oc | Thursday 23rd January

Market Feels A Bit Quieter at the Top End

Biggest Auction of the Day: Jonathan Dixon (JP Dixon) sells 66 Hanby Road, , for $4,660,000, 2 bidders and a big crowd of 90

At 6.00pm Saturday, the James Clearance Rate for Melbourne’s $M+ was 61% on the 23 auctions we covered. The , our bidders per auction measurement, was at 2. Given there were very few auctions this weekend because of the Easter campaign interruptions, we are not reading too much into these stats.

Overall Summary of Melbourne’s Million Dollar Plus Auctions:

  • Ducks ($M+ auctions with no bidders) 23%
  • Lone Rangers ($M+ auctions with one bidder) 18%
  • Norms ($M+ auctions with 2 or 3 bidders) 41%
  • Volcanoes ($M+ auctions with 4 or more bidders at auction) 18%

Market Summary

Welcome back to Melbourne’s $1 million plus auction, following the Marketnews Easter/School Holiday hiatus. When we last reported three weeks ago, we left you with the news that the market was booming on all fronts. All our indicators – Stock levels, Clearance rates and Bidderman – were in the red zone. So where are we now?

Market

There are five key seasonal markets in Melbourne.

  1. Early or Pre Easter
  2. Post Easter or May Market
  3. Winter – Late June to late August
  4. Early Spring – Footy Finals to pre-Melbourne Cup
  5. Late Spring or pre-Xmas – post-Melbourne Cup

Historically, the most fluid markets in terms of price movements are the post-Easter (No.2) and  post-Melbourne Cup (No.5) markets. The pre-Easter (No.1) and early Spring (No.4) markets are usually, but not always, solid. The Winter market (No.3) is usually relatively flat at the Top End due, to a large drop in auction activity.

Since 2007 there have been four significant Top End market directional changes; three of them started or clarified themselves around May. The Down of 2008; the Up of 2009; and the Down of 2010. The other significant directional change is the current Up that began Late Spring 2012. We always find May an interesting month.

So how has it started this week?

With only one auction on for me this weekend, I decided to attend as many Opens as I could in order to get an on-the-ground feel of Open attendances at the Top End. These after all are the early signs of any market change. These are the ones I visited, and for which I will be writing James Home Ratings:

  • 371 Glenferrie Malvern (Matt Davis – $3m+)
  • 23 Montalto (Warwick Anderson – $10m ish)
  • 8 Hopetoun Road Toorak (Justin Long – $5m+)
  • 46 Kooyongkoot Road (Maurice di Marzio)
  • 11 Goodall (Campbell Ward $3.1m)
  • 11 Muir Hawthorn (Sam Wilkinson – $2.5m+)
  • 20 Kasouka Hawthorn (Scott Patterson – $3m+)
  • 49 Cookson Camberwell ( Peter Vigano- $2.8M+)
  • 10 Bridport South Melbourne (Kaine Lanyon)
  • 10 Lawson Elwood (Tony Pride)
  • 4 Stewart Brighton (Barb Gregory/Jason Gill – $3.2M+)
  • 17 Bolton Hampton (Kate Strickland – $3.5m+)
  • 12 Russell Camberwell (David Oster – $5.5m+)
  • 14 Harcourt Camberwell (Matt Davis – $9mish)

And so from these visits, what was THE MOOD – THE BUZZ – like?

Numbers at opens appeared to be down and the Market Buzz of pre-Easter appears to have softened a smidgeon at the Top of the Top End. Stay tuned for we will know close of business Saturday Night May 24th – that is our first auction Super Saturday post Easter.

Speaking of Stock Levels – May is traditionally a big month for transactions and there are five auction weekends this month. According to our expert opinions (below), we are seeing plenty of choice out there. And our experience concurs with that so far. The real questions for us are the long term quality of the selection and the real price you have to pay, i.e. how many bidders you will really be up against at the level you are thinking (especially if the market eases).

Sandringham: 106 Bay Road, Steve Tickell (Hocking Stuart), under hammer, $1,825,000, 4 bidders and a big crowd of 100 people

Underquoting ‘not a big problem’

There has been a bit of talk in The Age recently with two articles on Underquoting.

Generally speaking The Age’s Alice Stolz – ‘Underquoting needs to be addressed’ (May 2) seems to be most on the money as far as buyers are concerned.

My thought is: Let’s reduce the emotional heat in the argument and drop the word Underquoting and call it agent ‘Step Quoting’ as we do.

Why?

Because many agents are not really lying. What they are doing is informing buyers of a number, in a way that best represents their clients’ interests, which are not necessarily the same as your interests if you are a buyer. (Even if you feel they are lying, responding with anger and bad emotions are not always helpful in good buyer decision making.)

So, Step Quoting from agents is a lot about buyers not understanding what the agents quote really is and what it isn’t.

Remember that an agent quote:

  • Is a number designed to get you the buyer to visit the – nothing more.
  • Isn’t a cast iron guarantee of what the property will go for, or indeed what the seller will definitely sell for.

Our most viewed Masterclass article on STEP QUOTING may be worth a read if you are a buyer and you want to reduce the Quoting Angst by understanding how agent quoting really works.

STEP QUOTING LINK: https://marketnews.com.au/2014/05/step-quoting-black-or-noble-art/

Another of the articles in The Age titled: “Underquoting not a big problem” (also May 2), was, we felt, unhelpful if buyers perceived from reading it, that agent quoting wasn’t a government or real issue because the CAV hadn’t received many substantiated complaints.

To us that’s a bit like assuming the chickens are happy with the RSPCA endorsement of chicken meat in supermarkets because there are few complaints. In other words, just because formal CAV complaints are low, this does not necessarily mean that agent quoting is not a problem with buyers. All it may mean is that very few buyers want to go through a formal process of complaining – i.e., what’s in it for them, it’s hard to prove and the government has done little in the past.

In our opinion there is no link between the number of CAV complaints and the level of buyer unhappiness and confusion on Agent Quoting.

However, this is not an agent bashing exercise. While some have been the cause in the past, all can actually be the solution in the future if they want to be – so let’s keep it civil.

Agents across the board have to want to fix the quoting issue and currently there is no consensus to do so.

Agent Quoting is a real and significant problem for buyers because:

  1. Many buyers do not understand what the agent quote is actually saying.
  2. The agents also do not have a consistent view as to what the agent quote is saying. Is the agent quote an agent guess, a seller reserve, a buyer estimate, or what? This creates much confusion.
  3. The agent body, the REIV (of which we are members), has only made a lukewarm attempt to address this issue. In fact they shut down their ethics committee a couple of years ago (I was on it at the time) and little has been heard on agent quoting since.
  4. The government has not successfully legislated to make the agent’s quote consistent and easily understood by the public.

All four of the above (Buyers, Agents, REIV and the Government) need to be on the same page for anything to work.

The Queensland solution, as we understand it (and we may not fully), of removing all quoting appears to be an attempt to do the right thing. But it appears poorly conceived, impracticable and unpoliceable. At some stage an agent will have to say a price. He or she is a conduit between buyer and seller and price is an unavoidable discussion point. At some stage, whether formally or informally, the buyer will say “give me an idea on price” and the agent will have to respond. We can’t see how that can be made illegal. But all we know on this is snippets from The Age article and we may not know all the facts on the Queensland solution.

Buyers and Sellers and Agents all have rights and obligations in the matter of quoting; just like tradesman, Myer and petrol stations do when they are quoting.

One option is that the agent auction quote range (say $3 million to $3.5 million) must include the reserve in it at all times – irrespective of the timing of the quote. Rather than adjust the range during the campaign – just make it bigger.

If two buyers force the price beyond the range to, say, $3.8 million then so be it. That is market forces and no agent can predict that every time (ourselves included). But an ethical and skilled buyer or seller agent can get the range estimate right between 80% and 95% of the time (as we do), depending on the type of market we are in.

If a seller doesn’t want that range estimate restriction then they shouldn’t don’t use the auction process; they could use the EOI (Expression of Interest) and Boardroom process instead.

If a buyer wants more pricing information then they need to do their research and either engage an independent buying professional or educate themselves somehow.

Finally the government and the REIV could be running a “real life and accurate” education campaign to explain what an Agent Quote is and what it is not. They make a lot of money from Stamp Duty and could put a little bit back.

Private Sales and EOIs also need some attention. Nothing complicated, just a few simple rules around processes.

Auctions can be very transparent buying processes when run ethically for all parties, and they are part of Melbourne’s societal fabric. We should want to enhance what we have, not just complain about it.

Auctions are great!

South Yarra: 70 Wilson Street, Grant Wallace (Hocking Stuart), under hammer, $1,265,000, 3 bidders

Biggest Auctions:

  • Brighton, 66 Hanby Road, Jonathan Dixon (JP Dixon), under hammer, $4,660,000, 2 bidders
    As the bell rang to alert the assembled 90 onlookers that Jonathan Dixon was about to begin his auction…(See More in Auction Reports)
  • Brighton, 11A Wolseley Grove, Greg Costello (), under hammer, $3,230,000, 2 bidders
    Greg Costello was our auctioneer here, in front of a good sized crowd of around 65 people…(See More in Auction Reports)
  • Toorak, 4 Woorigoleen Road, Justin Long (), after auction, $3,075,000, 1 bidder
    Bidding was lean in Woorigoleen this morning. After asking for opening bids, auctioneer Justin Long enquired as to whether the crowd…(See More in Auction Reports)

Bidderbuzz:

  • Toorak, 16 Devorgilla Avenue, Rodney Morley (Rodney Morley Persichetti), under hammer, $2,178,000, 5 bidders
    Approximately 65 people lined the street to see this single level townhouse go to auction.  With it’s own street frontage and easy access…(See More in Auction Reports)
  • Glen Iris, 5 Malvern Avenue, Steven Abbott (Jellis Craig), under hammer, $1,626,000, 5 bidders
    A bit of a surprise to see auctioneer Steven Abbott in this part of town but its always good to see him in action as he always presents an entertaining auction…(See More in Auction Reports)
  • Canterbury, 22 Wattle Valley Road, Mark Fletcher (Fletchers), under hammer, $1,845,000, 4 bidders
    A crowd of 60 gathered to see auctioneer Mark Fletcher and the team at 22 Wattle Valley Road…(See More in Auction Reports)

Biggest Pass Ins:

  • Albert Park, 77 St Vincent Street, passed in, $3,320,000, 1 bidder
    The weather bureau predicted rain, but it was bright sunshine at today’s auction…(See More in Auction Reports)
  • Kew, 32 Highbury Grove, passed in, $2,750,000, no bidders
    Our auctioneer took centre stage on the platform porch of this sprawling Kew heritage home addressing a crowd of 88 gathered in the front gardens and courtyard…(See More in Auction Reports)
  • Malvern, 1/8 Glenview Avenue, passed in, $2,200,000, no bidders
    Hopes of an outdoor auction were quickly dashed when an abrupt downpour saw everyone voting with their feet and rushing to the toasty…(See More in Auction Reports)

Agent Survey: How are stock levels looking for May and June?

, Jellis Craig (Hawthorn): “Our office has enjoyed an increase in auction bookings year on year of 30 % for the month of May. This is in line with the rest of the market and the volumes have  probably been added to by April this year including Easter weekend, Anzac Day and school holidays. June bookings are coming in now and only have the slight interruption of the Queen’s Birthday weekend but on the back of strong results for the first quarter of the year we expect the market to continue on the back of stable economic conditions being low interest rates and a good share market  despite what promises to be a tough budget.”

Damian O’Sullivan, Marshall White (Albert Park): “Stock levels are looking very healthy for May and whilst we expect much of the same for June, it is still very much early days. The Easter and Anzac Day weekends have been understandably quiet from a volume perspective so we are anticipating a busy few months ahead, highlighted by a competitive environment not dissimilar to the first quarter of this year.”

David Hart, Buxton (Brighton): “Coming off the back of a typically very busy March, and a quieter April which had both school holidays and Easter to contend with, May and June are looming as being pretty busy with healthy stock levels. The majority of sellers choose a similar time line, trying to fall outside long weekends etc, and the period between now and the next bout of school holidays at the end of June is pretty clear, with the exception of the Queen’s birthday weekend.”

Gary Peer, Gary Peer & Associates ( North): “We are set to have one of the busiest May’s in the history of our business. As there are 5 weekends ( or at least 5 Saturdays ), this will somewhat artificially boost the figures at the cost of June , which is in effect short changed by one major selling day ( Sat May 31st ). Irrespective of this calendar anomaly, there is still a keen willingness from vendors to take advantage of the upswing and positive mood the market has displayed since the 2014 selling season commenced. The large offerings prior to the Easter break did little to stifle competition, which was notable in the more affordable sector of the market. Our listing numbers over May and June combined look to be considerably higher than in recent years. It will be interesting to see whether the recently published spruiking of some of the doomsayers , together with the threat of increased interest rates does anything to dampen the strong buyer spirit which is currently evident.”

Mark Wridgway, RT Edgar (Toorak):  “Our stock levels are looking very good certainly for May, and June is starting to build momentum and volume as well. In particular we have some good quality stock coming onto the market.”

Subscribe to our Market News Newsletter


Tags: , , , , , , , , , , , , ,

Be with James

Would you like to talk to us about finding or negotiating on your next home?
We buy 100 homes for our clients every year.
We buy Inner East and Bayside over $2m.
View more MasterClass Articles

Inside James Market News