oc | Wednesday 22nd January

Spring’s first big test – Pass is the mark.

Wow 7 bidders. , 2/2 Somers Avenue, Kevin O'Brien, Under the Hammer, $2,445,000

At 6pm on Saturday, the James $M+ Clearance Rate was 65% across the 31 auctions we attended – a solid result. The Weekly Review Bidderman was also a very solid 1.8 bidders per auction. There was a fairly even spread of ducks, lone rangers, norms and volcanoes.

This weekend was the Spring Market’s First Big Test, with 90 auctions over $1m in Inner East and Bayside. Here are the results:

Area Clearance Rate
James Pass Mark

Clearance Rate  on September 1

Clearance Rate
September 15

Boroondara

60%

72%

66%

Stonnington

60%

76%

70%

Bayside and Port Phillip

60%

71%

43%

 

Some other KPI’s

James Pass Mark

September 1

September 15

$M+ Hammer Rate

33%

43%

35%
$M+ Bidderman

1.5

2.0

1.8
$M+ Clearance Rate

60%

75%

65%

Market Commentary

As we reported two weeks ago, we have had a positive start to Spring. Last week the market did what it had to do on very low numbers, and this weekend we faced Spring’s first really big test.

Why a Test? Well we have had very, very low auction numbers for some time, averaging around 50 auctions per weekend over $1m when 100 is a strong number. On Saturday we had approximately 90 auctions at that price level in Inner East and Bayside. So if the market has held up on Clearances and Bidderman on those numbers, you would have to say the positive news of two weeks ago is continuing.

We decided to cover a wider area for $M+ Auctions in our sample of 31 auctions and we didn’t simply focus on only the really high end. Consequently we missed some of the bigger auctions we normally cover. But we feel that the subsequent stats are giving a wider, more representative feel of the $M+ market right now.

The Score was a Solid Pass, especially when you look at the Clearance Rate combined with Bidderman.

The market appears to be healthier than it was in Winter.  Sure, it’s on low stock.  And if there is a rush of stock onto the market in late Spring, it could still mean a messy end to the year. But things are better right now than they were a few months ago. They are more like it was last Autumn.

This market pick-up shows that vendors are adjusting their price expectation, that agents are doing their job and that, when the home is right, the bidders are also doing theirs.

Biggest Sales:

  • Toorak, 9 Scotsburn Grove, Justin Long (), under hammer, $4,220,000, 5 bidders
    Uh oh, you know it’s going to be a big auction when the photographers are lined up …(See More in Auction Reports)
  • , 87 Berkeley St, Rob Vickers-Willis (Abercromby’s), after auction, undisclosed above $3,525,000, 1 bidder
    A crowd of 70 were present at the auction of this architect built home by John Davey…(See More in Auction Reports)
  • Carlton North, 417 Canning St, Tom Roberts (), under hammer, $2,608,000, 4 bidders
    A large crowd of 110 gathered and the stage was set for this Carton North auction…(See More in Auction Reports)

Bidderbuzz Auctions:

  • Malvern, 2/2 Somers Ave, Kevin O’Brien (Jellis Craig), under hammer, $2,445,000, 7 bidders
    With five buyer advocates in a crowd of 120 it wasn’t hard to work out that this auction had some simmering heat to it…(See More in Auction Reports)
  • Kooyong, 14 Norford Grove, Paul Williamson (Jellis Craig), under hammer, $1,240,000, 4 bidders
    This was an entertaining contest right from the word go that proved it is not the crowd size but the number of bidders that really counts…(See More in Auction Reports)
  • Clifton Hill, 17 Berry St, Arch Staver (Nelson Alexander), under hammer, $1,115,500, 3 bidders
    The chatty crowd of 50 formed a large semi-circle around auctioneer Arch Staver who stood centre stage…(See More in Auction Reports)

Biggest Pass Ins:

  • Hawthorn, 5 Hilda Cres, passed in, $3,900,000, 1 bidder
    In front of a big crowd of around 80 people…(See More in Auction Reports)
  • Toorak, 3 Leicester Sq, passed in, $3,510,000, 2 bidders
    Auctioneer Justin Long positioned himself poolside and received a lightening fast opening bid before he even asked for one – the offer of $3,310,000 was on the proviso no be placed..(See More in Auction Reports)
  • Camberwell, 65 Broadway, passed in, $2,100,000, 2 bidders
    The auction opened on a vendor bid of $2,100,000…(See More in Auction Reports)

$2 million Stonnington townhouses

With last week’s Huntingtower Road, Armadale becoming famous for its $525,000 Up bid, it was easy to gloss over the fact that there were five bidders who wanted a single-level downsizers home – and that it was bought by a young couple. On Saturday we saw another such volcano, with seven, yes that’s seven, bidders for the townhouse at 2/2 Somers Avenue Malvern (Kevin O’Brien of Jellis Craig), pushing the price nearly half a million dollars over reserve to $2,445,000.

There is a message there: the market is crying out for $2 million new(ish) smaller townhouses in Stonnington.

$3M+ Market

This weekend, only three out of seven properties over $3m were reported as selling before 6.00pm on Saturday, a result we feel shows a market continuing to struggle at the Top End.

9 Scotsburn Toorak (Justin Long) is a good case study. Five bidders fought it out on this property to take the result to $4,220,000, a solid result that in our opinion was well balanced between buyer and seller. It showed there is some depth for Top End homes that are priced, marketed and placed “on the market” correctly.  The fact that No. 11 Scotsburn sold last year for $5,000,000 post-auction, for a block with 50% more land, confirms that. (See James Auction Report – October, 22 2011)

9 Scotsburn is a bit of a “Toorak special”. Our James Home rating had it at 708/1000. It last sold in 2005, also at auction, for just under $3,500,000. This represents an increase of around 20% in the last 7 years – not exactly the expected doubling of price (100% increase) that would have been the normal expectation at the time of purchase.

This result has nothing to do with this home specifically, it’s more a reflection of the overall high-end market. The roller-coaster cycle of the last seven years has been one hell of a ride for Top End buyers and sellers.

However, we stick to our opinion that the $3m+ market is off life support when the 3Ps (Price, Property and Position) are aligned to market.

At $5m+, though, the market continues to remain seriously unwell.

Read our $3M+ Blog for more results on Monday.

Bayside Valuations

Bayside upper end home values are being “worked over the coals” by the banks at the moment – not to put too fine a point on things.

This can be a positive and sensible thing for banks to do in light of the information they have. They actually are acting prudently, which is good for all of us and means a higher chance of a softer landing for most of us. However the banks’ new found “Bayside conservativeness” can also exaggerate the true state of values (negatively).

In our Buyer Masterclass later this week we examine:

1. Banker Bayside Conversations
2. How Valuations Work in Falling Markets
3. How Bayside Buyers need to recognise that Finance Clauses are the new “must-have” for many private sale Top End home buys, and that sellers need to learn to deal with them if they want the best buyer
4. Our negotiation book full of non-deals over $5m “negotiated” this year, where bank valuations have been the start and finish point. “Bank vals” are important to banks, but they are not the whole answer in the deal process.
5. The Banking Paradox – where a banker accepts an auction result where you are the lone bidder, possibly miles above market, but they won’t accept a private sale negotiation on the same property possibly well below the market, without a finance clause.

Look for the full story on Bayside Valuations in Buyer Masterclass later this week.

The old boy's still got it! Rob Vickers Willis negotiates afterwards to sell the lone bidder above $3,525,000. 87 Berkeley St, Hawthorn

Following up on from our story ‘Auction Oddities’ last week, The Age‘s Marika Dobbin ran her story on Monday of the three homes we covered.

Postscript: As usual the buyer and selling agents copped a caning in the social media and as usual a number of Melbournian Auction Watchers missed the main point (in our opinion). It wasn’t about us. It was about:

  1. Emotion is costing buyers hundreds of thousands of dollars.
  2. Auctions are not “things” you should just walk into without considering professional representation.

We have continued the theme on professional buyer representation by asking some well known agents for their opinions – yes it’s self serving, but does that mean the argument is invalid?

Agent Survey: Do you think buyers need professional representation?

, (Brighton): “It really depends on the buyer and their own personal experience in property. In my estimation there are a lot of people who are time poor and do not have the expertise to make sound decisions. By employing professional representation they are eliminating a lot of the risk associated with purchasing property and are more likely to make pragmatic decisions based on real evidence including comparable sales etc. We have noticed this market change very quickly, so you need to have very recent sales data. There is no point looking at what happened 12 months or even 6 months ago, you really need to look at the last 8 weeks and to this end professional help makes sense.

Richard Winneke, Jellis Craig (Hawthorn): “I believe any buyer who has never bid before or who is not comfortable negotiating for the biggest asset of their lives should seek professional help (whether it be an agent representing them or a buyer’s advocate).”

Sam Gamon, Chisholm & Gamon (Elwood): “This is an excellent question. In our opinion it depends on the time constraints and the type of personality of the prospective buyer. When a buyer is time poor and cannot actively carry out their own extensive research on the particular market, a buyer’s agent does come into their own. Again, many buyers find confrontation difficult and can be confused by the mechanics of the negotiation process and again, the expertise of a buyer’s agent is helpful in this scenario. There are also occasions when a buyer may not feel confident enough with their body language to bid effectively at an auction. Buyer’s advocates show great expertise with bidding and are able to provide clients with genuine feedback on price.”

Matthew Young, Buxton (St Kilda): “Each to their own. Some clients have benefited hugely from professional advice provided by buyer advocates, however, the majority I feel love to get amongst the cut and thrust of it themselves. It’s a massive experience and most simply through researching the market, speaking with friends, and colleagues will themselves collate enough information and advice in order to make a sound purchasing decision. In my opinion, get involved and enjoy the experience of potentially buying one of your greatest assets.”

Mark Wridgway, RT Edgar (Toorak): “I believe that some buyers benefit from professional representation and some don’t. Its like most things in life, if the representation is good they will benefit, if not then it would add little . Obviously, the services that a buyer’s advocate provides varies from searching and vetting bidding/negotiating to just bidding or giving an opinion. People who are less experienced in property matters or are very time poor would benefit most and it’s a personal choice. It suits some people not others.”

Glen Coutinho, RT Edgar Boroondara (Kew): “Yes, I absolutely believe in the buyer’s advocate role and would recommend it because they can save thousands of dollars and in an arm’s length, non-emotional transaction. With third party advice they can get a clear understanding of the market place; even as an agent I have used advocates to bid for me.”

Last Market News for two weeks
As we go into the holiest of holy weeks with the Grand Final, there will be no Market News next Saturday or the one after.

When you return, you’ll be greeted by a whole new Marketnews design that is easier to read on tablets.

Go Pies!

 

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