SPRING 2021 M3
2.5
LOW
90%
MAY 2022 M2
1.4
LOW
68%
SPRING 2022 M3
1.3
LOW
62%
2022M3 - Melbourne Auction Market Breakdowns
63% of all auctions are not really auctions – having 0 or 1 bidder
A very low 6% of auctions are volcanic in Spring. This shows a weaker market and it also shows that underquoting is stupid in this market.
Bought befores are a feature of this market – about (12%) – however, they appear more about the agent getting it done, than buyers forcing the issue
An under the hammer auction is rare in the overall scheme of things:
1 in 4 (25%)
More and more homes are passing in – but not all are selling – meaning more buyers than in strong markets, don’t have to pay more in a post auction scenario, to get the deal done.
The verdict – the market is still falling
Despite our positive protestations to the contrary at the start of August, overall 2022M3 is another falling market – the fourth in a row, from Cup Day last year.
Two poor weeks and one not so bad week in Spring’s 3-week 100 Auction Test.
The 2022M3 market is about:
- overall falling market enthusiasm with
- shallow demand depth
- on low stock
but it’s more than that – it’s about non-matching price expectations of the two opposing forces – buyers and sellers and
those sellers who are high in the stirrups are getting a severe chafing.
2022M3 current clearance rates and Bidderman numbers clearly show that those not at market price, will get found out in a short sharp 4 week public campaign, except for the occasional pocket of sunshine at the A-grade, renovated, highest end of our market.
Here is a super powerful stat from today on the 39 auctions we covered.
27 of them were passed in – 27 of 39 passed-in – that’s a pass-in, (the opposite of clearance rate) of 70%. Less than 30% sold under the hammer (one was before). Now 12 have since sold on the day, leaving 15 unsold and 2 withdrawn.
Only 2 Volcanoes in 39 Auctions across the Top End (both in Boroondara) and a total of 6 for the 100 auctions we have covered over the last 3 weeks – that’s 6% according to our genius math. When the market is humming the volcano rate is 20/25% and above.
What this means is the majority of sellers are higher than the majority of buyers, on the market value of their home, on auction day.
As clearances continue to drop, reflecting higher disagreement on values between sellers and buyers, so the overall macro market begins to twist down with less stock (especially A-graders) coming to market, further reducing interest from buyers and then in turn less sellers and then less buyers and so on, until we hit the bottom of the cycle, bottom of the wave with minimal activity – it does take a while to turn the ship from that point.
Bidderers (Bidderman – bidders per auction) was a GFC-like freezing today at 1.1 – it needs to be consistently circa 1.5 for the market to stabilize and 1.7 and above to create some wounded underbidders for the markets to rise again. Bidderman 2 and we’re flying.
In Bayside today there were more auctions than bidders – Bidderwoman below 1 and this is on low stock.
The most positive thing to say; the Macro Market is continuing to head to the bottom and hopefully these numbers mean, it will get there soon.
The question then becomes how long will we stay there?
There are ways to manage the current situation to your advantage – read on.
- The consensus amongst agents is that the market has fallen around 10% in price expectations (more for reno’s and B/C Graders and less for A-graders) since the Cup Day 2021 last peak.
- We have had 3 falling markets – 2021M4, 2022M1 and 2022M2
- Currently the falls feel like they are abating somewhat, but on very low stock levels, and this is our key Spring analysis focus – to confirm or deny the seemingly positive mood swing coming out of Winter and leading into 2022M3 Spring.
More on Supply and Demand Levels coming out of Winter and into 2022M3 Spring:
- Stock Levels / Supply: Currently it is low compared to previous years (non-pandemic)
- Bidderers (formerly Bidderman but we have gone pc) / Demand: Currently low
- Clearance: Price – shows buyer and seller agreement on price. Currently low, except for the Top of the Top End and true A-Graders.
In a word, today’s Auction market was poor, BUT there wasn’t a lot of exciting stuff to bid on. In fact, we found it hard to find enough auctions to cover, BUT overall, the market was disappointing and negative compared to the last few weeks.
Bidderers (Bidders per auction) was a paltry 1.2 and only two volcanoes. In the isolation of today it implies weakness; 2 in every 3 auctions were a Woody (0 bidders) or a Loner (1 bidder) – and if this remains consistent over the 3 weeks, it will show a lack of depth.
Poor depth means few wounded underbidders, meaning further falls – meaning:
- Sellers need to be smarter than normal and explore your auction alternatives such as Off-market, EOI’s and even Hold.
- Buyers there are A-Grade opportunities now, but they may well dry up if future sellers see weakness and don’t bring their homes to market, this side of Christmas.
- Buy & Sellers – it’s about risk and risk management and process is a key to an extra $500,000 on a $5,000,000 deal. Sell first and know what $ you have but see the new homes you want dry up or you must compete like crazy – look at 8 Rockingham today – volcano and 50%, yes 50% above the on the market price. Buy first and risk a haircut or even an anchor, if you go to auction and not sell, like 45% of the market did today.
Today’s summary – not a great start, however
- The stock was not exciting today. But when it was, it still flew – read our Boroondara analysis on 2 A-Graders.
- Stock is very low and that can distort stats.
- Was today a blip – it felt different from even last week? In market trends there are speed humps and potholes – today was a pothole, despite the fact there were still a lot of people at some opens.
The next two weeks are important for 2022 M3 Spring: and before I admit to being poached by any economists’ eggs (I have given them a shellacking haven’t I) or confirm the potholes are turning into something more, our best practical advice is and has been:
- prior to starting a Buy or Sell or a Buy & Sell, one should have an eye on a Plan B, not just assume a smooth-running Plan A, and even better would be to have a pre-plan of testing multiple options to confirm Plan A or Plan B or even a Plan C, unless a better result doesn’t matter to you.
- Buying or selling don’t stick your head in the sand and hope, for in this market it may get stuck there!
- A good sale or buy price is not just about the Macro market – there are two other markets to consider (Micro PPP and Individual).
As better stock was on show today, so the market results were better. There was a clearance/agreement rate on price between buyers and sellers of 76%, on the 30 auctions we covered, in the 2nd week of 2022’s 3rd major.
It is a lot better than the 55% on the 30 Top End auctions we covered last week.
Overall, on the 61 auctions covered in the last fortnight, clearances are at 65%.
We see 2022M3 as line ball, between a still cooling market and a stabilizing market.
Even with today’s improvement, 1 in 2 auctions was a Woody or a Loner (0 or 1 bidder) – that’s a lot of non-auctions, but better than the 75% of non-auctions of last week.
Surely these consistent numbers ask the thinking seller – is auction always the way to go?
Yes, it’s the easiest for the agent, but is it the best for you? Granted Off-markets and EOIs are not flying out the door either.
Today, more sold afterward than they did last week – a reflection on stock and more sellers accepting the evidence in front of them.
What does this all mean?
On very low Supply – due to many potential sellers still being fearful of going to market – we have seen a market appearing to be levelling out but…….. 2 big factors
Demand: Bidderrers (new name for Bidderman) @ 1.7 today and over the two weeks @ 1.4 bidders per auction, shows a real lack of across-the-board depth AND ………
……we can’t stress enough, that this is all on a very, very low base of stock (seasonally adjusted). The jury is well and truly out, on the market state, if stock levels increase noticeably.
So, let’s not get carried away (only 2 Volcanoes today). We are not saying the market is firing, but it is far from completely dead either – if you get price right, then there are deals to be had.
Quoting: We have talked a lot about price recently. If you are a buyer, (with very few exceptions) you don’t need to be flying past the quote on any initial offers and if you are a seller and you choose a lazy agent who quotes low, then you will surely be leaving money on the table.
Underquoting makes little sense for sellers and buyers most times, but in this market, for sellers, it’s downright idiotic – only 4 Volcanoes in 61 Auctions – that’s the point of a lying underquote (to get a false volcano) and Volcanoes are only running at a 7% success rate.
In this market (cooling – levelling maybe), even A-Graders must be sensitive to market – if not, then they are not an A-Grader, as they will not sell due to price. One in 3 homes are not selling.
Understand the 3 Markets and Your Price
There are Melbourne buyers and sellers, puzzled by the property game right now – and today’s results will not give them any more comfort.
They understand the macro market is falling – but not the variance in results!
One question this week: Why are there 5 bidders on one home at circa $19m (Harcourt sold this week) and no bidders on another @ circa $19m – same area.
Second question this week: why indeed is a $19m home seemingly easier to sell (and harder to buy) than a $3m home right now?
It’s the overall market we hear you say.
That doesn’t hold water, doesn’t really make sense. How can the macro market treat one home one way and another a different way – is it market luck or like a bushfire or something else.
Yes, it is about markets, but not just the one macro (overall) market.
Your buy or sell price is a lot more than the singular macro market you’re reading about.
Here is a very simplistic explanation as to why your price is a lot more than the macro market – it is 3 markets and whilst you have no control over 1 of the markets; the other 2 markets you can directly and positively influence.
Macro markets have moved around 10% on some homes since Spring 2021 – what is the other 90% of your price?
Macro Market say 10%
PLUS
Individual Market – you and the decisions you make around many things including agents, method, ask and a whole lot more – timing, testing, planning, strategy and so on – can vary by say 10%. Yes, maybe a helluva lot more than 10%, but just go with 10% for the sake of this simplification.
PLUS
PPP Micro Market – your property’s fundamentals of Price, Property and Position –A/B/C graders if you like. It’s the 3P’s including Price that determines an A-Grader and that by default must be 100% – 10% – 10% = 80%
That’s right, 80% of your price is not the macro market, not your agent, but what you bought or are trying to buy – the PPP’s market. Therefore, fundamentals are so important in any market and why some homes are still flying and of course, that is before we even look at Capital Growth scenarios (keeping it simple).
In this market there are
- opportunities to sell and buy better
- opportunities to trade up better and downsize smarter,
- opportunities to improve your buy sell changeover dramatically
- opportunities for something special, that in a tearaway market you could not do.
Yes, this market is not for the faint hearted or the head in the sand stickers – it is for those that have a solid plan, hire the right personnel and have or are trying to acquire a A-grader.
More than ever, a great result is NOT about the macro market – it’s about who you engage to work with you and the PPP’s of your buy/sell, if indeed you choose to do so.
Your price variances are about what we call – the stretch factors – and now, more than ever, your good decision elasticity will determine a good result, more so than the macro market cry of: she’ll be right mate.
The Stretch Factor
- If the macro market is pulling you down (seller) or giving you a leg up (buyer), think about using that knowledge to your advantage.
- The PPP micro market makes up most of your price when selling or buying, know that and be patient when selling, for the market works in waves but your fundamental PPP’s remain the same.
- The individual market is still the market you have the most influence over – there are huge variances in this week’s results.
If you are losing 10% on the macro, then know you can make it up in the individual market – that means a meaningful plan, good personnel – all actioned accordingly.
Sellers: If you think that is always a 3-week auction with one agent – well think again about multi-list, off-market, 4-month campaign, not 4 weeks or not sell for a few years and so on.
Buyers: If you think that is only a 3 week compete at auction on A-graders – well think again about off-markets and option B.
What is it about speed, about not exploring options, about not changing direction that seems so fixed, in so many minds, when it is so obviously not working?
And to finish, if you think this is all baloney then maybe you think that the Cats are the same as the Roos; that the Hawks in 2008 – 2016 were just extra-ordinarily lucky and everybody else was not, or that anybody could have done what The Fly has done in 2022.
If you think that, then we or others who are successful in this game, cannot help you.
