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

Key Points:

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

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

Elwood, 63 Spray St, Sam Gamon (Chisholm & Gamon); Passed in on a vendor bid, $950,000, 0 bidders

Biggest Sale: Elwood, 18 Addison St, Kaine Lanyon (BenMac);  Under the hammer, $1,540,000, 3 bidders
“After a slow build up, 18 Addison Street, Elwood had three bidders all keen to make this high rating property their next home. Auctioneer Kaine Lanyon worked hard to dodge the showers and keep the interest of the widely dispersed crowd all looking for shelter. An opening vendor bid of $1,320,00 did its job and the bids started to flow. When the half time break was over the serious stuff started, and the property was bought under hammer for $1,540,000.” (Guy Angwin)

Biggest Pass In: St Kilda, 31 Marine Pde, Josh Stirling (Hodges); Passed in, $3,300,000, 1 bidder
“On a bleak rainy day, Josh Stirling worked hard on his preamble to a small crowd of 35 people and finally got a bid of $3,150,000 overtopping the Vendor opening bid of $3,100,000. However the selling price was not reached and this fine property was passed in on a further Vendor bid of $3.300,000.” (David James)

Bidderbuzz Auction: Middle Park, 2 Langridge St, David Wood (Hocking Stuart); Under the hammer, $1,355,000, 3 bidders
“If you don’t try then you won’t succeed! That could have been said of the opening bidder at this Middle Park auction, who put in a cheeky bid of $1,000,000. Not really what the auctioneer was looking for, and he quickly topped that offer with a vendor bid of $1,250,000. Three bidders in all, with the property on the market at $1,340,000 and selling under the hammer for $1,355,000.” (Adam Woledge)

Graphs
Contrary to the graph on the right, the clearance rate for Port Phillip was 44%. The rest are accurate

Agent Q & A: How much value do you put on land? How much on the building? And finally, how much is to do with emotion?
Joseph Allan, Chisholm & Gamon, Port Melbourne:“Emotion plays a large role in real estate; buyers – particularly owner occupiers – are motivated by the lifestyle a property and its location will give them. The expectation of where they wish to be down the track will influence how long they think they will hold a property and therefore how much they will be willing to pay for it. A couple planning a family will contest harder for a property that can grow with them through extension or renovation than a property that offers the same accommodation but will necessitate a move a couple of years down the track. Conversely, downsizers will be potentially motivated in an apartment purchase by emotion and perceived lifestyle. The reduction in property maintenance, the freedom of movement afforded by a secure complex and the belief that this maybe their last purchase may lead them to compete past what they believe is a property’s mathematical value. Many of these motivators are based on what the buyer thinks might happen rather than what they know will happen. It is why agents target a particular demographic when selling. With most properties we sell not just the property but also the lifestyle.

I believe the traditional mantra of ‘You must buy dirt’ is changing. Melburnians are becoming more endeared to apartment living as a lifestyle choice, particularly in Bayside. This has been supported by very strong price growth for apartments, particularly those that are well built and offer a point of difference. Good developers are now aware of supporting apartments with the correct infrastructure; gyms, pools and open spaces are now much more common than they were in the past. Dirt will always have an inherent value but buyers are now more confident that a wise apartment purchase can not only offer a great lifestyle but also a great investment.”

Mark Harris, BenMac, Albert Park:“The value of land comes purely from comparables, i.e. what sales have occurred in the area previously. As for the value of the building, that is also based on local area comparables. The third and probably the most important aspect to value is the emotional value. This is a lot harder to determine and can vary from person to person as it is subjective.”

Results

We Only Buy Homes

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

Key Points:

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

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

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

Agent Q & A:

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

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

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

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

Results:

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:

A sea of umbrellas was all that could be seen at 97 Graham St, Albert Park. Around 90 people watched as Andrew Stuart (Hocking Stuart) brought down the hammer at $2,630,000. Two bidders.

Key Points:

• We focused on Albert Park today and there were reasonable bidder numbers across several auctions. However, Port Phillip has still started Spring very slowly.
• Prices had been falling during Winter and the factors are there for that to continue; especially if any sort of Spring stock level surge is not met by a corresponding increase in bidder numbers – our only proviso is this is a small dynamic market and things change very quickly in Port Phillip.

Biggest Buy:
97 Graham St, Albert Park, Andrew Stuart, Hocking Stuart, Bought $2,630,000.
“Despite threatening skies overhead, and persistent drizzle, Andrew Stuart bravely started proceedings outside with a vendor bid of $2,400,000. After a relatively slow start, a battle between two keen buyers ensued. After Mr Stuart declared the property on the market at $2,617,500, the bidding quickly soared to the selling price of $2,630,000 – a strong result for Mr Stuart and the Hocking Stuart team.”(Jen Milligan)

Agent Comments:
Oliver Bruce, BenMac, Albert Park: “There is a reasonable selection of properties available in Albert Park. A good mix of terraces, small and large, modern and liveable. There are a few unrenovated and three or four land offerings too. There is a shortage of double fronted homes and there are fewer properties on the market in Middle Park. South Melbourne is quiet and there is a shortage in the Howe Crescent/ Lamaro precinct. I am seeing a lot of the same faces around at opens and auctions. Reasonable numbers are attending both for correctly priced opportunities. As always, price is a driving factor for both vendors and buyers. I have seen some absolutely phenomenal prices in every price bracket. These big prices have been driven by competition. One can only assume that the buyers are flocking towards the better homes, or the better priced homes. I am seeing very few offers for properties prior to auction. Buyers are sitting back playing the waiting game thinking that no one will bid, only to see two or three motivated buyers pushing prices well above everyone’s expectations.”

Adrian Wood, Cayzer, Albert Park: “The market is fair at the moment. There is a lack of stock and looking into Spring is like looking into a crystal ball – who knows what will happen. Demand is higher than supply at the moment. Bidder numbers have been down overall, but good quality, well priced homes are still bringing outstanding results.”

Bidderbuzz Auction of the Day:
25 Longmore St, St Kilda West, John Bongiorno, Marshall White, three bidders:
“Having to hold the auction indoors due to wet weather, John Bongiorno asked serious bidders to enter one room and anyone else to stand down the hallway. His invitation to the sitting room was taken up by around a dozen people which looked promising for Mr Bongiorno and the Marshall White team. Out of that group, there were three bidders who fought it out, taking the price to $1,075,000 which, unfortunately, wasn’t enough to buy the property under the hammer. Mr Bongiorno, instead, passed the house in at this amount. Bought after for an undisclosed amount.”(Jen Milligan)

Clearance Rates & Monitor Table: Spring start has been slower than a Mark Webber one.

We Only Buy Homes

Phil DeFegely (for JC Street) brought the action indoors at 347 Dorcas St South Melbourne. Passed in $980,000. Two bidders.

Sam Gamon (Chisholm & Gamon) looks for some bidders at 36 Shelley St, Elwood but to no avail. Passed in for $940,000, no bidders.

Key Points:

Analysis: This was Spring’s first test for Port Melbourne to Elwood. As far as auction homes go it failed badly. The quality was questionable and some newer stock coming on is visible – so there is a high chance buyers are holding off until then. Even so this was a poor start to Spring for Port Phillip. This $M+ market is smaller than the others we cover weekly and has a history of responding dynamically to minor changes in circumstance, so the next few weeks will be viewed with interest.

Agent Comments: In  fairness this election question was asked just prior to this weekends’s results.

Joseph Allan, Chisholm & Gamon, Port Melbourne:“When I heard about the election, I thought it was not going to be ideal for the market. But so far, I have had no indication that it has affected it at all. I guess the big question is: will it affect stock levels coming up? We’ll wait and see.”

Kaine Lanyon, BenMac, Albert Park: “I don’t believe the actual election result itself will affect the market in any real direction. It’s more the waiting around, the ‘holding pattern’ until we see a final result of who will next govern the country, that seems to be affecting the market in a positive sense.  Many vendors will still not yet commit to a selling campaign, so there is  less stock on the market – which in my view is largely why some of our results have been so strong over the last four weeks. That is limited choice for the current bunch of buyers to choose from if they miss out on the only property they like that is currently available”.

Sam Gamon, Chisholm & Gamon, Elwood: “I haven’t seen any impact due to the Election.  Buyers are realising they’re not on a ‘deserted island’ and that other people are making decisions. In essence, I feel buyers are very decisive for the right property. If anything the Election may hold back some sellers from listing as they’d like the assurance of a definite outcome. The warmer weather is bringing renewed positivity to the market place and buyers are keen to move forward when they find something they relate to”

We Only Buy Homes

David Wood (Hocking Stuart) successfully sold 80 Neville St, Middle Park, after auction for an undisclosed amount. One bidder, small crowd of 30.

Canterbury 23 Chaucer: James Tostevin of Marshall White: Great atmosphere with three bidders over $3,800,000 - a strong result. Bought after; undisclosed price.

At 6pm on Saturday the James Million-Dollar-Plus clearance rate was 50% for the 38 auctions we attended. Of note is the fact that only 1 in 4 sold under the hammer.

On Sunday the post-auction clearance rate rose to 66% on all 61 monitored properties. That tells us that the market is right on the brink, but still limping over the line. We’ve been seeing these kinds of significant differences between “under the hammer” and “post auction” clearance rates for a few weeks now (see last week as well), a very different situation from earlier this year. As buyer agents, and for you as buyers, that tells us a number of things about post auction and private sale negotiations.

Bidderman, our Demand Indicator, has dropped significantly to only 1.2 bidders per auction. Almost 1 in 3 auctions had no bidders at all. This was our most significant stat of the weekend and a key indicator  going forward – let’s see if it bounces back in two weeks.

Market: The REIV clearance rates might not show it – but the market was soft this weekend. Many agents and reporters described a real hesitancy amongst buyers and the $M+ Clearance Rate and Bidderman confirms that. Now is possibly the start of another downward price trend, especially with stock numbers on the rise. Possibly it’s an election slowdown or maybe buyers are seeing more choice coming into Spring and are acting accordingly with reservation and only when it makes sense. Wow! September has more excitement on offer than just Collingwood.

But conditions are varying widely across the different council areas. If you are in Bayside, for instance you may be thinking that very few buyers bid at auction any more. You would also be seeing plenty of stock around, some which has been there for a long time (especially over $2m). So with plenty of new homes coming on, you are probably thinking prices are likely to be weak in Spring in Bayside.

If you are in Boroondara you are probably seeing some heat building up in the market, with good stock attracting good competition and most things selling on the day or soon after. You can see more stock coming on but you know you are probably in for a fight. But you can also remember May and you know if too much comes on it could well be a buyers market in Boroondara this Spring.

If you are a buyer in Port Phillip you may be thinking that the market is still a bit sleepy and hasn’t started any sort of Spring run – either in auction numbers or new stock.

Finally, those of you in Stonnington are probably a bit confused – some things are selling that shouldn’t and some aren’t that should. You are likely aware that the market is very price sensitive but you haven’t as yet seen the Spring stock surge start and like all of us you are not sure if and when it will.

Agent Opinions: This week we followed up on the $3m+ market asking agents: “Where is it?” Their full answers are in the Market wraps, but here is a sample of what agents are saying:

Richard Winneke, Jellis Craig: “Three auctions this weekend all over $3m – that will be a true indicator  – if only one or two sell then sellers will be cautious putting property on the market. Buyers out there at that level, but they are also cautious. Market at lower level is very different. Not seeing a great amount coming on in the higher level – 8 properties over $2m in September for Jellis Craig which is not huge, at least a third down in terms of numbers compared to last year.”

Activity and Stock Levels – The graph below shows New Stock ($million+) in Boroondara, Stonnington, Bayside and Port Phillip. To note:

• Consistent big stock levels until end of May
• Big drop in mid June stock levels
• Steady build from mid July

Highlights and Lowlights

• No bidders in Sandringham today at the three auctions we attended. At one of them Steve Tickell, of Hocking Stuart, curiously said he was testing the market by not offering an opening bid, or any vendor bids…and passed the property in without announcing any amount at all… Stephen, what did we all learn here?
• The biggest result was at 23 Chaucer Canterbury with Marshall White’s James Tostevin firing up 3 bidders to reach over $3,800,000.
• Check out the video auction of John Bongiorno at 10 Walerna Glen Iris in the Auction Reviews Section.
• Credit where credit is due: Auctioneer Kaine Lanyon of Bennison Mackinnon deserves mention today for achieving a great result for his clients while keeping the crowd well entertained at 76 Spring Street, Port Melbourne. He did so with a combination of wit, charm and humor that only a skilled auctioneer can execute. In my opinion he did affect the outcome and I am sure many people left the auction convinced he single-handedly pushed at least one of the parties over and above what they intended to spend – Author David McMillan.

BidderBuzz Auction of the Day

64 Maud St Balwyn North – Julian Tonkin, Jellis Craig – 4 bidders, sold under the hammer – $2,015,000 Maybe it was auctioneer Richard Earle’s comprehensive preamble, or maybe it was the comfort of an indoor auction. Whatever it was, this auction got off to a flying start with a genuine opening bid of $1,800,000 from the 60 people present. Two more bidders joined in, resulting in an intense three horse race. When it seemed to all that the property was going to be bought at $2,000,000, a fourth bidder jumped in out of nowhere to be the successful buyer at $2,015,000. A strong result.

The wind was up, their tails were up and so was the price. David Lack gets a solid result post auction - over $2,250,000. 2 bidders. Port Melbourne, 2 Swallow.

Are Special Conditions costing sellers BIG MONEY?

Sellers may be costing themselves big dollars all in the name of legal “protections” they would never agree to if the buying shoe was on the other foot.

One prominent conveyancing company claims to be protecting their selling clients with a list of clauses in their selling contracts – but in fact their efforts and attitudes are causing buyers to walk away from deals. In this market that is not a good step for sellers.

If you watched the two latest episodes of Channel 7’s “ Under the Hammer”, particularly the one about the Yarraville auction which featured one of our buyers, you’d be interested to know that the real drama wasn’t what you saw on TV but what happened behind the scenes with the 20 or more phone calls and emails between auctioneer Adrian Butera and our company just to get our buyer to the starting line. It was all about this conveyancer’s Special Conditions.

In Victoria when we buy or sell a home the paperwork we are required to agree to is made up of a number of sections. These include the particulars of sale price, settlement arrangements and chattels; normal contractual conditions governed by the REIV and the Law Institute; and Special Contractual Conditions.

With regards to the Special Conditions sections the conveyancing firm we are referring to is putting in clauses or conditions that are interpreted by our clients’ buying solicitors as meaning that:

• If the home burnt down, the buyer would still have the pay the seller the purchase price in full.
• If the seller couldn’t provide title (we thought that is what you were buying) – they would still have to pay all the money to the seller. (We’re sure the banks would love that idea – NOT!)
• Some of these special conditions may affect the buyer’s ability to insure the home they buy.
• If the buyer had a dispute with the seller, they would still have to pay the seller in full and only after could they dispute.

Back to the Yarraville auction: it took three days and all those phone calls and emails, but the sellers finally agreed to strike out the special conditions.

Even though things have been quiet, we still managed to get 5 $M+ homes over the line this last week in Malvern East(post auction), Balwyn North (off market), Malvern East (under the hammer), Port Melbourne (pre campaign) and Canterbury at auction. One of them (Port Melbourne) could have been very, very different as our client had to walk away from an acceptable deal; owing to this conveyancer’s special conditions. It was only when the seller ignored the conveyancer and crossed out these additional onerous special conditions that the deal was revisited and consummated.

We think sellers need to know about this practice because buyers’ lawyers are increasingly refusing to accept these special conditions, which means that $M+ investors are simply having to walk away from a deal – even on good properties. It’s a practice that could be costing them tens of thousands of dollars.

To illustrate, see our chart below where in Identical Auction One Bidder 3 was able to have the Special Conditions removed but in Identical Auction Two Bidder 3 was not. He did not bid, which reduced the purchase price significantly.

We are hoping to name the conveyancing company, pending legal approval.

Sellers who read this need to be made aware of these issues so they can decide whether they have hired the right conveyancer.

And buyers be aware of what you are signing up for if you come across these kinds of contracts. Make sure you get good professional advice, or you could be up for something more (or less) than you bargained for.

James Buyer Opinion: This week our James Buyer Opinion is on “Carrot and The Stick and Other Negotiation Styles.” Next week in Buyer Opinion we have a special Buyer Agent Conversation – Getting Info to Make an Offer.

Also next week, Election Saturday, we will have a reduced coverage; but there will be a Market Insight – just no wraps - owing to significantly reduced auction numbers.

We Only Buy Homes

Mal

Took this photo at an open at 59 Studley Road Ivanhoe - Liz Walker Jellis Craig - all laid out on the kitchen table. Just want buyers want - fair dinkum information. Sellers - Liz Walker and Jellis Craig Ivanhoe provide what buyers want - reasonably accurate information.

Bit of traffic at 6 Tribe Street South Melbourne both before and during the big game. Bought under the hammer for $1,493,000. Geoff Cayzer and 4 bidders.

Key Points

• 41 sales for the month of July – only one over $3m.
• Albert and Middle Park combined reported only six $M+ sales in July
• Two BidderBuzz Auctions – both with four bidders and both bought under the hammer in the $1.4 millions. 367 Dorcas St with Gerald Betts and 6 Tribe St with Geoff Cayzer.

Agent Comments re the question of Spring stock levels and new WOW projects

Kaine Lanyon, BenMac: “Stock levels over the next month are still looking relatively thin. There is a trickle coming on but we are definitely feeling that many vendors are holding off embarking on a sale campaign until the federal election is well out of the way, thus making sure that won’t be a distraction to the buying public;  The really good homes have been missing from the market of recent weeks and while we have some with the “Wow” factor not far away from coming onto the market, that product is as scare as hen’s teeth at present; New homes being built/constructed are almost non-existent in the Port Phillip area mainly due to the heritage overlays, making genuine ‘start-again-from-scratch’ opportunities just not there” .

Nick Yannopoulos, RT Edgar: “Low stock levels at the moment, I think because of the election. After that I think things might pick up a bit but at the moment there is a shortage; Not too many good family properties out there at the moment; Not much building – planning always takes time…development is slow at the moment.”

Michael Szulc, Cayzer: “Stock levels will increase through natural progression towards Spring. Things don’t just triple however in a few weeks  and properties are very tightly held in this area anyway; In this area, there are only ever a few big, family homes with that “wow” factor on the market – this isn’t the area for that type of property; No building going on. Nothing. The landsize doesn’t suit new big, family homes.”

Clearance Rates & Monitor Table

Buying Activity

We Only Buy Homes

Andrew "Comfy" Stuart sells post auction for $1,235,000. 13 Ward St South Melbourne. 0 bidders.

Yet another pass in 49 Farrell Street, Port Melbourne. Andrew Stuart of Hocking Stuart searching for Bidders.

Over the past two weeks we have reviewed more than 900 properties in Melbourne’s blue Chip suburbs. Of those properties, 35 were flagged for inspection. Properties are excluded using strict criteria which includes the review of attributes like aspect, light, size, number of levels & legal ownership.

Post inspections, 7 of these properties have been selected as being James Investment Grade: In other words, less than 1% of properties that have come onto the market recently. These properties are hard to find and also hard to fault.

Speaking about the market, generally yields are between 2.5% to 4.5% depending on the type and size of the property. In contrast to this time last year, yields were around 3.5% to 5.5%. The fall in yields is due to recent price rises, whilst rents have remained relatively steady over the same period.

In our target suburbs Vacancy Rates are at present less than 2% and in most cases less than 1%. Interestingly however, this is not putting upward pressure on Rents as the market place seem to be maxed out at current levels.

Towards the end of July the market sentiment was definitely cooler with buyers keeping their hands in their pocket. This resulted in a number of properties passing in, especially under the $1,000,000 mark. This trend is could continue as we move towards the uncertainty of the up-coming election.

There is opportunity for buyers in the market place at the moment with bidder numbers down, an overhang in stock resulting from the falling clearance rates and noticeable reductions in price from a number of months ago.

Invest Well

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

Investing in your family home means you can avoid, perfectly legally, the tax the government wants you to pay on an investment property.

“Why not live in your money?” one wily auctioneer suggested at a crisp winter morning auction in Melbourne recently.

Why not indeed?

As a buyers’ agent of million-dollar-plus homes in Melbourne, I see people buying and selling some very nice homes in some very nice suburbs.

One thing I often wonder is why, when someone has made money out of one of those very nice family homes, either by design or by accident, their first thought is often to draw on that money to invest in something completely different.

Why would you invest $400,000 in a house in Seaford or an off-the plan apartment on Queensland’s Sunshine Coast when you have made your money in a $2 million home in Eaglemont or Hawthorn?

The family home can be put to work to store and to create wealth. Photo: Justin McManus

Why would you put money you made buying land in inner Melbourne into oil futures or Russian uranium?

Family homes can be the cornerstones for wealth creation and wealth storage.

Suburbs such as Toorak, Port Melbourne, Albert Park, Balwyn and Kew offer plenty of proof that family homes bought in good suburbs can create and store wealth.

Following this logic, then why not invest in something that works – why not think about trading up on your current home as your next investment strategy instead of pulling out $400,000 and buying another investment with very different characteristics from the one that made you good money in the first place?

Why not put some of your superannuation ideas or your new Porsche research effort into something you and your whole family can actually enjoy right now and for a long time to come?

Why not think laterally about what the tax office calls your principal place of residence – your home?

Yes, negative gearing gives you a tax deduction, but by investing in your family home, you can avoid, perfectly legally, the land and capital gains tax the government wants you to pay on an investment property.

And you get to improve your own lifestyle at the same time instead of letting a tenant and an investment scheme salesman enjoy your investment while you live in a less than satisfactory home.

The obvious question is, what to do when you need extra money for things such as school fees or holidays? You can’t live off the income from your family home, but you can borrow against it and down the track you can downsize, and pay the whole lot off, thus getting the school and holidays and interest paid for by others.

So how do you make sure you’ve bought well? Clearly not every family home is a good investment. When investing in anything, what you are looking for is a good financial outcome, which has three parts: growth, cash flow and risk.

How does a family home measure up?

■ Growth: Price increases come from demand and supply, and we can fairly safely assume that there will be ongoing demand for good homes in good suburbs, and that the supply of land in those suburbs is limited.

■ Cash flow: You need to be able to service the investment and minimise your expenses; your income needs to be able to service the interest on your family home. You may be better off upgrading rather than spending too much on renovations.

■ Risk: There is no replacement for homes with a backyard near a train station and shop. I don’t think shelter is on the way out as a human necessity.

Your home as your main investment is only a good idea if it has the right investment characteristics – the three P’s.

■ Position – inner city, near a central business district with an international airport, and near infrastructure.

■ Property – good land content; a land-to-value ratio of more than 66 per cent is ideal for an investment. Remember, land appreciates, while buildings depreciate. The building itself should have a good floor plan requiring minimal renovation.

■ Price – affordable within its market or better and with the right risk characteristics.

There are some great books around that expand on these points.

Try any Jan Somers book (a great Australian property writer), or The Millionaire Next Door by Thomas Stanley and William Danko. Or approach reputable selling agents.

Why not invest in your family home and, as that wily auctioneer said, live in your money? Why not indeed!

We have held over to next week the start of  9 part series on Negotiation which includes a week on Backward Bidding – A New Negotiation Technique : Look for on a Tuesday at James Buyer Opinion from next week.

This article was written in The Age, Business Day section 26^th July 2010. Author Mal James http://www.theage.com.au/business/property/the-castle-as-a-bank-vault-20100725-10qjq.html

St Kilda 45 Havelock: Robert Harvey pleading - but to no avail. Passed In bidderless for $880,000

From Port Melbourne to St Kilda things are very much normal for this time of the year. Something – but not much - is happening. These are Bayside suburbs and sales here are very seasonally orientated.

Of the five auctions we covered this week, three passed in, one sold under the hammer and one after auction. Bidderman was just over 1 but that’s not a hugely meaningful figure this week because, as Michael Szulc of Cayzers puts it, one week we are all chocolates and sell everything, the next week it’s all boiled lollies and lots of pass-ins. On such low numbers it all depends on the stock quality.

There were ten reported residential sales over $1 million this week compared to 25 in the corresponding week in May – or about 40% of the activity now compared to May.

Agent Comments – detailed interview with Michael Szulc of Cayzers

• Pre-auction offers are being considered with 25% of Cayzers auctions currently selling beforehand – admittedly on low numbers, as expected for this time of the year
• Overhang is being mopped up – but less than you think Mal.
• 35% of sales are private
• Sub $1 million properties have cost-prohibitive traditional advertising, but those with just internet advertising are selling just as well
• Prices treading water. Plateau
• I got an interesting answer when I asked Michael why we had such huge stock levels early in the year and his response was the most original one I have heard: With the GFC a number of investors took out 12 month leases. All those leases lapsed about the same time, just as we had come into a significantly better market, and were all put up for sale around the same time.
• Significant drop in activity – but this was largely expected

Highlights

34 Derham St Port Melbourne – a nice little single fronter in not the best part of Port Melbourne.

James Auction Report: Torsten Kasper of Chisholm and Gamon politely rejected an opening bid of $800,000 from the crowd and instead offered a vendor bid of $900,000 to get things going. After a slow but steady start, four genuine bidders entered the fray and a battle ensued to the very end. Rapid-fire bidding from all parties saw the property go on the market at $945,500 and subsequently sell for $1,092,500. It was a subdued crowd with a lot of curious bystanders, but a strong result for Mr Kasper and the Chisholm and Gamon team.

We are looking at 8 auctions in Port Phillip in the coming week.

We only buy homes

Port Melbourne 34 Derham: Best auction of the day. 4 bidders and bought under the hammer for $1,092,500

Albert Park 77 Page: Mr Stuart sure knows how to pull a crowd. A couple of jokes, four bidders and bang: she's bought - $1,290,000. He's still got it!

Of the 10 auctions we attended, three were bought before auction, three were bought under the hammer and four were passed in (with one bought after).  Our demand indicator Bidderman was at 1.5 bidders per auction. So out of 10, seven were bought. That seems a big improvement on the last few weeks. We have seen 20 homes over $1m purchased in a fortnight in Port Phillip.

This clearance rate boost was not completely unexpected; unlike Boroondara and Stonnington there is not much new stock on the horizon in Port Phillip. And, while there is an overhang of unsold properties, there is an argument that this mostly relates to inferior or overpriced stock.

We think Port Phillip may be a microcosm of what might happen in Melbourne generally – as soon as stock begins to dry up, the clearance rate will subsequently improve. And if that continues, a return to stronger prices will follow. While we are not fortune tellers, it feels as if this market – along with the other main Million-Dollar-Plus markets across Melbourne – may just be taking an enforced breather (caused by supply exceeding demand), and could reignite again once stock levels are significantly pared back. Let’s wait and see.

The big unanswered question is demand strength: Bidderman is still somewhat weak in Port Phillip, evidenced at 0.9 this weekend despite the post auction clearance rate.

20 Gellibrand Road, Port Melbourne went under the hammer with Frank Callaghan of Frank Gordon, advertised at $1,300,000+. After a very confident opening bid of $1,400,000, two bidders pushed the price to just over $1,600,000. Enter bidder number three, who was only interested in bidding in $1,000 rises, and the property was finally bought for $1,681,000 – which I thought was a solid result for the vendors.

Similarly, the auction at 13 -15 Evelyn Street, St Kilda East saw confident bidding and multiple bidders willing to pay considerably more than the reserve. The growing crowd saw Kaine Lanyon of Bennison Mackinnon put on a good performance and produce a solid result for his vendors. Speaking with Mr Lanyon after the auction, he indicated that, whilst the market is generally patchy, quality real estate is still attracting strong interest and multiple bidders and achieving good results.

Last but not least, 77 Page Street, Albert Park with Andrew Stuart of Hocking Stuart (a James Market News favourite), saw four bidders put their hand up for a slice of one of Albert Park’s premier streets. An opening vendor bid of $1,100,000 was followed by frenzied bidding. The property was announced on the market at $1,160,000, with a final result of $1,290,000. It was a strong result, given the current market, for a property with no car parking. However, that is what happens when four people are determined to get into a great pocket of Albert Park.

The properties that were sold before included: 7 Burns Street, Elwood;  76 Armstrong Street, Middle Park; 161 Dow Street, Port Melbourne.

The properties that were passed in included: 5 Kerferd Place, Albert Park; 96 Iffla Street, South Melbourne; 118 Hambleton Street, Middle Park (Sold post auction for $1,760,000)

What was interesting about all the passed-in properties was that  in all instances the vendor was the only bidder. So where is the value level if there are no actual bids?

Opportunity is now here, which makes it important to have more information on hand than the vendor thinks you have and than what the agent  is telling you.

Auction Clearance Rates

19 monitored – 13 bought – 68% clearance rate ( last week 54% / week before 32%)

Know your market

Middle Park 118 Hambleton: Oliver Bruce - He looks good and he is good. No bidders, yet bought immediately afterwards for $1,760,000.

St Kilda 35 Vale St: Today with the rain, it's indoors, up close and personal. Matthew Young of Buxton firing up two bidders on the way to a bought price of $1,192,000.

At 6pm Saturday the James Million-Dollar-Plus Clearance Rate on the 35 auctions we attended was 51%. Our Demand Indicator, Bidderman, was up at 1.7 – still hanging in there.

PRICE CORRECTION
There is no doubt the market has eased, “corrected” – call it what you like. One easy word to understand  is “dropped”. On a few properties it has dropped by 10% since Anzac Day.  Some homes – mostly the higher quality ones – haven’t missed a beat. But for the majority, what seems to have occurred are minor falls – although that’s hard to prove specifically.

The statements from the selling agents seem to be leaning strongly towards a “supply based correction”. At this stage we agree. If we keep seeing large amounts of stock come onto the market in June then it’s logical that prices will continue to fall, until some balance returns.

SUMMARY CLEARANCE RATES
Overall the clearance rate was 50% for 124 auctions we monitored in Port Phillip, Boroondara, Bayside and Stonnington. That’s in line with our James Million-Dollar-Plus Clearance rates – confirming it again as an accurate measure of Million-Dollar-Plus Melbourne.

• Bayside – 35 monitored – 14 bought – 40% clearance rate (last week 46%)
• Boroondara – 46 monitored – 24 bought – 52% clearance rate (last week 70% )
• Glen Eira – 9 monitored – 5 bought –  55% clearance rate (last week 55%)
• Port Phillip – 11 monitored – 6 bought – 54% clearance rate (last week 32%)
• Stonnington – 23 monitored – 15 bought – 65% clearance rate (last week 69%)

Highlights

• While 8% were not reported, indicating a reasonably high degree of accuracy for clearance rates, the numbers of unreporteds are increasing.
• Stonnington sellers seem to have made the price adjustments that some Boroondara owners (“wannabe” sellers) have not.
• Some ripper auctions included 50 Hawthorn Grove Hawthorn (Paul Keane of Jellis Craig), 23 Ferncroft Ave Malvern East and 2 Carmyle Avenue Toorak, both with Jeremy Fox of RT Edgar. These auctions saw four or five genuine bidders (well above the 1.7 Bidderman average)
• Selling in Million-Dollar-Plus Melbourne seemed a coin toss – you had as high a chance of your property passing in, as selling on the day – the first time since 2008.

SUPPLY OVERHANG BUILDS
First some stats. Last Saturday’s (May 29) Auction results showed strong evidence of “auction overhang” in Port Phillip where the clearance rate was 32% clearance rate on the 22 auctions we monitored.

Seven days later the reported clearance rate had lifted from 32% to 45%, with only three of the pass-ins and unreporteds reported as having been bought. On this evidence, it seems a stretch to say that in Port Phillip Million-Dollar-Plus homes are being bought soon after auction. There is overhang elsewhere in $Million Melbourne but not as much as Port Phillip. Which suggests the chance of bargains there.

What Supply Overhang means to you, the buyer
1. More choice, given that new stock has to compete not only with other new stock, but with old stock which hasn’t sold yet.
2.  Better pricing on all homes as there is real competition for the first time in a long while – providing of course you understand the negotiating game and know how to play it.

UNREPORTEDS
Practically all last week’s unreporteds were still for sale on Friday – suggesting that the REIV view that 50% of unreporteds are in fact sold does not seems to apply to the Million-Dollar-Plus  market.

ARE METHODS OF SALE CHANGING?
Perhaps in Bayside but not yet in other areas. Look at the latest 50 homes advertised for sale on the website www.realestateview.com.au

THE SEARCH & NEGOTIATE GAME HAS CHANGED
We feel there are at least four things all buyers should be considering:

1. Most importantly – home buying is still about best meeting your needs and taking a 5-10 year longer term view
2. You need to sharpen your methods on checking all homes – especially pass- ins
3. You need to monitor stales (old unsold homes)
4. You need to reconsider offer techniques

Let’s look at point 4 in more detail:

RECONSIDER OFFER TECHNIQUES
Let’s look at a real life example in detail: one particular property we bought today was 27 Eddys Grove, Bentleigh with Chris Hassall from Buxton. It had a quote range of $975,000 to $1,050,000. We thank our client for his permission to publish these exact figures.

From the top:

1. On pre-auction Friday we were told the property was on the market at $1,150,000 and that it would be sold that day (Friday).
2. We checked the website on Friday and saw that it still had a quote of $975,000 to $1,050,000. We asked: Would we buy it if we paid $1,150,000? We were told that we could if no better bid came in.
3. We hadn’t made a bid – so we were trying to work out how it was on the market at $1,150,000.  

First Offer Technique considerations (pre auction). What would have happened if you had bid then based on that information?

Anyway it didn’t sell, and come auction day the quote on the website and in the paper remained at $975,000 to $1,050,000. At the auction there was an opening bid of $1,000,000. Another bidder joined in and so did we – making a bid for $1,040,000. From $1,100,000 onwards we asked auctioneer Craig Williamson if the property was on the market. We were told “No” – despite the fact that each time we asked we were $50,000, $60,000 and then $70,000 above the top end of the quote. (Please note we make no claim this is out of the ordinary or an illegal practice as the REIV and CAV state this behavior is fair enough).

Second Offer Technique considerations (during auction). What happens if you had not bid, bid differently, or put in a killer bid?

Eventually the property was passed in to us at $1,120,000. We stood there in the sprinkling rain for five minutes before a Buxton salesperson came to us – they were too busy talking to the underbidders and other interested parties. My client, through us, was the last person Buxton spoke to. We are sure there is a perfectly acceptable explanation for this curious behavior. But versions of this happen at many auctions.

(Let’s point out at this point that we have good relations with Buxton Brighton and less than a fortnight ago we bought another $1m+ home through the Bentleigh office and were treated well by Ivan Blow and Craig Williamson.)

This story is not about Buxton or Chris Hassall (whom we think is a solid agent) – after all they got a good price and did nothing that many on the selling side considers untoward.  No – this story is about whether you as buyers have the right offer technique and strategies to best manage your options in this changing market. It shows the importance of good offer technique pre-auction, during the auction and post auction.

Back to 27 Eddys Grove: we were eventually given the reserve of $1,150,000 – with the additional strong advice that if we did not take it, then the underbidders would immediately be given a chance to submit their offers, and that the highest offer would win. While that would have been intimidating to the uninitiated, for us it was no problem. Technically we were being given first right of refusal.

After consulting with our client, we accepted. We felt the reserve was reasonable, we felt we needed to separate ourselves from the other bidders and our client really wanted this beautiful home. It was not a time for bravado but a time for cool heads, was our recommendation.

Third Offer Technique considerations (post auction). What happens if you decline or the stated reserve is a lot higher?

The case of Eddys Grove, like many others, begs the question of why the agent wouldn’t just quote the home at the fair reserve level of $1,150,000? That’s another story and a never ending battle with many agents. But we digress – our focus is Buyer Strategy and Offer Technique.

During any auction campaign you have three very distinct offer times: Pre, During and Post. As the going gets a little tougher for sellers so it will for buyers. So, as the stakes get higher, you will need to sharpen your offer technique before you count your chickens.

OFFER TECHNIQUE – THE CLAYTONS RESERVE  (The false reserve)

1)      What happens if you don’t know how to play the pre and post auction games? Do you join in and just keep bidding against yourself in this market; given you are possibly the only bidder – or do you miss out if there really is another bidder?

2)      What is there to stop the auctioneer at a pass-in telling you the reserve is $400,000 above the quote or their real reserve - and that if you don’t pay it they will offer it to the others? What can you do to defend yourself against a Clayton’s Reserve when you are the highest bidder playing by the stated rules? What strategies do you have?

3)      If, as a buyer you are offered a property with a Clayton’s Reserve and you refuse – does that mean the auctioneer can offer the property at a different reserve to somebody else? Or do the others have to be given the same Clayton’s reserve?  Do they come back to you? How do you as the highest bidder manage this?

For now, in the interests of our clients and to discourage this illegal behavior (The Clayton’s Reserve), in cases where we have won the right to hear the reserve and we consider we have been given a Clayton’s Reserve we will now publish (if we get our client’s permission) the agent’s name and the Clayton’s reserve given to us, We will also send a note of complaint to the REIV and ACCC. If any of our behaviour is as inappropriate as the Clayton’s Reserve, then by all means return our return serve back to any of our advocates.

We have a good many excellent selling agent relationships. They are important to us personally and professionally. We are shown many courtesies and keep many confidences (as we should and will continue to do so). However we are giving fair warning to selling agents, who, by way of example, quote $2 million and then tell us, when we have won the highest bidder right at auction, that the reserve is $2.4 million.

Agents, we would much prefer to deal fairly with you. Why abuse the auction system? If you want to do that why not use Expressions of Interest or some other method of sale?

Our offer technique management, in this instance, is to return the serve right back at you as hard as we can. We will still negotiate, but our relationship on the home in question will continue beyond the buyers and sellers signatures. If you think we are bluffing a Clayton’s Reserve from you will find us both out.

Apologies if this seems a tad emotive or self serving but the Clayton Reserves are continuing and we represent buyers and think these kinds of “Reserves” are legally and morally wrong. Simple as that.

Let’s move on.

Congratulations to Andrew McCann of Bennison Mackinnon on 115 Stanhope Grove Malvern, whose company to our knowledge is still the only publicly declared Melbourne based real estate company with reserves in their quote range. We videoed their auction today – it should be up tomorrow. Their quote was $2,100,000 to $2,300,000. The property passed in at $2,150,000 and with some negotiations was bought post auction for $2,255,000 by the buyer it passed into. That seems solid agent work. Fair buyer quoting; stated reserves.

Now let’s really move on – did you hear the joke about the leprechaun …

Buy Happy

Mal

PS  No Market News next week as its Queens Birthday Weekend and Council Wraps up tomorrow (Sunday)

Toorak 2 Carmyle: Looking like an almost drowned rat - Jeremy Fox from RT Edgar firing 3 bidders up with his banter and a smile. Bought under the hammer for $3,375,000.

Not enough pressure at an auction for you? Then why not add a Channel 7 film crew and a new TV series and it's raining and indoors in a small space and you've got Marcus Peters breathing down your neck. Mate I was scared just watching. One very brave bidder and passed in at $850,000. St Kilda - 23 Mitchell.

SUPPLY OVERHANG BUILDS
First some stats. Last Saturday’s (May 29) Auction results showed strong evidence of “auction overhang” in Port Phillip where the clearance rate was 32% clearance rate on the 22 auctions we monitored.

Seven days later the reported clearance rate had lifted from 32% to 45%, with only three of the pass-ins and unreporteds reported as having been bought. On this evidence, it seems a stretch to say that in Port Phillip Million-Dollar-Plus homes are being bought soon after auction. There is overhang elsewhere in $Million Melbourne but not as much as Port Phillip. Which suggests the chance of bargains here.

What Supply Overhang means to you, the buyer
1.  More choice, given that new stock has to compete not only with other new stock, but with old stock which hasn’t sold yet.
2.  Better pricing on all homes as there is real competition for the first time in a long while – providing of course you understand the negotiating game and know how to play it.

We genuinely believe that there is an air of bargain hunting around at the moment and if you are a little brave or a little flexible on the purchase then perhaps you may consider being a bit more aggressive on the offer. Perhaps you also may consider talking to a buyer agent to show you your real alternatives.

Stock Levels Going Forward – Unlike Boroondara stock does seem to be drying up a bit. Forward auction bookings for Port Phillip are decreasing compared to May. So a quick rebalance is possible.

Apartments
This $M+ market is still continuing to show some signs of life with 3 more reported sales in

• 576-578 St Kilda Road Melbourne at $2,200,000 with Biggin and Scott
• 48 Nelson St St Kilda for $1,300,000 with David Cutler of Century 21
• 3908/7 Riverside Quay Southbank (Eureka)  for $1,200,000 with Georgina Dakdouk of Dingles

A report from Michael Szulc of Cayzers
We had 7 auctions scheduled for today, of which we have sold 5.  1 before auction, 1 under the hammer, 3 passed in and sold shortly after.

The new trend appears  for buyers to be holding back until the last moment and not declare their interest until they have to. It is only when it appears the property will be taken away from them that they show their hand. Whilst buyers are thin on the ground just at the moment, they are still there and it is case of the agent knowing how to deal with the situation……….patience and experience is proving very important at the moment.

Buy Opportunity

Port Phillip – 11 monitored – 6 bought – 54% clearance rate (last week 32%)

Port Melbourne 65 Bridge; Gerald Betts of RT Edgar. 1 bidder and passed into them for $1,810,000

Albert Park 144 Danks: Passed In for $2,410,000; but with 2 bidders there should be a result soon unless the vendor isn't aware of a buyer mood change. Karl Gillon of Buxton

With Bidderman less than 1 – meaning more auctions than bidders  – it may be time for a change of scenery for Port Phillip auctioneers unless things turn very quickly or they can come up with some new ideas. And the post auction sales are not happening either according to reported REIV results, so a pass-in and deal later strategy can’t be justified to a seller who is forking out $10,000 to $20,000 on marketing. But the sellers are not our constituency – buyers are. And buyers: you have opportunities if you can find the right home and it’s a goodie. The opportunity comes with your assessment and negotiations skills.

Port Phillip is a very fickle market at the best of times and May is proving more fickle than usual. Especially if its $2m and over.

If you need some help in getting through the maze of unsolds to find the gem then please consider giving us a call. There is actually a lot on offer and buyers if you can’t recognize this buy signal then we advise a change of medication.

Population and Wealth pressures mean that sometime soon this part of the Bay will again shine – so the smart recognise this an opportunity and those that are waiting for more easing are brave.

Sound a bit “salesmany” but we encourage your participation as some of the market seems to be returning to 2009 pricings – how long that will last we don’t know.

Next month maybe a different story

Port Phillip Auctions – 22 monitored – 7 bought – 32% clearance rate

Buy Opportunity

Port Melbourne 266 Esplanade East: Joseph Allen: Passed In for $1,720,000.