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Are our banks being fair to locals?

So is it true Kaine? Everybody is telling us the market is easing. Mmmm,  lets have a look at the results. 20 Park St Kilda West, Kaine Lanyon, Under Hammer, $2,605,000, 3 Bidders

So is it true, Kaine? Some are telling us the market is easing. Mmmm, lets have a look at the results. 20 Park Street, West, Kaine Lanyon, Under Hammer, $2,605,000, 3 Bidders

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8815bidders

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We know the papers keep telling us the market is on the wane, it’s getting cold, the “bubble” is bursting; but we’re sorry, we still don’t see any bubble and we don’t see any bursting.

Today on the 8th of the 8th – we covered 35 of the approximately 140 $M+ auctions across Inner East and Bayside Melbourne; that’s right 35; great sample and we got a good spread of home types as well.

The results in our mind were clear cut, unambiguous and decisive.

Bang, nothing has substantially changed since May. Our three key market indicators were clearly in the red zone (stock, James Bidderman and clearance rates).

80% clearance rate – seems almost normal, doesn’t it?

But it’s not normal historically – its incredibly strong. 80% wow.

This time last year we had an 80% clearance rate also, but the striking difference was James Bidderman – it was hovering around 2 bidders per auction. Today it was almost one full bidder per auction more.

If you want a shock jock headline – today there were almost 50% more bidders per home, than this time last year. This time last year was when the latest surge began.

Look at today’s Volcano figure – a little shy of half the auctions in $M Melbourne had 4 or more bidders.

Of course the market can change quickly – we are not saying things won’t change in mid-spring or pre-Christmas.

What we are saying is the market hasn’t changed yet.

Big Crowd at 101 Argyle Street Fitzroy sees Arch Staver conduct an Under Hammer Volcano (4 bidders) to $2,851,000

Big Crowd at 101 Argyle Street, Fitzroy sees Arch Staver conduct an Under Hammer Volcano (4 bidders) to $2,851,000

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1) Banks: We have been advising our clients for some time that the banks have become harder to deal with, than this time last year. Since those comments we have introduced internal measures to help our buying clients AND the banks have put investor rates up. Ok, the banks are being prudent, aren’t they?

Yes, but hey, there is a bigger picture here that the banks and the government are not seeing or maybe are choosing to ignore.

Are banks being fair to locals?

Question:  Are our local banks involved in some form of inadvertent, bizarre reverse prejudice by pulling interest rate and other restrictive lending levers for locals.

As any local buyer will acknowledge, it is already very difficult to compete against the huge Asian inflow of money. Asian buyers have more financial options eg currency swapping, than the local Australian buyers do.

Are we seeing a repeat of the 1960s where the banks wanted to encourage new building, so they made it easy for locals to borrow to build new in Doncaster, while making it more difficult for locals to borrow and buy second hand in Albert Park? The Greek and Italian migrants who at the time had more money raising abilities than the locals, took full advantage of this when walking off the boat and bought en masse in Albert Park, Port Melbourne and Middle Park with minimal competition.

The Asian buying influx is a lot, lot bigger now than the Greek and Italian influx of those times.

Since the FIRB changes of 2009 which opened and never shut the floodgates to overseas investment, large amounts of land and huge numbers of established homes in Inner Melbourne have been and are continuing to be bought by overseas investors. This seems to be what the Australian governments of both political persuasions want – ok, that is the government’s call – that’s not the point of this article – that’s for another time.

Our policy at James is clear – we act for local and overseas clients without internal policy bias.

Our point is that the locals (your children and my children) need to be on as level a playing field as possible when it comes to being able to compete against buyers from Asia.

Otherwise the banks/governments maybe subjecting some of our clients, locals, your/my children etc to a form of bias which we find totally unacceptable and outside our values of Australian fair play.

The banks, for no doubt very good reasons in their mind, are making it harder for locals to buy – but they may not slow the surge, as they intend. All they may do, is make it a lot easier for overseas buyers to buy near schools, buy in good streets, buy the established homes; as fewer local buyers have the ability to compete against the more sophisticated money from China and other Asian countries.

We think this is seriously unfair on local Australians if it plays out as it looks like it may.

Local banks need to be helping local buyers, not making it harder – guys, it’s already bloody hard enough for local buyers.

When are people of influence going to stand up for our children and for local buyers – who want to live locally.

If the government and banks want the market to ease, go to the source of the creation – huge and unabated overseas demand.

Banking leaders please look at what you may be inadvertently doing if you carry on your latest policy directions.

This current market is not being driven by local interest rates – this current market is being driven by overseas demand and if you continue to weaken the local competition by restricting their ability to borrow (which no doubt is based on good intentions); all you may be doing is making it even easier for overseas buyers to buy, while making it harder for some of our clients, locals and our/your children to buy.

Is that fair? No, it is not fair.

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2) Land Values: In the last week we at James had six auction deal involvements at Ivanhoe, Brighton, Glen Iris, Malvern, Kew and Brighton East. 3 bidders, 2 bidders, 1 bidder (but we suspect a lot more), 5 bidders, 4 bidders and lastly 3 bidders on 6 Lucas Street, Brighton East.

6 Lucas Brighton East  Auction Sales 8/8/15:  $2,055,000.  9/8/14: $1,670,000

6 Lucas Street, Brighton East
Auction Sales:
8/8/15: $2,055,000
9/8/14: $1,670,000

Strong Auction at 6 Lucas Street? Not really. At Lucas we were one normal bid above the underbidder. It was smack bang in the middle of where we gave advice to our client as “current market fair and reasonable”.

This is the market – these prices are not unexpected for good land in good streets in great precincts. In our opinion, this is a true market reflection of the 2014 to 2015 market shift and the new market norm for good land holdings.

How about the Balwyn price examples we showed you in Market News last week.

Below is also our land value guide from last week, where we highlighted what we call Brighton’s Golden East (Shasta, Plantation, Regent, Lucas, Binnie, Edro) at $2500 per sqm – today we paid $2597 per sqm. 6 Lucas was not an abnormal auction and to many it was no surprise.

BrightonWinter2015

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3) Independent of Selling Agencies Buy/Sell Advice. An increasing part of our work for clients is the Buy/Sell. This is where a client wants to buy; but they also want/need to sell. At James we now have a service that provides early advice to clients thinking of selling.

This advice includes:

  1. Selling Agent’s real performances – no rubbish internet stats – all real life experiences over 10-15 years.
  2. Selling alternatives – methods, off market, private sale, EOI – not just the standard three week auction cycle which you hope captures all from around the world who maybe interested in your home.
  3. How to use your sell to leverage your buy.
  4. How to market to attract overseas buyers and which agents actually do. Eg would you rather spend your money on “The Migration Agent Weekly” or “The Local Rag”
  5. What really works with buyers in negotiation and what doesn’t.
  6. Timing?

Some of the benefits:

  1. Professional advice independent of any specific selling agency.
  2. Professional advice independent of any specific time frame.
  3. No follow up pesky phone calls.
  4. Advice based on over 1000 sales from the other side of the fence as to what and who really works.
  5. Advice is sometimes don’t sell, or don’t sell yet, or renovate instead – when do you here that from a selling agent.
  6. You can co-ordinate your buy and sell with the one property professional.

Another two positives of this service for buy/sellers are:

  • It’s on an hourly rate – yes, we work for you on an hourly rate – so no huge commitment of a signup and you can stop anytime.
  • It can be deducted from the selling agent’s fee when you sell – so it is free, meaning no extra charge, if you want it to be.

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41 Atkins Street, Kew (Richard Earle, Jellis Craig), $4,325,000, under hammer, 2 bidders

26 Maleela Avenue, Balwyn (Alistair Craig, Jellis Craig) price undisclosed (range: $3,874,360 – $4,262,200), after auction, 2 bidders

8 Wandeen Road, Glen Iris (Andrew Hayne, Marshall White), $3,060,000, under hammer, 4 bidders

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16 Karma Avenue, Malvern East (Steve Burke, Hocking Stuart), $1,325,000, under hammer, 7 bidders

7 Major Street, Highett (Adam Gillon, Buxton), $1,355,000, under hammer, 6 bidders

56 Bayview Crescent, Black Rock (Stephen Tickell, Hocking Stuart), $1,780,000, under hammer, 6 bidders

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26 Chesterfield Avenue, Malvern $4,200,000 passed in, 2 bidders

48-50 Greville Street, Prahran $3,300,000, passed in, 1 bidder

25 Margarita Street, Hampton $2,900,000, passed in, 1 bidder

 

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