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50% of the homes are still being bought by local buyers – there are solutions

Big Crowd  in Surrey Hills. 44 Suffolk Road, Tim Heavyside, Under Hammer $3,370,000, 5 bidders

Big Crowd in Surrey Hills. 44 Suffolk Road, Tim Heavyside, Under Hammer $3,370,000, 5 bidders

At 6.00 pm on Saturday, the James Clearance Rate for Melbourne’s $M+ was 72% on the 18 auctions we covered. James Bidderman, our bidders per auction measurement was 3.1.

Market Summary – Market News Lite Version
There have been auction interruptions all April due to three of the four Saturdays being attached to holidays – two past with Easter and the next with Anzac Day. Accordingly the numbers and quality of offering was at an overall low today.

Overall Summary of Melbourne’s Million Dollar-Plus Auctions:

  • Ducks ($M+ auctions with no bidders) 5%
  • Lone Rangers ($M+ auctions with one bidder) 17%
  • Norms ($M+ auctions with 2 or 3 bidders) 39%
  • Volcanoes ($M+ auctions with 4 or more bidders at auction) 39%

Bigger Auctions:

  • Surrey Hills, 44 Suffolk Road (Tim Heavyside, Fletchers) under hammer, $3,370,000, 5 bidders
    Big crowd, white board and coffee cart and auctioneer Tim Heavyside was ready to relish the stage… (See more in Auction Reports)
  • Richmond, 17 Malleson Street (Russell Cambridge, Biggin & Scott) under hammer, $2,740,000, 4 bidders
    At the stroke of 12 the St Ignatius church bells rung signalling the start of the auction… (See more in Auction Reports)
  • , 3 Arthur Avenue (David Hart, Buxton) under hammer, $2,571,000, 3 bidders
    Never mind the crowd size, count the buyers… (See more in Auction Reports)

Bidderbuzz:

  • , 43 Surrey Road (Lachie Fraser-Smith () under hammer, $1,700,000, 6 bidders
    On a grey cloudy morning auctioneer Lachie Fraser-Smith brightened the mood with his cheery demeanour… (See more in Auction Reports)
  • , 11 Lambeth Avenue (Andrew Hayne, ) under hammer, $1,820,000, 5 bidders
    Despite the inclement weather there is a good turnout for the auction of this brick home, presented with approved architectural plans for a new 5-bedroom home, plus underground garage… (See more in Auction Reports)
  • , 11 Leslie Street (John Piccolo, Woodards) under hammer, $1,411,000, 5 bidders
    This era home has been so tightly held that when it was last transacted, we weren’t even using the Australian Dollar yet!… (See more in Auction Reports)
Trevor Gange, 43 Aberdeen Road Prahran, Under, After Auction, above $2,100,000, 2 bidders

Trevor Gange, 43 Aberdeen Road Prahran, After Auction, above $2,100,000, 2 bidders

Year to Date Review 2015 first quarter – key points

  • Two price structure on inner city homes. Eg With Chinese Interest $3,250,000. Without Chinese interest $2,800,000.
  • Significant increase in values in certain pockets of Boroondara, Bayside and Stonnington.
  • Lower quality properties selling on the same multiples as quality, just with less bidders. While homes with land are booming, apartments and even new townhouses are in many cases proving to be disappointing financial purchases when compared to land.
  • Key Issues for Sell/Buyers – not realizing what the home they are about to sell may actually be worth.
  • The 2015 discovery of Bayside by . Anecdotally one of the bigger agents provided this stat. 15% of sales last year vs nearly 50% of sales YTD to overseas buyers.

So we as buyers know what’s happening – what do we as buyers do about it?

Firstly, is this a Boom or a Structural Change – your answer has a material effect on the psyche of your buying moves from here.

If you think it’s a temporary boom then your solution may simply be to ride it out. A reasonable strategy if we are in a boom like the late 80s or 2007.

But this strategy has a fundamental flaw if the market is not a temporary boom, but a longer term structural market change as occurred in the late 90s and 2009. The flaw is that the “wait and see” strategy results in a “miss the boat” outcome if a significant longer term structural change rather than a shorter term boom is taking place.

Ok, so buyers out on the home hunt last year and this year know these issues, but what are the solutions?

Reacting to the short term rather than the longer term (by changing the good buying rules away from buying good fundamentals) as panic sets in, is a recipe for poor longer term family outcomes.

Process
It doesn’t matter what seemingly insurmountable odds you are facing, if you as a buyer go through a good process you will get the right outcomes as you discover that nothing is insurmountable with the right brainpower.

James Buyer Process – Options, Diligence, Decisions, Execution, Outcome
James Buyer Process – Good Plan (not a bad one), Rate, Value and Negotiate.

You are not alone
There are more local buyers in 2015 than there were in 2009 when the overseas buying phenomenon really started to take off. Think about it, if overseas buyers are purchasing 50% and sometimes more of the homes in some Melbourne Inner City precincts then what is happening to other local buyers like yourselves. This comment doesn’t actually show you a cheaper way but hopefully helps your psyche in understanding many other local people are facing the same issues you are BUT 50% of the homes are still being bought by local buyers if agent figures are correct.

Good Buyer Outcomes come from Good buying Fundamentals
Examples from three James Buying clients all of whom we have had contact with in the last month.

Fundamentally Good Decision (One) – Bought for a client in Bayside two years ago, agents knocking on their door recently asking if they wanted to sell. A significant premium offered seemed attractive. We suggested the figure was not really a premium but just market value as the Bayside market has fundamentally changed on this type of property. We discussed a different number to sell at, take a profit and buy a home in a nearby precinct not attracting overseas interest.

End result if it happens. Same home fundamentals but with a lot lower mortgage and therefore increased happiness as other non-home lifestyle options could be taken up. Worst case scenario: no deal at the premium but clients still living in a great home with a significantly increased value.

Fundamentally Good Decision (Two) – Bought for client in the Inner East instead of the Outer East two years ago. That decision has put $600,000 into their back pocket when the two properties are compared now. The downer was the home we bought needed a reno. Clients wanted to sell, take a profit and buy something else with a more completed home in the Outer East. Crunching the numbers; after stamp duty, selling fees, moving costs and new buy in premiums it could be shown that staying put and doing a $500K reno would be a substantially better longer term financial decision.

Fundamentally Good Decision (Three) – Our client bought into Scotch Hill two years ago which occurred after we spent a long and difficult time not buying a different but flawed property in . This decision has conservatively put a million dollars into their back pockets in a very short space of time.

In this, as in any market, buying property well for financial and emotional happiness is about making good smart decisions. It shouldn’t be about buying anything to get in or just giving up. We at James think good buying in 2015 is about working smarter not harder.

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And now for something completely different. Click on pic below or this YOUTUBE link for a very different slant on Architects and Advocates working together for a client before an Auction or Private sale or EOI or Off Market.  https://youtu.be/738EKcP6O0E

JBA Architects

 See you again in May as there is no James Market News next week (Anzac Day).

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