there were multiple unsatisfied buyers, that this had great rear access, was sexy and that the market is moving north, and a final price of $1.5 to $1.6 million had to happen. Above that, add emotion and this was an emotional home and auction. Well done to the buyer.

13-15 Harrison Hawthorn. The quote was not accurate for buyers ($1.05 million) but we were still surprised by the result ($1.53 million). This was a compromised block of land and, no matter how you look at it, a difficult build. It’s a further $1 million to $1.5 million to build a home(s), with underground car park and you will still have no back yard. The land value works out at $2567 per sq metre and that’s higher than Blytheswood at $2396 per sq metre with views and a bigger block only a few weeks ago. It’s also higher than Kay and Burton’s very strong Muir St sale at $1.6 million or $2534 per sq metre, which was next to the river and sold only a month of two ago.

Bruce Severns of Noel Jones, who is a good guy, texted us these thoughts after we questioned him about the sale: Anything that is in a good location and/or has a good home on it is keenly contested. That’s agent code for the market is almost flying. The above was a very strong result for the seller by any criteria.

5 Marlborough Camberwell. Golf Links Estate. We like the area but found the back of the home needed a big, big fix and it wasn’t an easy reno; plus going up is not always easy in this heritage-protected area. So we passed on it. But still, in the cold, 120 people turned up to see Mark Dayman give a really first-rate performance. We said Scott Patterson was the best auctioneer going around in Boroondara and Mark Dayman on his day is his main competition. Four bidders and sold for $1.302 million – the right money.

Issue of the week: stock levels

Tim Picken went on to say that there seems to be a fantastic energy in today’s market. He said there was some buyer urgency coming back – that is agent code for buyer stress, which means potential for rapidly rising prices. He added that nobody wanted to write a cheque three months ago on homes (and he added he was nervous as well), but now the market has changed and changed dramatically.

Richard Winneke, Jellis Craig’s top-selling agent for a number of years running, made these observations over a quick chat in the street.

He was surprised at the high sale for Carrington, claiming that “it may not even have sold for that much back in the peak price times of 2007.” For certain properties, the market has definitely bounced back.

James Redfern of Marshall White gave us his take: if a home ticks the boxes and has no compromises, then we are almost back at the peak; however, the market is not behaving as it was in 2007 where keen buyers were actually crazy buyers. James feels there is still a rational market and buyers are in control and will not exceed certain levels.

He added another gem: it’s the estate sales or top precincts that are really pushing back up hard. Grace Park, Golf Links, Tara, Reid, Armadale and so on. This is a fresh observation and rings true in our mind.

This week at auction

31 Rockingham St Kew. Interested to see if the Top End market responds to this offering. With 21 Ross St Kew selling north of $4 million but 17 Grange Road Kew (asking around $5 million) still remaining unsold, we think the $4 million to $5 million market has a few wobbles but this auction may help clarify things.

2a Oak Hawthorn. Wonder if Marshall White will adjust their quote after the sale across the road at Harrison Crescent today?

9 Boronia Canterbury. Another land indicator in Canterbury’s Golden Mile fringe.

Pricing

Wormy is on the juice and firing upwards in Boroondara