oc | Wednesday 22nd January

The Winter of Waiting?

Don't look so worried Jeremy! You got 13 Stradbroke Ave, away at $3,880,000, 20 Mayfield Ave, Malvern away at $2,625,000, 3 Royal Crescent, at $2,614,000 - all under the hammer, as well as 15 Woodmason St, Malvern away post auction for $2,970,000. If you can clean up 73 Rose St, , which passed in for $3,525,000, it will be a clean sweep in a toughish market.

At 6pm on Saturday, the James Clearance Rate for $M+ was 45% on the 29 auctions we attended, showing cooler market sentiment on low stock levels. The Weekly Review Bidderman, our demand indicator, was 1.4 bidders per auction, which was a rise on the figure before the long weekend – although it didn’t feel like there was an improvement in bidding intensity this weekend. In fact it felt the opposite.

It’s Winter and historically the $M+ market goes into hibernation.  However we feel the last fortnight has seen a significant negative change in market sentiment, with buyers appearing more cautious than just a few weeks ago. It will take time though to if this really represents a significant mood shift, and what the size and extent of it may be, given that new stock levels are so critically low in both numbers and excitement that data from such small samples has significant room for error.

Biggest Sales:

  • Toorak, 13 Stradbroke Ave, Jeremy Fox (RT Edgar), under hammer, $3,880,000, 2 bidders
    It was a rapid crossfire of offers from the moment auctioneer Jeremy Fox asked for bids…(See More in Auction Reports)
  • Fitzroy, 278 Gore St, Arch Staver (Nelson Alexander), under hammer, $3,410,000, 3 bidders
    I first visited this property at a mid week open three weeks ago – it was packed with people excited at seeing this very rare offering…(See More in Auction Reports)
  • Malvern, 15 Woodmason St, Jeremy Fox (RT Edgar), after auction, $2,970,000, 2 bidders
    Small crowd of 30 here to see the Jeremy Fox auction on this north facing, modern interior, but plain fronted home in the Tooraky part of Malvern…(See More in Auction Reports)

Bidderbuzz Auctons:

  • Malvern, 20 Mayfield Ave, Warwick Anderson (RT Edgar), under hammer, $2,625,000, 4 bidders
    Quick-fire auction with some good banter….(See More in Auction Reports)
  • Port Melbourne, 21 Walter St, Kaine Lanyon (Marshall White), passed in, $1,015,000, 4 bidders
    A crowd of over 60 gathered to see if this 1930s semi would have a new owner by the end of the day…(See More in Auction Reports)
  • Surrey Hills, 760 Rd, James Tostevin (Marshall White), passed in, $1,980,000, 3 bidders
    It looks like there are still plenty of people out there wanting to buy a house as shown by this auction with another crowd of around 100 attending this on…(See More in Auction Reports)

Biggest Pass Ins:

  • , 9 College Pde, passed in, $3,120,000, 3 bidders
    A big crowd of around 120 turned out to see what would happen to this Kew property at auction on Saturday…(See More in Auction Reports)
  • Armadale, 73 Rose St, passed in, $3,525,000, 1 bidder
    Not another Rose St Armadale auction! Hey, what’s wrong with this street? It seems like half a dozen have gone on the market in this street in a short period of time…(See More in Auction Reports)
  • Malvern East, 12 Glenbrook Ave, passed in, $2,300,000, no bidders
    Auctioneer Mark Wridgway sought bids after painting an enticing backdrop in terms of low interest rates and the position of this house…(See More in Auction Reports)

Big crowd, no action! Canterbury, 43 Wattle Valley Road. Passed In $1,700,000. 0 Bidders.

In Depth Analysis of Melbourne’s Top End

It’s early Winter and there is some frost hanging over the Top End property market.

We are saying it’s frosty – not ice-cold. Some of this weekend’s auction results even had a bit of warmth in them, but generally June has been frostier than May.

Why has the temperature changed and is it consistent?

There are in fact some Melbourne Winter Warmers out there – the well-priced property at auction, and also Off-Markets.

Behind the scenes there are some well connected agents getting a modicum of deals over the line. Not in great numbers, but it is winter remember and in Melbourne a lot less happens in winter, even in the best markets.

To support our claim that Melbourne’s Off Market has some action, here are some solid results from over the last fortnight while Her Maj was blowing out the candles on her birthday cake.

  • Toorak – 5 Towers Road (Michael Gibson). No 1 and No 3 are still for sale on the internet at $20m+, but No 5 has sold quietly off market for over $12 million.
  • Toorak – 40 Mathoura Road (). Approximately 800 sqm and it changed hands in excess of $4 million – making land that will probably see units on it going for over $5,000 per sq metre. No Board, No Advertising.
  • – Anderson St (Michael Gibson) over $7.5 million and there was an underbidder.

The boys at Jellis Craig haven’t been asleep either when it comes to off-market dealings

  • Kew – 28 Edward St – “The Balwyn formula” (small land, huge classy new home, big ticket) continues to return – although this time it’s in Kew. Richard James delivered big on this one at over $5,400,000. The Ridge  and Fellows make this three “Balwyn formula” homes selling for over $4 million in just one month. In other words none of them were one-off flukes. There is a tinsy bit of depth to this market. Google this address – zippo.
  • – 12 Kintore (Al Craig), a big home on 1250 sqm in the Tara estate, changed hands for over $4.4m. Granted it was down by around 4% on the sale price of 2010 but it was still over double the sale price of 7 years ago. Very low key sale – no pics, no ads, no fanfare!
  • saw Stephen Abbott help move a terrace in Jolimont Parade for a smidge over $4 million.
  • Us – March was our second best month ever, in May we had a record weekend. In June we have started OK, with buys in the mid $1m, high $1m,  high $2m and mid $3m in Kew, Canterbury, Brighton and Armadale.

A Saturday religious experience - an Arch Staver Auction. Fitzroy 278 Gore Street, $3,410,000 under the hammer, 4 bidders

So some good results out there. But generally the mood is chillier – that 45% Clearance Rate is the lowest we’ve seen for some time.

Why has somebody seemingly opened the fridge on the property market in June? It’s not just the Americans and the Europeans, they left the door open a long time ago.

Reasons Why the Top End is as it is now.

We can see five reasons and for the most part they are not unexpected. In our offices we generally budget on June, July and August adding up to about the same as a good month in May or October in terms of buying homes.

  1. Historical reasons – Winter is always cooler in terms of market activity.
  2. Market levels – for the last 18 months the market has very much been like the Victorian water situation of a few years ago. Stock has slowly been drying up since 2010 and we have now reached a critically low point for market-priced, quality stock. Many buyers have in recent times reached their own frustration tipping point and temporarily moved out of the market by taking a long term lease, or mentally retiring from the market for a time. So more buyers and sellers are leaving the market than in previous years.
  3. Stock Quality – on top of lower levels, the quality of what’s out there right now is, for the most part, seriously unexciting.

And then there are some additional reasons

4.  Some businesses are doing it tough. And even those who are not experiencing hard times themselves are seeing others doing it tough, and that makes them nervous.

5. Some buyers are waiting for the market to slip further. In any market there are opportunists and discretionary buyers, and in the past few weeks some of those have decided that the longer they wait the better things will be for them.

So what of the next few months?  How will buyers see June, July and August going forward?

While some buyers will act, many buyers now appear to see the mid year market of 2012 as The Winter of Waiting.

  • Waiting for New, Exciting and Market Priced stock to come on
  • Waiting for prices to fall (especially if their offer has been on the table for a while)
  • Waiting for agents to improve their quoting behaviours.

Good Crowd, Good Bidding - No Result. Surrey Hills, 760 Canterbury Road, James Tostevin, Passed In $1,980,000, 3 bidders

Some Guidelines for Buying in this Market

  1. If the goodie isn’t there, don’t buy. You’re a long time in a family home – between 5 and 20 years. If it’s a wrong-un’, it can be a life tipper. It can tip you into emotional unhappiness, and it can tip you into a financial situation that down the track means you have to put more into the next mortgage, given the lack of capital growth because of a bad decision relative to the rest of the market.
  2. But if it’s a goodie – act now! On the other hand if you can snag a goodie in this market, it could set you and your family up for life emotionally and financially. Now could be a good time to trade up into a bigger home. It really could be! The gap, meaning the mortgage difference between what you have and what you want, is lower than it’s been in a while, because prices are falling more at the higher end than at the lower end. As well there are opportunities to buy and sell in this market, with the cost of borrowing becoming more affordable with each rate drop.
  3. Don’t buy and quickly resell. Just about everybody who has bought and then re-sold quickly in the last few years has lost money. It’s not just the purchase price you need to take account of, but also the stamp duties, agent fees and other incidentals, which add an extra 10% or more to the costs. So if you act in haste and then want to get out, chances are it will cost you 10% of the purchase price (AT LEAST).
  4. Rent. In this market there is nothing wrong with renting. It’s not wasted money. In fact in a flat or down market renting is smart. Granted, it doesn’t give you the same sense of belonging as does owning your own home. But if you can skip one of life’s stages** in this market and rent, then as long as you remain disciplined and continue to look and act when the right home comes along, you will probably be better off than if you were to buy, sell a couple of years later and then rebuy.

Our message in the Winter of Waiting of 2012 is about making the right decision. That right decision is to keep looking if you want, but if it’s not there, a decision to do nothing is not all bad.

Our final two points on the Winter of Waiting are on price.

  1. If you have an offer on the table be patient. If you don’t know how to be patient or structure a good offer, then get professional assistance. Professional Advice costs 1% to 2%, whereas a bad buy can cost you 10% to 20% on top of the purchase price.
  2. Price is important, but what you need is the big picture on price. Are you in the right million range in the first place? The right million is far more important than twisting the agents arm to save $50,000. Any idiot can “save” $50,000 buying crap in this market. So don’t buy crap and make sure that in this quiet market you understand what true is – and if not get a professional second opinion!

** Life stages – 1. Single 2. Couple 3. Young kids 4. Older kids  5. Mid life crisis 6. Downsizing 7. Twilight

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