oc | Thursday 20th February

Some strength but lacking consistency

Anybody for Ice-cream: Peter Kakos (Marshall White) at 23 Meredith Street, Elwood, under hammer, $1,331,000, 5 bidders

At 6.00 pm Saturday, the James Clearance Rate for Melbourne’s $M+ was 66% on the 34 auctions we covered. The Bidderman, our bidders per auction measurement, was at 1.7. Both these statistics are still solid but they appear to be flattening.

Overall Summary of Melbourne’s Million Dollar Plus Auctions:

  • Ducks ($M+ auctions with no bidders) 30%
  • Lone Rangers ($M+ auctions with one bidder) 20%
  • Norms ($M+ auctions with 2 or 3 bidders) 33%
  • Volcanoes ($M+ auctions with 4 or more bidders at auction) 17%

HALF the auctions we covered this weekend had one or no bidders. That is a significant change compared to the year’s first Super Saturday (Mid Feb), where just one in three auctions were lone rangers or ducks. That stat should be a clear beacon to homebuyers that you need multiple strategies going into a negotiation, as you now have a 50/50 chance of simply bidding against yourself.

Market Summary – Super Saturday

  • Bidderman and Clearance Rates are easing under the weight of stock, but there are plenty of deals going over the line.
  • A number of homes are being bought before, or just after, on minimal bidding, which is a sign of a flattening market.
  • There are still some very strong results pointing in the other direction, so the market is not giving up just yet.

Here we are at the business end of May, with the first of two Super Saturdays before the Queen’s Birthday weekend break. After that there are a few weeks of activity before we appear to be going into a winter of lessening stock with some uncertainty. The market direction is nowhere near as solidly upwards, as it was in 2013.

This was also the first real significant market test since Easter. It reinforced what we have felt all of May – the market is changing and we have entered a choppy phase, where some results are above expectations and some are below.

Look back at our Marketnews headlines for May – Down, Down, Up, Flat.

So while there is some real strength in the market for the right homes, right now (see our Bidderbuzz and Top Buys), overall the depth appears to be lessening, with an increasing number of results either flukey or flat.

Fault lines are opening up  in the weaker home segments (e.g. unrenovated, lacking WOW, overpriced, poorly positioned). The market is a now a glacier:  moving slowly, slightly downhill and full of crevices – those crevices are not obvious, but they can be dangerous if not approached with caution.

Look at the mixed bag in Stonnington at the Top End auctions we covered – 4 bought and 5 missed in that $3m+ price zone.

Backing up these mixed bag comments; at the last 7 auctions we have bid on, we have had two defeats, two strong wins under the hammer in which we were pushed and pushed and pushed, and three homes where we bought with weak or no competition (two bought before and one at a pass-in).

This weekend we were soundly defeated on a brilliant home (James Home Rating 802) at 15 Avondale Road , as three other bidders took it past the initial opening and on the market bid of $4.2 million, to a very strong $4.9m. Well done to Andrew McCann and Andrew MacMillan – good advice to their client.

Then off to East Melbourne to bid on 144 Simpson St (James Home Rating 705) – with just one bid ($1.6m), it was passed in to us and bought shortly after. Agent Paul Caine.

We finished off the day with a purchase for a client at 12 Russell St Camberwell (James Tostevin and David Oster) of a generational home buy (James Home rating 667) and three strong bidders pushing the under the hammer price past $6,000,000. A specific pre auction and auction strategy was executed in light of our expected competition.  A satisfying result for buyer and seller.

That to us is a good representative snapshot of the market – strong in places, but not always the consistent bullish nature of pre-Easter.

Overall, we feel the market has stopped rising for the moment, for all but the exceptional. But, and its a big but, we are not calling it down for the count in any way, as the last 18 months has been a rising price staircase of up, flat, up, flat, up and flat.

In March we thought the market may be slowing but then April went bang.

The Winter of 2014 is not as clear as the Winter of 2013 with regards to the market direction, which means you need to go into each deal with multiple buying strategies to avoid either missing out or paying too much.

Who's running this show Buddy! Dynamic duo Alastair Craig and Peter Vigano (Jellis Craig) at 49 Cookson Street, Camberwell, after auction, $3,190,000, 1 bidder

Biggest Auctions:

  • Camberwell, 12 Russell Street (James Tostevin, Marshall White), under hammer, undisclosed above $6,000,000, 3 bidders
    12 Russell St was the site of a show stopping auction today, as Auctioneer James Tostevin
  • Armadale, 15 Avondale Road (Andrew Macmillan, Jellis Craig Bennison Mackinnon), under hammer, $4,900,000, 4 bidders
    Andrew Macmillan had quite a crowd gathered to auction this impressive home today, and the bidders were present too…(See More in Auction Reports)
  • Toorak, 1 Myvore Court (Gowan Stubbings, Kay & Burton), under hammer, $4,300,000, 3 bidders
    Gowan Stubbings was at the helm for this auction, and he did not waste much time in getting proceedings moving…(See More in Auction Reports
  • Hawthorn, 4 Riversdale Court, after auction, undisclosed above $4,000,000,
    Last auction for the day with a house aptly named Milton and described as “being in paradise,” by auctioneer Scott Patterson…(See More in Auction Reports)

Bidderbuzz:

  • Hampton, 20 May Street (Robin Parker, Marshall White), under hammer, $2,365,000, 5 bidders
    A cracker auction in every way! The late autumn sun was shining, leaves were fluttering in the breeze, auctioneer Robin Parker was in fine form…(See More in Auction Reports)
  • Camberwell, 21 Finsbury Way (Doug McLauchlan, Marshall White), under hammer, $1,787,000, 5 bidders
    Beginning on time in front of 80 people, Doug McLauchlan and team were keen to get things underway…(See More in Auction Reports)
  • Elwood, 23 Meredith Street (Peter Kakos, Marshall White), under hammer, $1,331,000, 5 bidders
    With the iconic “Jerry’s Milk Bar” looming brightly at the end of the street, Peter Kakos addressed the crowd of around 80 describing this as one…(See More in Auction Reports)

Biggest Pass Ins:

  • Toorak, 31 Power Street, passed in, $4,000,000, no bidders
    Despite a large crowd of 90 or so in attendance at today’s auction, there is little joy to be had…(See More in Auction Reports)
  • Malvern, 25 Henderson Avenue, passed in, $3,600,000, no bidders
    The last time I saw auctioneer Marcus Chiminello, he  made me laugh. I was looking forward to a repeat performance, but unfortunately he was losing his voice and so auctioneer took over…(See More in Auction Reports)
  • Toorak, 27 Moonga Road, passed in, $3,200,000, no bidders
    The auction was slightly delayed as our vendor had gone momentarily AWOL….(See More in Auction Reports)

 

Chinese Nationals and Other Overseas Buyers.

Somehow when we talk about the biggest phenomenon in Inner Melbourne home-buying – Chinese Nationals, their spending power and the apprehension that is increasing out there among some home-buyers when competing against overseas buyers – we get diverted from the main game.

The main game, in our mind, is not the Chinese Nationals themselves. It is how they as a group have been changing the face of Melbourne homebuying, particularly since 2009, and how you need to deal with the associated price issues that Overseas Wealth (Demand) and Reducing Housing Stock (Supply) will have on you and/or your ’s current and future home-buying plans.

What has been happening in the market in the last five years (post GFC) is more about demand, supply and price than about Chinese Nationals. Big picture-wise, the price and supply changes we are seeing would have happened eventually due to organic population growth. However, right now the overseas market, and in particular the wealth and actions of Chinese Nationals, are  significantly accelerating the price and supply issues through their demand.

As homebuyers you need to deal with this, just as you need to deal with Agents, Auctions and other nuances of the Melbourne Market.

Overseas buyers are not buying every home, everywhere. Their effect is much more like a snowball rolling down a mountain. In some markets this has turned into an avalanche, whereas in others it is  still just a small snowball rolling down a mountain.

The effect of overseas buyers is best evidenced by the different strengths and bidder depth in the Inner East markets versus the Bayside markets.

The Inner East market is where Chinese National bidding is the most significant.

  1. Inner East had a far shorter GFC period in 2008/2009 than Bayside
  2. Inner East had minor price drops compared to Bayside in the GFC and in 2011/12
  3. Inner East has stronger $ per sqm land prices across the Board (except absolute Brighton waterfront)
  4. Inner East has changed streetscapes in many areas. with New Builds specifically aimed at the Chinese National Market, e.g. Balwyn and North Balwyn.

Short term and understanding the changing market nuances

As buyers you need strategies to compete against wealthy overseas buyers now and to buy well generally now. You also need to understand as buyers that EOIs are set up in a number of cases for Chinese Nationals and other overseas buyers, and you need to manage that if the home you want to buy is being sold through an Expressions of Interest campaign.

You need to understand how Chinese Nationals and other overseas buyers value land and buildings, so you can compete effectively.

You need to understand how different cultural influences affect Private Sale and EOI negotiations and you need to know how to prepare and bid at auction when competing against overseas buyers.

If you don’t, or your strategy is to wait, then we think you may have issues, as we have tried to illustrate in the above diagram.

But it’s not just about you buying a home now. What effect will this significant influx of wealth have on your children buying homes?

Longer term solutions and a different strategy

As buyer advocates, a large part of our business has always been buying generational homes for families to live in and pass on. We have acted many times for local and overseas clients, including Chinese Nationals, with this as a key desired outcome.

An increasing market segment for us (with a slightly different take, but same desired outcome) is the purchase of smaller, well-located family homes through Super Funds.

These $M+ homes are bought as quasi-investments and sit in super funds with the view they can return some cash and provide some growth in the medium term; but ultimately they are purchased for our client’s children as a hedge against being priced out of the market.

Generational Homes for you and your children

Personally my family lives in a three home estate in Brighton with grandparents and parents and children. This has been set up like this to assist future generations to remain in the area (if they so choose).

It was relatively easy for my generation in the 1970s and 80s to move from Outer Melbourne (Doncaster was then Outer) to Inner Melbourne (Malvern then Brighton).

But how easy will it be for our children to find a home? Our children may well be the first generation that is living in poorer accommodation as adults than they grew up in as children.

Unless our children are rocket scientists with an entrepreneurial bent, or they get parental help, they will be moving further away from Inner Melbourne on affordability grounds. Or they will be living nearby but in apartments.

In moving further away from Inner Melbourne your children will also be moving further away from infrastructure and transport and school choice and the footy and restaurants and ……. and you.

We suggest you develop strategies now.

We are not for or against overseas buying, just as we are not for or against first home buying grants or for or against negative gearing. Our job is not to debate. We see our job as raising the issues and helping our clients find solutions. We are buyer agents operating in the Top End marketplace.

We feel this best helps you, the buyer, consider your options now and into the future.

If we can help you plan and buy your inter-generational homes, whether you are a Chinese National (we have Mandarin speakers on staff), Americans, any other overseas buyer….. or Australians; then please call our Bayside or Hawthorn offices and arrange a time for an initial obligation free meeting.

Biggest sale of the day: 12 Russell St, Camberwell, James Tostevin (Marshall White), undisclosed above $6,000,000, 3 bidders

Round the Grounds

  • Camberwell, 49 Cooksoon Street (Alastair Craig, Jellis Craig), after auction, $3,190,000, 1 bidder
    We are gathered on the north-south facing tennis court – a rare feature according to auctioneer Alastair Craig, who tells us that homes with a court in Camberwell and Canterbury…(See More in Auction Reports)
  • Camberwell, 5 Lodge Road, (David Gillham, Noel Jones), after auction, $1,785,000, 2 bidders
    Auctioneer David Gillham recommended that it was not a good idea to take Uncle Charlie’s advice and leave bidding to the last minute…(See More in Auction Reports)
  • Hawthorn, 11 Muir Street (Gerald Delany, Kay & Burton), passed in, $2,380,000, 2 bidders
    ‘I know it’s human nature not to be the first to bid … but one day somebody is going to start me off!’ says auctioneer Gerald Delany….(See More in Auction Reports)
  • Balwyn, 26 May Street (Richard James, Jellis Craig), passed in, $2,950,000, 2 bidders
    A big home and big crowd but this auction boiled down to a simple show of four $50,000 bids….(See More in Auction Reports)

For more results, read Architect Adam’s Boroondara blog

Stonnington

  • Toorak, 1 Tashinny Road (Gerald Delany, Kay & Burton), under hammer, $3,005,000, 3 bidders
    Gerald Delany had the support of the weather and 3 strong bidders as he stood in front of this renovated period home…(See More in Auction Reports)
  • Malvern East, 11 Coppin Street (Tim Derham, Abercromby’s), passed in, $3,010,000, 1 bidder
    Tim Derham’s gravelly voice calls us to attendance. On offer a substantial Federation era residence located in the Gascoigne estate on some 883sqm…(See More in Auction Reports)
  • Toorak, 17 Power Avenue (Justin Long, Marshall White), passed in, $3,000,000, no bidders
    Autumn, with its surprising changes in weather, has arrived. A crowd of 60, we stand in front of this large and imposing solid brick c1930 English style home…(See More in Auction Report

For more results read Gina’s Stonnington blog

Hampton: 20 May Street, Robin Parker (Marshall White), under hammer, $2,365,000, 5 bidders and a big crowd of close to 100 people

Bayside

  • Brighton, 19 Moffat Street (Sam Paynter, Hodges), after auction, $2,050,000, 2 bidders
    A vendor bid of $1,700,000 opened proceedings after auctioneer Sam Paynter was met with the all too familiar silence from the crowd….(See More in Auction Reports)
  • Brighton East, 16 Northern Avenue (Campbell Cooney, Hodges), after auction, $1,675,000, 2 bidders
    The auction of this five-bedroom, four-bathroom new build was to provide me with my second experience of the “Bidding Against Ones-self” strategy….(See More in Auction Reports)
  • Brighton, 147 Were Street (John Bongiorno, Marshall White), after auction, undisclosed above $2,925,000, 1 bidder
    We were invited into the rear of this five-bedroom, two-bathroom home so that auctioneer John Bongiorno could demonstrate to the 60 onlookers…(See More in Auction Reports)

For more results, read Kris’ Bayside blog

Port Phillip

  • , 28 St Vincent Street (Oliver Bruce, Marshall White), passed in, $1,100,000, no bidders
    The coffee cart failed to ignite a fire today, auctioneer Oliver Bruce crying “goodness gracious me”…(See More in Auction Reports)
  • Albert Park, 13 Ashworth Street (Karl Gillon, Buxton), passed in, $1,400,000, no bidders
    It felt a little quiet here today, a small crowd of 20ish which grew a little as neighbours ventured outside for a look…(See More in Auction Reports)
  • Elwood, 10 Lawson Street (Tony Pride, Pride Real Estate), passed in, $1,850,000, 1 bidder
    The irrepressible Tony Pride was our master of ceremonies here – his introductions are always entertaining…(See More in Auction Reports)

For more results read Karen’s Port Phillip blog

Agent Survey: Are overseas buyers a significant buying force in your area at the Top End?

Alex Schiavo (Kay & Burton, Brighton): “We are finding overseas buyers are still looking at Melbourne’s prestigious suburbs as an ideal location to and raise a family. We have noticed, in particular, an increase in the number of looking at premium positions such as Brighton’s Golden Mile, in popular streets such as Mulgoa Street and Glyndon Avenue, with prices ranging from $4m to $15m.”

David Wood (, Albert Park): “We are seeing mostly local buyers active currently in the market at the top end, and more specifically local to Albert and Middle Park. Foreign interest is strong over $5 million but tend to be ex pats. (We are getting great enquiry from UK, USA and Hong Kong/Asian ). Outside expats, interest is from the UK, South Africa and Russia rather than China.”

Glen Coutinho ( Boroondara, Kew): “The overseas buyers are forming a strong part of our market, with almost 20% selling to mainly Asian buyers. A strong attraction to properties locked in the private school belt, these sales are still underpinning our market at present.”

Justin Long (Marshall White, Armadale): “There is no doubt that a significant amount of our inquiry for upper end is from international buyers. Many of these are from China in particular as they see Australia as a very safe and stable environment for (property in particular) but, just as importantly, for their family to live. There is also a sentiment among many expats throughout Europe, Asia and the USA that their future lies at home and, having reaped the financial rewards of working in foreign markets for many years, now that their children are at school age, there’s no place like home.”

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