oc | Monday 20th January

Scotch Hill home of 600 sqm doubles in 3 years.

Scott Patterson at 2 Crossakiel Hawthorn Today bought for $4,010,000 with 3 bidders. August 2012 bought for $2,125,000. Nothing done to it. That is near on double.

at 2 Crossakiel, today – bought for $4,010,000 with 3 bidders. August 2012 bought for $2,125,000. Nothing done to it. That is near on double.

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1. Bidderman has shifted from Mid 2s to Low 2s per auction while clearance rates remain steady. That could be significant – but big stock numbers right now – so not making any sweeping statements.

2. The market continues to be driven from the Top Down. The Top 3 auctions we covered today had 11 bidders. This means that what goes on at the top, effects the lower markets through spillage dropping down, rather than the lower markets driving the upper markets through increased wealth and population. This is mainly from the “Chinese Phenomenon” effect.

3. Banks are becoming more and more difficult to deal with, if a borrower needs bridging finance and/or higher LVR’s. This in turn makes it easier for Chinese Nationals to buy more homes due to less competition from local Australians.

4. The market has an insatiable appetite for high-end blocks of land that you can build new on. You get or put a Heritage overlay on a property and you can be devaluing it by 20 to 25% (please, this is rough rule of thumb from experience). In some cases it makes the home unsaleable at a reasonable price. In other words, on many occasions, a block of land is now worth more than the same block with a home on it that you cannot bulldoze.

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It’s difficult for us to write about how the market is without constantly raising the elephant in the room.

1. Some people think we are focused on Chinese Buying to the exclusion of other issues; as we have been writing about the “Chinese Phenomenon” since 2008. But then, people said the same about our off the plan/financial advisor articles in BRW and other outlets from 2003 and agent under and step quoting since 2010.

2. It does not help our business to keep highlighting this issue. For example, it’s not great for our Chinese Investor business to produce the articles we have, such as the ones below. However we think our children, our employees, your children and our Australian buying clients (of Chinese, Anglo, Asian, all over the world backgrounds) also have property buying rights in Melbourne.

3. Yes older people, myself included are making money – but does that make it right for our children and younger people?

3. The “Chinese Phenomenon” dominates our Inner East market and is starting to have major influence on our Bayside market. This has significant spill over to other Melbourne markets and other price brackets. We do not see this ending anytime soon – despite some small cracks appearing in our markets.

4. There are solutions to the “Chinese Phenomenon” and they involve profiling streets, precincts, property type, when and how. You can buy around and against the “Chinese 20% premium” if you have good strategies. We have those strategies – but first, buyers need to understand that despite some recent press implying the “Chinese Phenomenon” is no big deal – it is – it really is. Its bigger than under quoting, bigger than off the plans, bigger than The BLOCK and other shows, and bigger (for many) than interest rates right now and near on as big as the issues of negative gearing and high density living/population increase.

Chinese buying is, in our opinion, one the BIG 4 permanent game changers of the last 25 years, along with high density living/population increase, banking deregulation and negative gearing. 

Under Auction Psychology read our special report below on what is really driving the Inner Melbourne and adjacent property markets AND what you can do about it.

Footnote: Please, this is not about Chinese Australians and it’s not about Chinese people as doing anything wrong – it’s about Australians (Chinese Australians included) not being able to buy homes where they want to.

Justin Long coaches his crowd of 100 along nicely to $4,605,000 under the hammer for 32 Heyington Place Toorak. Volcano with 5 bidders

Justin Long coaches his crowd of 100 along nicely to $4,605,000 under the hammer for 32 Heyington Place, Toorak. Volcano with 5 bidders

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33 Finch Street, Malvern East (Andrew Macmillan, Jellis Craig), $5,230,000, under hammer, 4 bidders 

32 Heyington Place, Toorak (Justin Long, Marshall White), $4,605,000, under hammer, 5 bidders

30 Campbell Street, Kew (James Tostevin, Marshall White), $4,210,000, under hammer, 2 bidders

Full James Auction Reports click here

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2 Mason Avenue, Elwood (John Carter, Hocking Stuart), $1,652,000, under hammer, 5 bidders

48 Claremont Avenue, Malvern (Lachie Fraser-Smith, Jellis Craig), $2,946,000, under hammer, 4 bidders

19 Carson Street, Kew (Richard Earle, Jellis Craig), $2,702,000, under hammer, 4 bidders

Full James Auction Reports click here

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18-20 Deauville Street, Beaumaris $3,650,000, passed in, 0 bidders 

112 Stanhope Street, Malvern $3,400,000, passed in, 0 bidders

37 Tennyson Street, Sandringham $3,240,000, passed in, 2 bidders

Full James Auction Reports click here

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The Chinese Phenomenon – Case Studies

References:

1) Here is a link to a sample of 500 (Five hundred) homes we have bought recently – you decide if we are qualified to make the comments we are making http://www.james.net.au/homeratings/houses_bought.php?token=LJbnmFauW3

2) Here is a link to the 5000 (Five thousand) auctions we have reported on – you decide if we are qualified to make the comments we are making. http://www.james.net.au/auction-results

The ‘Chinese Phenomenon” in Inner Melbourne got a lot more intense 7 years ago when the government opened the floodgates to Asian investment by basically dismantling FIRB on second-hand homes. The governments of both sides have since said they shut the gates – but they haven’t or can’t as so many Chinese families bought in.

As many Australian homebuyers who want to send their children to school at Carey, MLC or Scotch are aware; it has become very, very difficult for them to do that. It’s not the high school fees.

No, they cannot send their children where they want to, because they cannot afford to buy a home within a bulls roar of the school of their choice. We know this, because we act for these buyers – we are finding homes – but it is very difficult.

There are clear no go precincts (financially) for second, third and fourth generation Aussies such as Scotch Hill, Sackville Ward, Canterbury’s Golden Mile. There are whole unaffordable suburbs near these schools, where its basically impossible to buy a home, unless you are Chinese or first generation Chinese Australian. The obvious suburbs are Balwyn and North Balwyn; where we can see that for every 100 homes bought in the area 90 are bought by Chinese or Chinese Australians and the rest by companies (possibly Chinese), other Australians. There are more suburbs than just Balwyn and Balwyn North. These are Valuer General Statistics and our data.

So what affect does this have on the whole Eastern Suburbs of Melbourne – on real people who are not Chinese?

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Real Life Case Studies: Two recent successes for us in low percentage “Chinese Areas of Boroondara” – Canterbury and Kew.

The importance of James Buyer Advocates profiling streets and precincts is to understand just how much of a chance the 20%+ Chinese bidding premium is a factor. By profiling streets, property types and precincts we can show our clients the likelihood of Chinese bidding – for instance a period home in Maling Road Canterbury has a lower likelihood of Chinese bidding than a knock down period home in Canterbury’s Golden Mile only a few hundred metres away.

Armed with this information both these homes were able to be bought outside the normal auction process at prices acceptable to our clients without the Chinese factor. Homes our clients wanted, near schools they wanted their children to go to. Its was not easy, but it was possible.

The issues for Aussies is partly the “Chinese Phenomenon” but its also partly now our MAJOR BANKS.

We’ve all heard about the Investor Premium banks are now charging Australian investors (of all backgrounds including Chinese Aussies). This makes Aussies less competitive against Chinese National Buyers; but now MAJOR BANKS are making life more and more difficult for Australians to buy homes to live in when bridging finance and higher LVR’s are involved. Prudent yes, but NOT FAIR.

How does an Aussie trade up without a bit of stretch on an LVR and bridging finance in a rising market? Please tell us NAB, Westpac, CommBank, ANZ and others. We’ve heard complaints about all banks.

OK they don’t help, because it is not prudent. Agreed.

With prices climbing by 20%, 50% and so on in the last few years, how do the banks and the governments expect locals to compete against the Chinese National money and the dollar dropping.

Whatever is going on, is grossly unfair to local Anglo Australians and local Asian Australians and locals……..

Please, we give you examples: A client of ours was given a bank letter of approval, bought under the hammer at circa $1.5m and the banks would not accept that as a valuation, despite the letter. It was an auction – they still haven’t accepted it months later. For Pete’s sake how unfair is that on an Aussie battler. The banks deemed the value at 10% less and this put great pressure on our client – despite the letter of approval. Their argument became their valuer and the data he used to arrive at that figure – that data was historical and six months old. Yeah, and mate, we are a rising market and you have given a letter – what are our clients expected to do. Our client in this instance was not Chinese.

It was unfair banking – but hey, it doesn’t stop at $1.5m. At $3m, at $4m, at $5m, at $8m banks have refused to assist Australians – doctors and so on buy homes at levels and in manners they deem inappropriate. We have had to suggest other alternatives.

Again is this a level playing field for Australians?

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Real Life Case Studies: Welcome to Scotch Hill and the power of the “Chinese Phenomenon” even when Chinese people don’t bid. This weekend’s 2 Crossakiel Court is a classic example of the Chinese hidden hand – in that even though Chinese people were not bidding, it was the fact that Chinese people had taken so many homes off the table, that the prices got to where they got on this one. We dipped our toe in the water at $3.1m prior to auction, which was a lazy $1 million over what was paid just on 3 years ago – nothing done to the home. A polite but quick rebuttal told us what we already suspected – 2 Crossakiel was on fire – we sort of moved on.

At the auction we witnessed an Anglo Aussie downsizer (?) hidden in the crowd indicating to his agent to keep going – he was up against an Asian Aussie downsizer (?) and they slugged it out to over $4m – meaning this home had effectively doubled in 3 years. As nice and quaint as it was – the price was not a reflection of the home – it was a reflection of the prices paid by Chinese people on other homes on Scotch Hill this year.

Land has risen 20%, 30%, in some cases 40% in the last year– but equally as important, housing stock has been taken out of the market.

We could see this coming over the last five years and Scotch Hill, Grace Park, Maling Road, Sackville Ward have been the most prolific areas we have bought in for our high end clients – some of which you can see on our map.

Many have been off market, which are not listed on the map.

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Real Life Case Studies: You are a young couple trying to buy into the Studley Park Area of Kew as you love the quiet, leafy green feel. Over the last 3 months:

  • You have seen a home that was advertised over $2.5m sell, without any referral to you, to a Chinese person that didn’t have FIRB approval on Tuesday at $3.2m but miraculously, according to the agent got FIRB approval on the Friday. You simply were not informed or given a chance– despite your pest and building inspections, contract etc and it was sold before auction.
  • You went to an auction in Raheen Drive to consider a property quoted at $1.8m and needing a major renovation and you watched two Chinese people bid and bid and bid and bid and bid past $2.65 million.
  • Your advocate did due diligence on a home in Young Street this last Saturday on a $1.8 to $2m quoted property. This home needed a rebuild and was on the south side and with a big slope – it was an expensive rebuild. Your advocate had profiled the area and assessed the chances of Chinese bidding to be low as the area is profiled as less than 20% Chinese – which in Kew terms is unusual – and so we went to auction.
    At $2.15 million a Chinese person bid $2.53 million which we all thought was a mistake – despite her lack of English or seeming lack of English, the agents asked her to change her bid to $2.22m so as the auction could continue. A short time later she bought the home over $2.5 million – it was no mistake and she wasn’t stopping.
    Our belief is she may have been a neighbour and that property sold for over $5m recently – we cannot confirm that however, and that always throws out our James Chinese Buyer profiling.

At a coffee afterwards this James Buyer Advocate urged these really nice people to hang in there, as although its bloody hard, we will find a home for them that they can afford to buy. Their story in not unusual and it’s a matter of keeping on keeping on against the tide of Asian money.

Is it a level playing field for Australians and will it be impossible for our/their children to buy?

Here is a list of homes (500) we have bought recently – you decide if we are qualified to make the comments we are making.

http://www.james.net.au/homeratings/houses_bought.php?token=LJbnmFauW3

Here is a link to the auctions (5000) we have reported on – you decide if we are qualified to make the comments we are making.

http://www.james.net.au/auction-results

Mal James

Special2

 

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