oc | Thursday 23rd January

Nervous Bidders are losing the plot – and costing themselves a lot of money.

A few smiles were found on Saturday and here was one of them. David Hart (Buxton) with friend at 48 Regent St, Brighton East. Passed in $1,275,000, 1 bidder

At 6pm on Saturday, the James Clearance Rate for $M+ properties in Melbourne was 55% on the 29 auctions we attended. We covered around half the $M+ auctions this weekend. May is looking very lean for auctions and today was almost a non event auction wise

The Bidderman, our demand indicator, was 1.2 bidders per auction. Considering the low numbers on offer at auction this was not a good sign for sellers going forward.

The Perils of Emotional Bidding
The big auction issue for me this weekend was how bidders were bidding. I went to three auctions with a total of  nine bidders and saw some very surprising and costly bidding.

One example was the auction at 48 Emo Road, . This is a lovely little single fronted in one of my favourite family and investment areas, the Ardrie Park precinct in . Middle of the road quality, not bad for those just starting out in the home ownership stakes – plenty of space inside and outside and good flow. Good feel.

Anyway the auction is about to start and a nice healthy crowd of around 100 has gathered to hear the pearls from a not-so-old stager who rarely auctions these days – Peter Bennison.

Peter calls for an opening bid, to which one very enthusiastic bidder responds with a strong and emotional bid of $950,000. With repeated calls for further $10,000 rises unsuccessful, Peter takes a strategic half time break. On returning, he unsurprisingly declares that the property will be passed-in to the lone bidder if no further bidding. After a second bidder pipes in offering that elusive $10,000 rise, the original bidder responds emotionally and strongly with a crowd hushing $1,000,000. Perhaps the bidder should have asked the “Is it on the market?” question – because this was well above the original quote of $890,000 to $950,000.

What it also means is that the auction will now be completed behind closed doors with some argy bargy instead of cleanly in the street and under the hammer, which a good question could have allowed. The final result of $1,150,000 is decided inside a few minutes later. Wow! I know the buyer saved the fee of getting professional help and normally I am against such flexible post auction reserves but really if a  buyer wants to pay then they should be allowed to – it’s a free country. For the very experienced Mr Bennison this bidder was a gift, and he knew exactly how to work this  situation to the benefit of his client, the vendor (low quality agents may not have recognized the opportunity presented).

There are a couple of things that come from this as lessons to first home buyers and DIYers:

1) As a bidder, by all means look strong to ward off other nervous buyers. But it doesn’t help to look emotional – an experienced agent will pick up on that and it will cost you money

2) In this market you have to test every step of the way. Ask questions. There was nothing wrong with the opening bid but the winning bidder’s second bid could and in fact should have been presented in a very different way. Because it wasn’t, the post auction problems snowballed from this one decision.

3) In this market, on a $890,000 to $950,000 quote, and with no proven competition above $960,000 why would you be rushing up the pole to an incredible $1,150,000? If you have to pay it then at least take a few hours of testing to get there.

There’s no doubt that it’s a good home and I certainly would have recommended buying it. And maybe the result would have been no different if a professional was managing the buying side. But I think a number of safety procedures could have been implemented prior to agreeing to that amount.

There were further interesting results along these lines at the auctions at 13 Maskell St Brighton (Peter Kennett) and 7 McClaughlin (Mark Earle). Please see today’s auction reports for more details.

Now back to the market – Future Stock:

Auctions – May is going to be very quiet compared to May 2010, when we witnessed well in excess of 1000 $M+ sales across Melbourne. Melbourne’s Inner East and Bayside represent a majority of  Melbourne’s Million Dollar Plus sales, and predicted auction numbers in these areas for the four weeks in May are as follows: this past weekend 45, next week 43, and the last two weeks in May, 105 and 106. Even though there were five Saturdays in May 2010, there would need to be an incredible number of private sales this year to get the final numbers of solds anywhere near last year, and that is not likely to happen with the current market mood.

Off Markets – According to agents there is a strong trend towards private and off-market sales. Nick Johnstone, of JP Dixon (Brighton) says: “We are seeing a definite swing towards private and off market sales which shows a transitional phase in the market.” 

Other agent comments:

David Oster, Jellis Craig (): “The 28th May will be a Strong Saturday. It is the last clear Saturday before School holidays.”

Richard Winneke, Jellis Craig (Hawthorn): “May 21, May 28 & June 4 are 3 bigger Saturdays and then many owners will hold off selling until August.”

Melbourne Wide April Wash Up :
Volume –  Has a lot changed in Million Dollar Melbourne between April 2010 and April 2011? Well, yes and no. April 2010 had around the same number of reported $1m+ sales (there may be a 10% variance with the chance of late reported April 2011 sales to bring the April 2010 and April 2011 numbers closer together) but on a count of over 500 buy/sells, not much has changed in terms of volume.

However, even though the last market turned in April 2010, May 2010 was a boom month with well over 1000 REIV reported $m+ sales throughout greater Melbourne. Therefore May 2011 will be watched to see if it can get anywhere near those sorts of numbers, however we don’t think that will happen. We are still seeing a $M+ home bought every ninety (90) minutes somewhere in Melbourne and that was with Easter taking up a fair bit of the month.

Let’s look at a couple of suburbs which we randomly selected to give a spread of Greater Melbourne $M+ reported sales for the month of April 2011 compared to April 2010.

Price – In our opinion, backed up by REIV results, we feel prices are definitely flat or falling and have been for the most part of this year and a lot of last year. When we say flat or falling we don’t mean plummeting – we mean a drop by as much as 10% over the last 12 months. However we are still seeing plenty of instances of the old property truism: If it is well located and has some WOW and the right price to attract multiple bidders then it is still possible for the ultimate buyer to be paying more than you would have expected last year.

Winter is upon us and buyers and sellers alike appear in a less enthusiastic mood than even a few weeks ago. Even so, we have bought more $1M+ homes this year to date than this time last year at the same time.  And why wouldn’t you buy now, unless you know something we don’t? Price and choices have been considerably better than last year.

$3M+ Market Report:
Back from a week or two off, this market now, has a fairly clear run till Christmas, with a only brief breaks for a couple of holiday weekends.

A couple of strong results today:

  • Elwood 18 Normanby (Paul Sutherland) – Bought for $3,375,000, 4 bidders – see our video auction
  • Camberwell 26 Alma (Alastair Craig) – Bought After – $Over $3,000,000 at asking – no bidders – there is that strange bidding thing again

Over the next four to six weeks we should see more and some reasonable activity (although not expected anywhere near the levels of last year), as the May market is a traditional agent preferred selling time. Why? Well there is a good stretch of time until Queens Birthday weekend to run an uninterrupted campaign. Stock Quality is the unknown.

Come July things will be relatively quiet as there is a general sellers’ feeling (rightly or wrongly) that good homes do not look their best at this time of the year and accordingly a number of high end selling agents take winter holidays in Europe and therefore do not program campaigns to be run in their absence.

In the post Easter week or so there have been ten or more high end sales including the representative  half dozen below

  • 15 St Ninians in Brighton for between $8m and $9m – perhaps not a lot more than what is was sold for less than 2 years ago (need to look up sale time to be absolutely sure of date) – Justin Follett of Kay and Burton
  • 255 New Brighton for between $5.5m and $6m – Regina Schmidt and Brian Devlin of Buxton
  • 50 Hotham St East Melbourne which had been on the market for at least 6 months for $7million – Paul Richards of Hocking Stuart – on the market for a fair bit of last year and also a failed auction. Nonetheless a reasonable price – not everything the sellers wanted – but more than had been offered at times in the past by buyers. A good result for both parties.
  • 150 Clarendon East Melbourne – the Salta apartments saw Anton Wongtrakun deliver another big sale at $5,200,000 for Unit No 4
  • Out to the paddocks of Lower Plenty with a Marketnews favourite Rocco Montanaro of Morrison Kleemand who achieved close to $3m on an Expressions of Interest Campaign for a good home on 7 acres at 75 Cleveland.
  • And we round up our selection of high end Easter Sales with a $6M+ sale at Mount Eliza 15 Freemans Road – Michelle Skoglund of Aqua

In summary over Easter the market at this level has not been dead, but definitely subdued – there is increasingly a dampening mood in terms of both buyer and seller confidence. Time will tell if this is a short or longer term phenomenon. Price will play a important part going forward as we seemingly move into more uncertain market conditions – i.e. ones that are not as clear as they have been in the past 2 years since we awoke from the GFC. Overall the market now and in fact all of 2011 has not been strong at the $3m+ level – but there are still enough transactions (especially in Bayside) of sufficient to avoid holding a wake just yet.

With winter approaching and a fair amount of stock available we think it is a buyers’ market and the future is best described as – “uncertain times”.

Finishing on a positive note our James Investment Division has seen some solid interest with investors coming back into the market (rentals are improving) and one current flavor of the times is blocks of flats. Some examples of what we are talking about.

The Big Issue: Klarity Kris and Architect Adam discuss the big issue of the week – does this market, with prices currently dropping, have elevated risks for buyers ? See what the two have to say by clicking on the live action.

Auction Video: This week Cafe Guy heads to Elwood on what was a big auction day for the Port Phillip area. Watch  the auction video of  18 Normandy Rd (Sutherland Farrelly) by clicking on the live action.

Buyer Masterclass: Double-fronter or two storey, single-fronted cottage? Architect Adam explores this dilemma in this week’s Buyer Masterclass. It’s a great article check it out!

We Only Buy Homes and Happy Mothers Day Mum and in fact to all Mums – we love you all!

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