oc | Wednesday 22nd January

Market Continues to Alter its Trajectory

Big Balwyn Bash: A massive crowd of around 180 people at the auction of 16 Percy Street, Balwyn, Richard James (Jellis Craig), under hammer, $2,765,000, 4 bidders

At 6.00pm Saturday, the James Clearance Rate for Melbourne’s $M+ was 68% on the 34 auctions we covered. The Weekly Review Bidderman, our bidders per auction measurement, was at 2

Overall Summary of Melbourne’s Million Dollar Plus Auctions:

  • Ducks ($M+ auctions with no bidders) 23%
  • Lone Rangers ($M+ auctions with one bidder) 17%
  • Norms ($M+ auctions with 2 or 3 bidders) 40%
  • Volcanoes ($M+ auctions with 4 or more bidders at auction) 20%

That’s a win to the Norms, followed by Ducks at nearly a quarter of the auctions we attended. Volcanoes weren’t too far behind – at one in five of the auctions we reported on, there were four or more bidders.

These contrasting results indicate a market that is altering the speed of its rise. Where previously pretty much everything was selling, that’s no longer the case. The A graders continue to motor along but the overpriced B graders and the C graders have started to run out of gas.

Market Summary

The flattening Hammer Rate (properties sold under the hammer), which has dropped to 1 in 4 from 1 in 3, and the weaker Bidderman rate, which has fallen from the mid 2s to the high 1s, are signs the market is easing. But we are not saying that it is going backwards. The market has been taking off for the last 18 months since October 2012, and this may be the first signs of a leveling of the altitude.

Last month we had clearance rates in the 70s – but now it is in the 60s.  It is still moving forward, its just that the angle of the ascent is not as steep in March as it was in early February.

It’s also still possible, as we mentioned last week, that the market may simply be in a slight lull before it begins another rise, exactly like the upwards staircase (rise, level, rise, level) we saw last year and towards the end of the previous year.

At the three auctions I bid at on Saturday, there were two bidders (Hampton), four bidders ( East) and four bidders ( East). So that’s two Volcanoes and a Norm, and all three were bought under the hammer having sailed comfortably past their quotes and then their reserves.

Next week is another Super Saturday, with nearly 200 $1 million plus auctions scheduled across Melbourne. So, by 6pm next Saturday we should have a definitive answer on whether we’re seeing a real change in  the market direction as we go into Easter.

Negotiation Council

But the action is not all Auction-based right now. While by the end of last week we had cleared the decks a little and were down to only four ongoing negotiations, a week later we were back up to eleven ongoing negotiations that were being discussed and picked apart at our twice weekly Negotiation Councils.

A number of clients have asked us what is a Negotiation Council and what happens at them.

All the better selling agencies have them. They are like match committees or, for the sportingly challenged, like board meetings. We have them twice a week – Tuesdays and Fridays – and we discuss any of our active negotiations, including Private Sales, Expressions of Interest, Auctions, and Off markets. As I said, we had 11 such discussions on Friday.

The meetings can be formal or informal. Eight to ten of us sit around a space, and each negotiation is presented and workshopped. We look at what the client wants, the current state of play, the outside forces, the agents involved and their track record and so on, and then we simulate different plays and look at possible outcomes just as a coach would draw up on their chalkboard.

Even though I have bid at more than 1000 auctions and negotiated hundreds of private sales, EOIs and Off Markets, I find these meetings most valuable. Someone almost always has something to improve the plan, and even if they don’t, that fact gives me greater strength going forward that we’re going about things the right way.

A Negotiation Council is the standard procedure at any good agency on any deal. This is why you rarely, if ever, get a standard or quick reply to an offer. Over the years the making and receiving of offers has become a very sophisticated process. Every time a milestone is hit by a buyer, e.g. an offer or a significant increase in an offer, it is taken back to their client and also taken back to their Negotiation Council.

Once the Negotiation Council has discussed the deal and agreed on a strategy, a smaller negotiation team is given clear parameters of how and when to operate. Deals are done once the result is firstly approved by the client and then secondly if it falls within the agreed Negotiation Council process parameters. That way a bigger organisation can operate relatively quickly and nimbly to meet the characteristics of a fast moving deal, while still having the benefit of everybody’s input.

Tug of War

I am still surprised when an otherwise very sophisticated businessman tells me proudly that they are launching a full-on assault on what they consider to be a measly agent to secure their dream property. They just don’t know what sort of a self-inflicted ambush they are walking into.

You may be chock-full of adrenaline and overloaded with other types of negotiation experience, but if  you are dealing with a successful agency on a good home,  you are not in man-to-man combat, you are in a tug of war – and the sides aren’t even.

On one side, pulling furiously in the quicksand, is you.

On the other side, on a relatively firm footing, is a team of  two, three or more – in some cases backed up by a number of others feeding them info and plays and scripts and research.

Take a look in the footy coach’s box next time you watch the footy on the telly – that is what you are likely to be up against when you are engaged in an Expression of Interest or Pre Auction offer or Boardroom Auction or lengthy private sale or Off-Market.

Good luck!

Ormond: 82 Hall Street, Chris Hassall (Buxton), after auction, $2,120,000, 2 bidders and a huge crowd of around 250 people

Biggest Auctions:

  • Malvern East, 24 Beaver Street, John Morrisby (Jellis Craig ), under hammer, undisclosed above $3,900,000, 4 bidders
    Auctioneer John Morrisby needed to use his full volume to reach the 150-plus crowd, all gathered and intent to see how the market would price…(See More in Auction Reports)
  • Balwyn, 63 Metung Street, (Marshall White), bought before auction, $3,000,000
  • Malvern, 2 Parkside Street, Alastair Craig (Jellis Craig Bennison Mackinnon), after auction, undisclosed above $3,585000, 2 bidders
    Auctioneer Alastair Craig described this as a picture-perfect home and it was hard to disagree…(See More in Auction Reports)
  • Camberwell, 34 Christowel Street, Hamish Tostevin (Marshall White), under hammer, $2,900,000, 3 bidders
    A big crowd of 100 was present at this auction, those gathered keen to see the result of this Golf Links Estate property…(See More in Auction Reports)

Bidderbuzz:

  • Balwyn North, 21 Jacka Street, Mark Fletcher (Fletchers), under hammer, $1,780,000, 7 bidders
    It was only during the auction that you started to realise that the majority of the crowd that had come were either bidders or friends…(See More in Auction Reports)
  • Balwyn, 16 Percy Street, Richard James (Jellis Craig), under hammer, $2,765,000, 4 bidders
    20, 50, 100 … now that’s just the number standing in the Japanese-inspired garden. There’s 10 sitting in the pagoda … no there are more…(See More in Auction Reports)
  • Brighton East, 47 Baird Street, Sam Paynter (Hodges), under hammer, $1,873,000, 4 bidders
    Auctioneer Sam Paynter was rewarded with a genuine bid of $1,770,000 when he opened the floor for bidding on this two story home in Brighton East…(See More in Auction Reports)

Biggest Pass Ins:

  • Middle Park, 61 Armstrong Street, passed in, $3,000,000, no bidders
    Despite a grey and overcast sky, a crowd of 40 gathers to see the auction of this renovated brick home…(See More in Auction Reports)
  • , 50 Mathoura Road, passed in, $2,850,000, no bidders
    Auctioneer Jeremy Fox’s opening comments about the convenient proximity of the location to both Toorak and Hawksburn village…(See More in Auction Reports)
  • Hampton, 23 Avelin Street, passed in, $2,050,000, 1 bidder
    Scrutinizing the crowd of 80 who had come to witness the auction of this five-bedroom, four-bathroom new home…(See More in Auction Reports)

Canterbury: 14 Allenby Road, Scott Patterson (Kay & Burton), after auction, $3,125,000, 2 bidders

‘Round the Grounds

  • Canterbury, 14 Allenby Road, Scott Patterson (Kay & Burton), after auction, $3,125,000, 2 bidders
    Around the corner from the golden mile and a good turnout are all ears as auctioneer Scott Patterson sings the praises…
  • Surrey Hills, 20 Durham Road, Tim Heavyside (Fletchers), after auction, undisclosed above $1,750,000, 1 bidder
  • Ringing the bell to gather up the crowd of 60, Tim Heavyside was keen to get things underway…(See More in Architect Adam’s Boroondara Blog)

Bayside

  • Beaumaris, 1 McDonald Street, Mark Earle (Buxton), under hammer, $1,300,000, 2 bidders
    Tree pruning in the school grounds opposite meant that the auction of this three-bedroom, two-bathroom renovated home had to take place in the rear garden, a “paradise” for children…
  • Hampton, 7a Talbot Street, Simon Bartaby (JP Dixon), under hammer, undisclosed, 2 bidders
    As rain threatened to fall, a crowd of 35 or so dotted the street and were entertained by auctioneer Simon Bartaby’s entertaining trip down memory lane…(See More in Klarity Kris’ Bayside Blog)

  • Malvern East, 3 Grant Street, Daniel Wheeler (Marshall White), under hammer, $1,311,000, 2 bidders
    Daniel Wheeler was at the helm today, putting this cosy Malvern East home to the market…
  • Toorak, 8 Winifred Crescent, Andrew Macmillan (Jellis Craig Bennison Mackinnon), after auction, $2,850,000, 3 bidders
    “Six hundred and fifty square metres of prime residential zoned Toorak land” was the introductory remark made by auctioneer Andrew Macmillan…(See More in Call Gina’s Stonnington Blog)

Port Phillip

  • South Melbourne, 343 Bank Street, Oliver Bruce (Marshall White), after auction, $1,470,000, 3 bidders
    A charming winding tree-lined street provides the backdrop for our auction, as auctioneer Oliver Bruce takes us through our paces…
  • Middle Park, 65 McGregor Street, Oliver Bruce (Marshall White), after auction, $1,670,000, 4 bidders
    The “Coffee Mob” is doing a brisk trade as our auction starts some ten minutes late. With free coffee on hand to warm the audience up…(See More in Karen’s Port Phillip Blog)

Agent Survey – Expressions of Interest:

David Hart, Buxton (Brighton): “With a few exceptions, expression of interest campaigns have not enjoyed significant success. Occasionally, where they have worked, they have ended up being an auction by another name, so one may question – why not have an auction campaign instead? Buyer feedback has been that they find EOI campaigns very confusing, where they struggle to get accurate information from the handling agent. Invariably they end up being a private sale post the closing date. There is a place for EOI campaigns, but analysis of their success puts them behind auction and private sale.

Paul Pfeiffer, (Toorak): EOI definitely has a place in the property market alongside auction, particularly in the markets that I work across in Boroondara and Stonnington. It follows the same methodology as auction, creating a deadline to act and the campaign runs for approximately the same length of time, although you will typically find a closing date for an Expression of Interest, on a business day, not on a weekend.

Like every strategy, they all have their positives and negatives. EOI is no different, as it does not remove the 3 day cooling-off period for purchasers and buyers can be uncomfortable with the lack of transparency.  However, in my opinion, EOI works far more effectively than auction, and private sale for that matter, in the following situations;

  • At the upper end of the in the subject suburb
  • Where the vendor would like to maintain a high level of confidentiality and wants to avoid being put under the “public spot-light”
  • When a unique offering enters the market that does not have a broad market appeal.
  • When a vendor is open to discussing terms and conditions with a special interest purchaser that would pay a higher price if they were able to receive a long settlement, conditional purchase etc.

Some of the most successful sales that I have been involved in are in EOI conditions.  Late last year I conducted the sale of two homes for high profile members of the public, one was for a chief executive and the other a high profile figure that frequented in the press. Both parties did not want to open their lives to the general public and we conducted EOI campaigns, with strict qualifying rules for prospective purchasers that eventuated in one of the highest sales in for over $7m and another sale in Toorak for $12m.

EOIs are not just exclusive to CEOs or high profile figures, we can utilise the sale method in situations where we have a unique offering to take to the market. In December last year, I put 32a Walpole Street, Kew to the market – there was a large price disparity between several agents that inspected the home, in fact there was a $1m variation between the lowest and highest opinion of value. Therefore, we elected to run an EOI for this property and obtain the market feedback from buyers prior to providing a recommendation to the vendor on a “fair and reasonable price” for their property.

Our role as a property agent is to consider each property individually and provide our professional advice, based on our experience.  I appreciate that is much easier to provide a “cookie cutter” approach to selling property than to explore options outside your comfort zone.  I do however agree that auction is the best way to go in MOST cases.

Iain Carmichael, Jellis Craig Bennison Mackinnon (): “Our firm will soon be commencing the marketing of an historic 27 room Gothic mansion sited on an elevated two acre site. We have chosen to use the Expressions of Interest process to market this particular property as it is a unique property that is difficult to value. Earlier this month we sold a property in East Malvern by EOI that had previously been offered for sale privately. It’s really about the level of comfort sellers have in using a method of sale other than auction. We tend to reserve the EOI process for those rare properties that have little in the way of sales evidence to support likely value or properties at the top end of the market. The method can be the catalyst that leads to a strong result within a short time after the closing date.”

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