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Are we there yet? – Waiting for 6 O’clock on the property clock? You may be too late…

On the face of it, this weekend’s results were not much different to last weeks. However it’s important to understand that no one is going to sound the horn when we hit the bottom of the market. Life doesn’t work that way. By the time people realise the market has bottomed out, it’s because it’s started on its upward curve and opportunity has passed!

It works similarly when we hit the peak of the market during which confidence is high and no one needs encouragement to buy. A bit like the gold rush, as soon as word gets out, the herd mentality kicks in, and it’s a difficult force of nature to resist.

So what is happening with our market? Some would suggest this is a typical market cycle – I’ve even used those words myself recently, and on the surface it may seem to be the case. However look a little deeper and a rather different picture is painted. Market downturns are usually accompanied with various factors such as interest rates which have climbed sharply and started to flatten out, job insecurity, poor wage growth, population decline, large supplies of stock and all manner of other triggers which may be tailored to the individual buying demographic in areas in our property market.

However, Australia isn’t suffering any of these – in fact on the face of it the picture looks enviably rosy.

Nevertheless, the face is often very good at contradicting what’s emotionally within, and if truth be known, confidence is anything but robust. In fact we don’t need an interest rate hike – the RBA are doing a good job of making us err on the conservative side with a mere hint at it. We all know bills are going to increase (carbon tax – petrol etc), but by how much is annoyingly uncertain. And furthermore, anyone with investments in the stock market will be looking closely at the current international tremors and not liking the aftershocks. I needn’t go into detail – we’ve all heard the news surrounding the Greek economy and its effect on Europe, America blinkering on the point of further demise, and not to mention possible warnings of a ‘hard landing’ in the major players our side of the Pacific which could – some have suggested – effect in a ‘commodity crash’.

However if you’re thinking we’ve started on a downward sloping curve, be warned, you may miss the boat!

We have a largely discretionary market. The evidence above suggests that most vendors don’t ‘need’ to sell – especially if they don’t get their price. They’re happy to sit it out and wait for better times. Mortgage brokers have reported a large increase in the number of pre-approvals, hinting that there are indeed plenty of buyers hovering in the starting blocks. The supply demand argument continues to be a testy debate, but however many houses are built in the outer suburbs of Melbourne, or high rise small one and two bedroom apartment blocks which are hardly an attraction for home buyers, (and neither fit into the typical first home buyer price range), stock located in areas where people want and ‘need’ to live is certainly not in abundance. Therefore it’s unreasonable to suggest that real estate will keep dropping in price – particularly in the top third of suburbs in Metropolitan Melbourne. (However, outer sunburn locations, and poor high rise accommodation heading into oversupply, may sing a different tune all together and continue to suffer low demand)

Therefore the only thing we’re waiting for is the spark that’s going to inject confidence and an element of security into the market. But waiting for that spark is not the wise thing for any buyer to do if they want to purchase at the bottom! I’m even tempted to argue today’s experience hinted at just such an upturn. Everything we witnessed sold – granted some of it was via negotiation – and most of the listings I focused on were quality properties likely to attract attention. However I did attend one auction which you’d have a job to describe even remotely as ‘quality real estate’. Furthermore, due to the interior condition, it was largely marketed to investors rather than home buyers. Did it sell? Did it ever! It attracted 5 bidders, and flew!

So todays 57% clearance rate – with turnover slightly up from last weekend – might be a hint of an upturn? No one can make that call just yet – but I grant you it’s not far away – perhaps even as soon as September/October…

Firstly those that sold under the hammer

15 Albert St, Surrey Hills

15 Albert St, Surrey Hills. What a super little home! 3 bedrooms, beautifully presented, low maintenance, well located, and attracting a wide buyer demographic composed of upsizers, downsizers, second home buyers – and perhaps even the odd investor – and you have all the ingredients set up to attract robust competition. With sunny sky, and a crowd of around 60, Daniel Wheeler – the small auctioneer with surprisingly deep booming vocal talents – opened proceedings with a vendor bid of 1Mil. Asking for increments of 20K didn’t pose a problem for the waiting bidders. Two got straight in with bids at the required level. As the price headed close to 1.1 the pace picked up dramatically. A car passed on the road, briefly blocking out they action, and seconds later we had already reached 1.2! Announced on the market at 1.23Mil– and not such much of a glance toward the vendor (therefore not breaking pace), another 3 bidders gainly joined in and the fight was on! Oh the joys of a good old fashioned auction – entertaining, exhilarating, -keeping everyone on their toes. Nearly 200K later – at a whopping 1.415Mil – and the contract hit the auctioneers hand to a round of applause from an appreciative audience!

9/183 Auburn Rd, Hawthorn

9/183 Auburn Rd, Hawthorn – your typical student digs would be an improvement on this apartment, and It’s certainly not going to attract a tenant any time soon – (at least not in its current condition.) A two bedroom ‘renovators dream’ – (to describe it kindly!) Located on a busy road on where parking is anything but abundant. A fairly large block of ‘average’ flats, and a unit for which a buyer would probably prefer the fixtures and fittings not to be included – and you wouldn’t imagine this auction would attract much of a crowd at all. However not so! Maybe because the price was attractively quoted the mid 300K, or because Swinburne Uni is close by – a crowd of around 70 turned out to watch. The auctioneer didn’t even need to open on a vendor bid. He asked for 300K and got it in no time at all. 5 bidders – yes 5 – were in competition for this little gem. The auctioneer didn’t get time to announce it on market until the price had reached 370K – however he did make haste to explain it had passed it reserve ‘some time ago’. The hammer wasn’t quick in falling – as the price headed upwards, buyers bidding needed time to discuss, make phone calls, and really stretch the budget before the auctioneer was going to let the hammer fall. In fact I’d argue it was a little unfair on the winning bidder who was twice forced to raise the bid due to prolonged repeated calling ‘it three times’. However, the agent worked well for his vendor – every last penny was squeezed out, and the final selling price was $377,000

Sold via negotiation

Onto those which sold after passing in on a genuine bid.

Firstly 43 Repton Rd, Malvern East.

43 Repton Rd, Malvern East

A delightfully well located pretty Edwardian single fronted home, with the agent quoting interest around 900K. The auction was slow starting – however there was a crowd of around 150 in attendance so it looked promising. Without even asking for an opening number, the auctioneer opened on a vendor bid of 930K. Asking for a rise of 10K didn’t cause much success until he was forced to take an early traditional ‘half time break’ to see the vendor after which the action got underway. He may have asked for 10K, however he got 20K with a bid of 950K. For a moment it looked as if a battle would eventuate as another buyer gained enough confidence to raise the hand by 10K (960K). Holding out however with a second bid of 970K the first buyer was successful in his efforts. The property passed in with no further bidding and was shortly negotiated bang on market value for $1.040Mil.

15 Goldsmith St, Elwood

15 Goldsmith St Elwood had the auctioneer producing every cliché in the book of poor real estate jokes. This piece of ‘gold’ was located in a ‘golden location’ providing buyers with a ‘golden opportunity’ to purchase a house worth its weight in ‘gold’! Buyers didn’t need much convincing however. The auction opened on a vendor bid of $1,450Mil. He asked for 10K rises although received 5K. Not to deter a confident bidder however, the bid of $1.455 Mil was met with a robust cry of ‘give the man Champaign!’ I have to admit the bidder was hidden behind a crowd, and not in easy view, however the agent did indeed rush over to the bidder, and later in the auction when bidding slowed, the auctioneer told the same bidder to have another sip of his glass of Moet and ‘think about it some more’. Three bidders competed and when bidding slowed around 1.480Mil the half time break didn’t convince the vendor to place it on market. The house was passed in at 1.490Mil and later negotiated for 1.525Mil.

8 Oak Grove, Malvern East

8 Oak Grove Malvern East produced a similar story. Quoted with interest around the 1.15-1.25Mil range, the auction opened on a vendor bid of 1.1Mil. A real bid followed this at 1.120Mil. Finally a second bidder stepped in and rising in increments of 10K, the price reached 1.205Mil before passing in. Negotiations didn’t make a marked difference however, as the final selling price was 1.206Mil.

Finally – one of our advocates spent the day in Geelong on Saturday. It holds some good opportunities for first home buyers and investors. There are fewer auctions in Geelong compared to the inner Metro areas of Melbourne, however as more buyers spread into our outer regional locations, this trend could change – (there was plenty of interest at all the opens). Of the six auctions which took place there this weekend, 3 passed in on a vendor bid, 1 on a genuine bid, and 2 sold under the hammer.

Catherine Cashmore