oc | Wednesday 20th November

This market now is very different from 4 months ago

Today we are reporting on 7 auctions on which we either bid, managed the sale, or had some interest in the result, as the final precursor to our 3-week 100 Auction test starting next week.

It’s a random selection on a small sample in an incredibly low market (stock wise).

Statistically, we would not trust the figures to form any major conclusions. However, anecdotally it is very interesting, especially when you couple it with our James Marketnews report of last week and our changing June market reports.

Irrespective of the size of the samples, we cannot deny there is a trend in the Early Spring Markets and this graphic sums it up.

Point to note about low stock – 4 months ago we were also in a very low stock environment but with none of the current bidding – the market has changed?

But hold onto your hats, we are not calling time, ringing the bell, crying in our buyer hankies; until we see the completion of the Early Spring 3-week 100 Auction test running through August 31, September 7 and 14 as this is a good sample size, good spread of results which produces good statistics.

It’s not all bad buyer news – better results will encourage a few more sellers to bring more homes onto the market.

This will increase buyer choice whilst neutralising (to some extent) rapid price gains for the time being.

These are of course maybes.

Another maybe is what we call the Twilight Zone Lag.

This is the time when the market is changing, or we think it is changing, but there is a lag in knowing “for sure”.

When a market is on the turn – the turn takes time – there is a lag –  it’s like a big ship changing direction.

The Twilight Zone Lag Time is the time to get your house in order (pardon the deliberate pun) before the whole world knows we are back in an upward phase.

The Easter market hole and possible bottom, took around 18 months to get to and it may take the same time to get out of it (if indeed we are doing that now).

It will take time for money to become superfluid again; for the buyer and bank relationships to rebuild.

It will take some time before some sellers begin to see their next home and take a chance on buying it, by putting their home on the market; thus lifting housing stock which in turns allows more buyers and sellers to build their confidence and also re-engage in the market.

This is the Twilight Zone Lag of a market turn before the Snowball begins.

Initially any changes will not be as noticeable, but underneath the surface, the market is paddling hard. Eventually, a seismic market surface move takes place and we are away on a significant and sustained rise again.

BUYERS are here, they have re-engaged or as we have tried to say in Market in a Minute (Banks click here), buyers never left, they just didn’t have the opportunity and resources to buy.

Medium-term we love the Melbourne home market as an investment whilst below is in play.

Reducing Supply – supply is dwindling. No more land is being made and many, many families are holding onto homes after they buy a new one. (Why? for their children and intergenerational living in places where there is infrastructure such as trains, private schools and cafes.) As well, land is being taken up by apartments (not as good an investment, except in the lower price segments).

Increasing Demand – have we stopped population increases and immigration yet? If we do, then maybe a Japan scenario comes into play. Let’s monitor how NZ goes with their foreign ownership changes.

So, for now, supply is dropping and demand is increasing. Where does that leave the Medium Term Price on family homes with some land in a good postcode, next to rail and schools? We think – UP.

Are today’s results a pointer?

Are the last few weeks indicators that the worm is re-turning and we are entering a new Twilight/Lag Zone of change?

Here are some powerhouse stats on today’s seven auctions randomly reported by us.

  • ALL 7 SOLD
  • 6 UNDER THE HAMMER
  • ALL EXCEEDED QUOTE AND ALL EXCEEDED RESERVE – $200,000, $200,000, $160,000, $35,000, $150,000, $20,000, $800,000 (yep $800,000)
  • BIDDERMAN: 4 – yep, an average of 4 bidders per auction. Bidders, 6,4,6,4,4,3,1. That means that for each of these 7 home types there are 3 wounded underbidders still out there, willing to spend more if the banks let them.

When Bidderman over a period of time and over all homes is consistently 1, the market is falling.

When Bidderman is 2, the market is healthy.

And when Bidderman is 3, the market is rocking.

Small sample, not saying the worm has turned, just saying we have now seen 6 auction weeks in a row (3 in June and 3 in August) that are stronger than Easter 2019, February 2019, even last year 2018.

But please, let’s wait ’till we see the stats of the bigger auction weeks coming up in the 100-Auction Test.

No space for this value article series today – but here is a letter to a new investor client this week.

Thursday 22nd August

Dear Susan and Peter,

Apologies with my delay, my elderly mother has been in hospital this last week and I didn’t want to write some guff just to meet my time indication to you.

So this is what we really think about an investment family home plan.

Susan and Peter, we think there are three outcomes in a plan (investment or otherwise).

Physical

Financial

Emotional

When buying a home the key to happiness and therefore a good purchase is matching the outcomes a property will bring, to the outcomes you the buyer wants.

The good outcomes need to be fairly immediate and also last in the medium to longer-term –  otherwise, you will tire of your investment and sell and then more than likely lose the best bits of the financial outcome (that comes from long term compounding growth).

You don’t want it to be a bottomless pit for your cash, that each month makes you feel uneasy or disappointed as you check your bank statement.

So we need to be clear on your outcomes, eg make money (financial) – be a home for you or your family (emotional and physical).

In property, there is so much good and bad info and to work out what outcomes a property may achieve, we channel the good info into 3PPPs to make sense of it all and to facilitate a method that will allow easier matching of homes to your desired outcomes.

3PPPs – Price, Property and Positional Land.

Positional Land is easily the most important – in Melbourne as anywhere else in the world – it’s about the type of land and the proportion of land value to money spent (not size) and where it is, which largely determine your outcomes. A women’s location comfort is another very important indicator to match positional land to emotional outcome.

Next is Price meaning money, meaning ownership structure / interest / depreciation etc / rent and capital costs like stamps or renovations. On price, it’s how much of that price you spend on ‘stuff’ that grows. Good land is good “stuff”, eg it grows whereas buildings often don’t and certainly profit to the developer doesn’t and above market proportion of price at purchase time also certainly doesn’t grow in value.

Growth begins at the market price of the proportional land component of the money you paid – not the price you paid – compound growth may occur on say 45% of the money you invest, whilst the 55% balance actually depreciates.

Finally the property – the type of property building you buy is critical based on above and……. Emotionally its feel, its light, its flow should rack up way more brownie points than any superficial marketing and spurious claims to architectural magnificence. If the building is too much of a percentage of price then as it depreciates it affects your growth (growth gives you future options, no growth doesn’t) – if the building requires cash to fix or reno then it also affects your land to value ratio. Rent or cash flow comes from the building which as it improves makes holding it a lot easier, if your deficit between money in and out is reducing, thus allowing compounding growth.

So with all that in mind above, please, three of your most important outcomes you want to achieve Susan and Peter.

And then we will suggest properties with PPPs solutions matching those Top 3 desired outcomes.

Thank you,

Mal, Gina, Simone, Randall, Kathy and Phoebe

James Buyer Advocates

0408 107 988

GLEN IRIS (Stonnington), 7 White Street
Auctioneer: Damien Davis – Jellis Craig
Opening Bid: $2,800,000
On the Market: $3,010,000
Under the Hammer: $3,216,000
Quote: $2,750,000 to $3,000,000
Bidders: 6
Crowd: 80
Everyone was here to perform – Damien Davis suggested an opening of $2,800,000 and he received it… Mr Davis then asked for a rise of $25,000 and again he received from Bidder 2 and Bidder 3. The trio then took the home to $3,010,000 when the home was announced “On the Market”  with no half-time break required. Bidder 4 keen to join in, then asked if $1,000 would be accepted, which it was. Bidder 5 held back until Bidder 1 and 2 had confirmed they were out at $3,046,000 but Bidder 3 and 4 meant business. Bidder 6, with their nerves of steel tried their luck at $3,115,000 but Bidder 4 had his eye on the prize and looked determined to take home the keys. Bidder 3 pulled out and the home was sold to Bidder 4 for $3,216,000.

James Comment: Nicely put together home that 6 families thought was worth over $3,000,000 – first sale in the street at this level – last 5 sales were between $2.2m and $2.8m all on the same land size of 660 square metres, in better times. 5 families still looking for a new home in Glen Iris over $3 million.

 

Glen Iris (Stonnington), 1714-1716 Road
Auctioneer: Andrew Hayne – Marshall White
Opening Bid: $2,700,000 VB
On the Market: $3,150,000
Under the Hammer: $3,360,000
Quote: $2,750,000 to $3,000,000
Bidders: 4
Crowd: 80

James Comment: We were the underbidder on this home, well done to Michael Ramsay and his client. We thought the quote should have been $3m to $3.3m due to quality of offering (but that’s our opinion) – meaning the result was in our opinion strong but expected – nothing seemingly inappropriate about the quote – it was on the market fairly and only a few weeks ago when the quote was set, we were in a market that was still regarded as tanking. This is a high-quality home, set back nicely mitigating noise, and could have sold in any market despite main road and weaker Glen Iris location. Agents Maddy, John and Fiona ran a really smart campaign.

South Yarra, 13 Hobson Street
Auctioneer: Nicholas Brooks – Marshall White
Opening Bid: $1,700,000
On the Market: $1,870,000
Under the Hammer: $2,035,000
Bidders: 6
Quote: $1,700,000 to $1,850,000
Crowd: 60
Nicholas Brooks opened with a vendor bid of $1,700,000 before turning it over to the crowd. A booming voice came straight back with $1,800,000 followed by a brief pause and Bidder 2 joined in. Bidding stalled at $1,870,000 when half-time was called. The home was announced on the market, which saw Bidder 3 and 4 join and after not too long, we welcomed Bidder 5 and 6. The battle came down to Bidder 5 and 6 and the home was eventually knocked down for $2,035,000.

James Comment: We were also an underbidder on this one. No car parking, nice little offering in need of a reno, and hey, 5 other buyers are still around looking for a similar investment. Strong but foreseeable result in our opinion.

Hawthorn East, 23 Airedale Avenue
Auctioneer: Marcus Chiminello – Marshall White
Opening Bid: $2,600,000
On the Market: $2,880,000
Under the Hammer: $2,902,000
Quote: $2,600,000 to $2,860,000
Bidders: 4
Crowd: 55
One in the crowd calls out ‘2 million!’. A small boy holding a unicorn colouring book yells ‘six hundred’ in response. There is probably more hope of seeing a unicorn flying over Hawthorn East rooftops than either of these bids taking hold. The auctioneer engages with both and then places a vendor bid of $2,600,000. The $2,000,000 bidder comes in with a real bid, they have competition though with three in it. At $2,630,000 it stops. ‘Is it on the market?’ is asked and a vendor referral is about to be taken when Bidder 4 jumps in and keeps it rolling. The question is asked again at $2,880,000 and it gets the nod, 23 Airedale is selling. Bids are slowing then breaking down and Bidder 3 holds on after a couple of last-ditch $1,000 rises.

Camberwell, 38 Cochrane Avenue
Auctioneer: Brett Vanderwart – RT Edgar
Opening Bid: $3,600,000 VB
On the Market: $3,750,000
Under the Hammer: $4,566,000
Bidders: 4
Crowd: 115
Big, bold house. Super-sized crowd and yet everyone still chose to stare at the grass when the call for bids came. Some banter and an opening vendor bid set it going before two bidders came in with $50,000 apiece. It was quickly on the market at $3,750,000, giving confidence for additional bidders to enter. Into the mid $4,000,000 range it appeared that two bidders were strongest though – the first and last in. Bidder 4 attempted larger rises while Bidder 1 always countered with $1000. This see-sawing two-horse race continued on for some time. As it neared conclusion auctioneer Brett Vanderwert joked to Bidder 1, ‘Another one thousand? Yeah, I know, just wanted to make sure’, such was this bidder’s unyielding commitment to the ‘$1,000 more’ strategy. The crowd chuckled and some looked on bemused at the 40-minute spectacle until Bidder 1 bagged the home when another $1000 rise was one too many for their dogged competition.

James Comment: Volcano only $800,000 over the reserve (ha ha) Boom! Back to 2016/17 times at this price. Strong Asian market appeal. Didn’t see this number coming!

Kew East, 65 Munro Street
Auctioneer: Jeremy Desmier – Fletchers
Opening Bid: $1,950,000 vendor bid
On the Market: $2,200,000
Under the Hammer: $2.360,000
Quote: $2,000,000 to $2,200,000
Bidders: 3
Crowd: 60
Slow to start with a vendor bid to open at $1,950,000. Auctioneer Jeremy Desmier advised, ”for anyone who hasn’t heard, confidence is back and market is moving…. time to buy”. Bidder 1 and 2 took bidding to $2,200,000. Announced on market at which point Bidder 3 joined in. After “phoning a friend” for instructions Bidder 2 pushed until they ultimately purchased for $2,360,000.

James Comment: We were engaged to manage the sale of this home after owners had failed to sell last year.  After an agent change and quote adjustment and decision to take advantage of the market right now, this home sold solidly. A credit to the owners more than anybody else – they didn’t repeat the same expecting a different result and they were motivators of us and the agents, not critics. Well done.

Brighton East, 14 Regent Street
Auctioneer: Stephen Smith – Marshall White
Opening Bid: $2,700,000
Passed in: $2,835,000
Quote: $2,600,000 to $2,800,000
Sold after auction: $ undisclosed
Bidders: 2
Crowd: 65
Close to 65 people, including numerous local real estate agents, lined the street and auctioneer Stephen Smith was wasting no time.  The property was sold by auction 12 months ago and Mr Smith said he anticipated that the competition for the property would again be strong. With no delay Bidder 1 opened with a bid of $2,700,000.  A second bidder quickly responded with a bid of $50,000, which was immediately matched by Bidder 1. At this point, the bids slowed and at $2,835,000 Mr Smith stepped inside to consult the vendors. Upon his return, there were no further bids, despite Mr Smith’s assertions that it was close to being on the market. The property was passed into Bidder 1 for $2,835,000 and later sold during negotiations.

James Comment: Sold last year for $3,000,000 – sold this year for around $145,000 less.

At James Buy/Sell much of our work is buying advocacy advice however, we also provide general property advice when investing AND specific selling management advice when selling.

Sellers contact James Buy/Sell before they speak to selling agents and ask us a wide range of questions  – there is no charge for this.

Three reasons why selling management of agents and processes is now a substantial part of our James Buy Sell business

  1. In this market sellers can start off on the wrong foot as they choose the wrong agent, have poor and often emotional processes and pitch either too low or too high and don’t get the result they wanted.
  2. Our seller management services are mostly no extra charge – we are paid from selling agents commissions.
  3. Since January of last year – meaning in this difficult market – we are 33 from 33 sold and 8 currently on the market or off-market for buy sell clients.

We are never paid by the buyer and seller in the same transaction – it’s a conflict.

Anyway, the point of this little note, besides the plug, is that every sale in which we are involved in, we/agent normally donates $5,000 from their fees (agent commission)

Since 2015, towards $200,000 has gone to a rehabilitation hospital called Plaster House (click here for more info)    run by an incredibly caring East Malvern woman living in Tanzania with her family; Sarah Rejman

When you engage James Buy/Sell to make a positive difference to your selling process, choosing the right agent and getting the right price; you not only help yourself, but you also make a big difference to Melbourne Homelessness ($300,000+ donated since 2006), Aboriginal employment (infancy stages) and Overseas Child Surgeries for the disabled poor in Africa.

For the record, we are going to Tanzania in the Grand Final Week 2019 (back just after the Pies win) to raise awareness and climb Mt Kilimanjaro. And our fifth Tanzanian visit will be with 5 young Melburnians in January 2020 for two weeks to volunteer with Sarah. We see how the money is spent (brilliantly and efficiently) and we take 0%, zero, zippo out of the money given for admin or our travel costs.

Here is her latest little note to us below;

 

Subscribe to our Market News Newsletter


Tags:

Be with James

Would you like to talk to us about finding or negotiating on your next home?
We buy 100 homes for our clients every year.
We buy Inner East and Bayside over $2m.
View more MasterClass Articles

Inside James Market News