oc | Monday 9th December

News of my death may be greatly exaggerated

Julian Augustini and Romana Preston patiently wait for the next expression of passion before knocking 9 Weatherly Grove Brighton down, under the hammer, for $3,400,000. 3 bidders

Julian Augustini and Romana Preston patiently wait for the next expression of passion before knocking down 9 Weatherly Grove, . Under the hammer, for $3,400,000. 3 bidders

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14.11.15indicators

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The market is not as bullish, as urgent, or as downright insane as it was from February to May, even June of this year.

Is this really a true statement?

In many cases we are 20% above the start of the year. Is the market’s outward intensity less about dollars and bidding and more about that, we humans, have just got used to it?

Look at today – look at the clearance rate today – all on big stock numbers – yes, October’s Super Saturday was a little weak, but today things looked strong – there is no real other way to describe it.

Any talk of a death in the market, is in our opinion, ahead of time.

Is Melbourne’s $M+ market falling or turning, or is it simply just flattening to become a tread, for a while, in an otherwise rising price staircase?  We feel we won’t really know until next year and in our opinion, a fall in the 2016 market is at the same odds as a rise – 50/50. The same odds as it is every year.

Quick Multiple question:  Is the market easing because?

A. Buyer sentiment has turned

B. The Press and Reserve Bank, some stock analysts and those bloody stats guys say it’s turning

C. This is what happens most years in spring due to stock gluts

D. It’s not really easing – it’s just that we’ve all got used to it

E. Who cares if you buy well

James Davis at 18 Rockbeare Ivanhoe. 1 bidder, sold after above $2,350,000.

James Davis at 18 Rockbeare Ivanhoe. 1 bidder, sold after above $2,350,000.

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The market from our eyes – here is a cross section of the homes we were involved in today, from an auction point of view. Please note under the hammer auctions, in this market, represent less than half our business.

Ivanhoe (James Davis) – High quality land with brilliant views, privacy and rarity with regards to proximity to Melbourne. We were the only bidder. Two other sales in the street this year had two strong bidders north of $2m. Because we were the only bidder does this mean the market has gone off? Normally these types of offering only attract one or two strong bidders. Maybe the market is tanking or maybe it’s just being normal. As an aside we found our dealings with James open, truthful, polite and measured and we think that got his client the best result possible. Our perception from a distance was the vendor advocate Warwick Brookes of Domain was also helpful in the process.

(Nic Franzmann) – We were unsuccessful on this one, but this is more about our inability to move our client from being an Amoeba to a buyer. Read our article below on Amoebas. We have agreed with our client taking a break as we are not helping them. This offering was quoted low $3m’s, always an extremely courageous agent quote – our James pricing three weeks ago was $3.8m minimum to $4.2m on a strong auction day  – it got $50,000 above the top part of our quote today. So has the market gone off?

Around the corner in Kooyongkoot – similar land size with a similar home went for over $5m in February – we remember it well as we were adjusting upwards our pricing advice to another client almost daily.  So has the market slipped? This land on Callantina was around 10% less in size than Kooyongkoot, the home on Callantina was in my opinion a bulldozer, whereas on Kooyongkoot the home had good bones for a rebuild and Callantina while being on Scotch Hill is not Kooyoongkoot in terms of class. Is that worth $800,000 – yeah probably. What the Callantina result says to us, is that the incredible early year burst has now flattened out in Spring, but it is still strong.

Camberwell (Michael Hingston) – This was where we help a buy/sell client sell, by advising behind the scenes. Michael got the selling job because of his credentials in the immediate area. Our client was reaching for the stars and why not. In the end you could argue that they got there. If you looked at the auction you would have thought fizzer, but if you then thought the market was tanking because there were no bidders, you would have been wrong. It was sold after. The strategy was around achieving a price, ahead of achieving a sale. Our clients understood the risks, took them and knew when to take a deal. The result was a gross $1m+ profit in just over a year for our clients with not that much done. As an aside I don’t see how that is a definition for market tanking.

The sellers were very smart cookies and the agent delivered in a pressure environment. We could all learn a lot from this couple – a pleasure to work for – they were respectful, deep thinkers, never a cross word even when things were not going swimmingly as they reached for the stars – and in the end, a brilliant result for them and a reminder – get your PPP’s right. Good land, good home, “good price in” and “good price out” is the key to buying well. Oh and get a good buying and selling agent hey! The auction visual says the market was weak, but the actual result says the market was strong.

South Yarra (James Redfern) – Here is a case of Noise. It’s a good story I need to listen to, because this was not my finest hour. I mean me and not we on this one. Acting for an investor client I looked at 9 Fitzgerald and thought a goodie. great location, very good land (north orientation, wide, flat and good rear car access) and the bones of the house were also very good. I priced $1.8m to $2m on a $1.5m to $1.6m agent quote.  I was spot on, on all fronts – it sold for $1.91m – but after that first day it was downhill from there as far as the quality of my advice goes.

Here are my amateur mistakes and some bad luck

1.     The pricing was always going to be stretch for our client, so, I suppose subconsciously, if I could find reasons that it wasn’t going to get to this range then great – I wanted to buy this little beauty for them. Mistake number one – hoped for rather than stayed objective. I began to think closer to agent quote and away from my quote.

2.     I was about to give up on this when an agent got into my ear, that it really wasn’t travelling all that well. Mistake number two – I listened and I believed because I wanted to. I continued to think closer to agent quote and away from my quote.

3.     My guts told me to offer beforehand to test the agent claims of not travelling well, but we ran into some bad luck. The Sec 32 was not transparent as they left out a neighbourly dispute from the paperwork, which we found out from our council due diligence – this caused a paperwork delay when we demanded more information. As well, the pest and building came back negative and we had to arrange a structural engineer to come and assess. All this took time and prevented us testing the claims by offering before auction.

4.     Come auction day I was looking at the structural engineer stuff, the fact the floor plan in its current form had weakened this classy offering, what the agent was saying and yada yada. I knew this was a good home – just disguised to some as a baddie, perhaps disguised to me.

Of course we didn’t buy it – it went for what it was worth and well done to the buyer of this home – you showed me how to do it. Clarity of mind – correct values – good strong bidding strategy.

Two important learnings

1.     Don’t listen to noise – actually listen to it – just assess it for what it is, noise and stick to the proven facts and your intuition (if you have good intuition that is – normally I do).

2.     And the market falling apart – huh. Not on good homes!!

Hampton (Jenny Dwyer) – Really attractive Castlefield estate Cal Bung where $2million was not a number you heard much of last year. On the back of Prince St selling very strongly an hour before, there was a strong opening bid of $1.9m after the auctioneer had suggested $1.6m – agent quote was $1.65m to $1.75m. The home was knocked down to our clients, on the market at $2.12m, smack in the middle of our price estimate. Those two back to back $2m+ results with Jenny Dwyer and Steve Tickell didn’t scream market tanking to us.

For us at James we see a market doing nothing more than a market does in Spring – actually that is not true, it is going better than many Spring markets we have seen.

Summary

The market is strong, not increasing at the rate it was in May.

The market is deep (look at today’s Bidderman on big stock levels); but not as deep as May.

Not every single home is selling, especially the B and C graders, which is unlike May – but there are still a lot of homes selling.

The market in November is not May’s market, but then no market we can remember was like Feb to May 2015. This is the November 2015 Inner $M+ Melbourne market and it is strong.

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We reckon this guy could be the next James Bond when Daniel Craig retires. The name is Stubbings! Gowan Stubbings! He has a silent but sterlly way of making people do waht they really don't want to do - pay more money. 6 bidders at 17A Moorhouse Armadale - $3,530,000 - it was land, so $6,000+ per sqm in Armadale - doesn't feel like all the market has fallen down a hole just yet.

We reckon this guy could be the next James Bond when Daniel Craig retires. The name is Stubbings! Gowan Stubbings! He has a silent, but steely way of making people do what he wants them to do – pay more money. 6 bidders at 17A Moorhouse, Armadale – $3,530,000 – it was land, so $6,000+ per sqm in Armadale … doesn’t feel like all the market has fallen in a hole just yet.

23 Widford Street, Hawthorn East (Glen Coutinho, ), after auction, $4,300,000, 2 bidders

33 Callantina Road, Hawthorn (Antony Woodley, ), under hammer, $4,251,000, 2 bidders

7 Maysbury Avenue, Brighton (Nick Johnstone, Nick Johnstone Real Estate), after auction, $3,750,000, 2 bidders

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54 Armstrong Street, Middle Park (Kaine Lanyon, Marshall White), under hammer, $3,415,000, 5 bidders

8 Essex Road, Surrey Hills (Steven Abbott, ), under hammer, $2,760,000, 5 bidders 

24 Fernhurst Grove, (James Tostevin, Marshall White), under hammer, $1,805,000, 5 bidders

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1 Murray Street, Armadale $3,410,000, passed in, 1 bidder

1 Lovell Street, Hawthorn East $3,366,000, passed in, 3 bidders

39 Anderson Street, $3,150,000, passed in, 1 bidder

Despite the crowds not all auctions fly - but not all auctions need to fly to get a result. Tim Derham sells 26 Urquhart Hawthorn afterwards in the high $2m's after it was the only auction today that had no bidders under the hammer.

Despite the crowds, not all auctions fly. However, not all auctions need to fly to get a result. Tim Derham sells 26 Urquhart, Hawthorn afterwards in the high $2m’s. It was the only auction today that had no bidders under the hammer. Good work, Mr Derham.

Is this you?

Are you a Buying Amoeba?

Amoeba

Definition of Buying Amoeba: An organism that constantly avoids buying a home, by looking for a discount that is not there, or reels off a never ending list of reasons not to buy.

The Buying Amoeba grows in the market until either:

  • the market passes him by or
  • he ends up buying what nobody else wants

This is classic Buying Amoeba and over the last few years he has been growing in strength.

You’ve been looking for a property for 12 to 24 months, but every time you try and buy, you find a reason not too. It’s too expensive, you don’t want to pay an advocate, the agents lied, the home isn’t quite right.

Are you this person? Are you looking for a 3-5% discount today on a home you could have bought two years ago for 30% less.

Well, your brand new excuse is here – the market is tanking.  You know this because you read the newspaper headlines. Lucky you  – now you don’t have to keep finding another excuse to wait or miss. “Honey, I’m just being market prudent” – let’s wait another few years for that 5% bargain discount when the market has gone up another 30%.

Market gyrations are not the main game.

Buying the right home is the main game. Buying good PPPs are the main game.

Buying is the main game.

Below is a letter we sent to a new  client this week.

Dear Peter and Kate,

Kate, good to catch up on Saturday – you are going to have to teach me how not to work.

We like buying investment homes for existing clients and then handling the ongoing management for them if that is what they wish.

Like a home buying purchase, we start with a simple first up question for you as an investor.

What is it you are trying to achieve with this purchase?

And like home buyers, the majority of investors sort of think they know, but they can’t really articulate it easily until they are forced to.

Pete, most answers get around to – I want to buy a good investment?

We then ask what is your (not mine or the financial planner’s or Aunt Freda’s) measurement for a good investment?
Measure – Risk
We can buy you a great investment in East Ballarat when the Kentucky Fried Chicken highway building comes up for sale – but if they move out, then you will never get another tenant – is that an acceptable risk long term for a great return now?

Measure – Cashflow and Convenience
We can buy you an off-the-plan apartment with guaranteed rent for three years and all the cash flow and deprecation charts under the sun and I’m sure we can even organize finance, and possibly even hold your hand for you. Cash flow in the short term is really good and it’s convenient – but you pay a big price. Cashflow and convenience and short term feel good – but you rarely get market-based capital growth.

Measure – Growth
We can find an investment that also may have another use such as for a relative, or even yourselves at a later stage. Or simply, it’s a good renter and it rises with the market and if we are good and a bit lucky, above the market.
This sort or home usually takes the form of one of two options if you are around that $1m to $2m mark.

Option one: Single-fronter – good spot – 3 bedder with car park and OK floor plan.

Option two: 1970s or a decade either side with some good land around it in a suburb a bit further out.

With either of these options we are looking for good as a percentage price of the deal, eg say 80% or more with an almost free home, with lower maintenance and goodish floor plan that will rent out OK.

BUT whatever we buy, you should be really clear on what it is you want, because holding a good home through a few property cycles (or even longer) is the key to good investment and good home buying.

You might like to read this little booklet we put together for The Age and The Weekly Review to help young home buyers – the principles are the same for all ages and all price ranges – if you want to buy well that is.

MHBGclickhere (1)

 

Footnote: Thank you Gary and Phillip for the invite to see Spectre on Thursday – the movie didn’t have as many special effects as a Gary Peer auction, but nonetheless we enjoyed it anyway.

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