Typical Melbourne spring weather provided a game of musical chairs for the crowds attending auctions this weekend. Each time the rain poured and threatened to push crowds into the shelter of front living rooms, buyers would no sooner start the trek inside than the rain would stop and sun come out. However as a consequence of the cooler conditions, the only homes attracting both crowds and bidders today were those good enough to stand out in a market currently abundant with poor quality, overpriced stock.
The clearance rate came in once again at an expected 55% – Enzo Raimondo CEO of the REIV let it be known that he doesn’t expect much improvement on the percentage for the rest of the year. A somewhat bold statement and one for which we’ll have to wait till 2012 to see if it’s fulfilled. However most are jumping to the assumption that the low clearance rate is due to a lack of prospective buyers, but this is not so. The number of purchasers lining outside open inspections, and attending auctions has increased significantly. Furthermore, AFG (the country’s biggest mortgage broker) reported their mortgage sales hitting an 18 month high in August. That’s some $2.7 Billion with 38% going directly to property investors. Owner occupiers are also rising in number and according to the ABS, they have been for past four months. Even first home buyers are coming back to the fold. Mortgage Choice recently reported a marked increase in first home loans, making up 35% of all loan approvals in June compared to an average 27%.
Therefore, with abundant stock and an increasing number of property shoppers, we can only assume a 20% lower ‘year to date’ turnover is more a case of the market suffering low quality rather than low quantity – and in that number we can also include all those discretionary vendors who have their expectations floating in the clouds. As you’ll see from the examples below, good family homes priced at the correct level to ‘appeal’ to current property shoppers, are so scarce, they’re often over achieving even in the lack lustre conditions. When purchasers do locate ‘The One’ that ticks all their boxes , more often than not they find themselves battling unexpected competition and consequently risk paying a boom price in what’s still an overall flat market (see Jupiter St below for example).
On the other hand – stock which is principally only attracting would be investors (who never want to dig deep) – or only fit for those with big enough budgets they can ‘afford’ to be choosy – are lingering in an often overpriced stratosphere to the point even the selling agents are starting to willingly shed ‘un-sellable’ listings. Therefore this weekend’s experience was split between those that sold well – and those that failed miserably, and the stock standard clearance rate was no revelation to long suffering weekly observers.
There are 1400 auctions yet to take place before the AFL grand final (after which the spring selling season begins to hit its stride) – so plenty of action ahead before we can take a breather on the 1st October.
Sold under the hammer
5 Jupiter St, Caulfield South. One of the few homes fitting nicely into the current major ‘young family’, ‘couple’ price demographic of 600-800K. It’s both well located and well presented with little competition to dampen demand. Quoting $730K+ this house attracted such a large crowd, when the auctioneer announced the auction would take place inside due to heavy rain, there was simply not enough room for everyone to squash in. As a consequence a large group of buyers ended up trying to monitor proceedings in the front garden, with an element of frustration from those not able to hear bids. Meanwhile inside the house it was virtually impossible to see the auctioneer. Not being a tall chap – and therefore lost in amongst the crowd – he thankfully had a loud enough voice to carry over the number of bodies surrounding him ensuring everyone could at least hear. The auction opened on a genuine bid of 710K and to say it flew would be understated. With bids coming in thick and fast it was a case of first come first served as the auctioneer tried to decipher who he had seen shout out each number first. With a good 5 bidders, the auction didn’t slow until 827K at which point – after a short break to visit the vendor – it was announced ‘on market’ The house finally sold comfortably, and a good way past expectation, for $831K.
Passed in vendor bid
82 Mitford St, Elwood is a luxury high speck home – but one that would only attract a small buyer demographic considering the unique design. It unfortunately produced a disappointing result with not a hint of competition during the auction. Marketed in excess of 2Mil and attracting a crowd mostly made up of dog walkers from the park next door – the auction opened on a vendor bid of $2.1 Mil. It was clear most were simply there as observers, so the auctioneer didn’t prolong the event too much. The house passed in with a reserve of $2.3 Mil.
Had the property had a more classic period design generally suited to the Elwood area it may have fared better, especially considering its location. However it’s unique construction was always unlikely to appeal to the masses – even in a better market.
Sold via negotiation after passing in on a vendor bid
On the other hand
On the other hand 10 Ruskin St did tick the right ‘Elwood’ home buyer boxes. Renovated, extended and period in style, with 4 bedrooms and 2 bathrooms, it was big enough for a family but with no off street parking, lacked some prospective interest. Although the auction was well attended with a positive atmosphere of genuine interest, the auctioneer was forced to open with a vendor bid of 1.1Mil. Despite working the crowd hard he seemed utterly aghast not to get one bid and with another vendor bid of 1.15Mil he passed the in. However even though it didn’t get a ‘bite’ during the auction – it still totted up in today’s clearance rate. As is often the case in a cautious atmosphere -buyers not willing to bid at auction were willing to negotiate afterwards and the home eventually sold for an undisclosed price in excess of the final vendor bid.
Sold via negotiation – passing in on a genuine bid
29 Washington St, Malvern East was another home not quite ticking enough boxes to represent the major demographic of buyers in Malvern East. This modern ‘replica’ single fronted period style home, doesn’t quite have the charm of the real McCoy and therefore the auction lacked the competition it needed to make an exciting event. Opening up with a shortish pre-amble due to the threat of rain, the auctioneer proceeded to go to town with his vendor bids. Placing three in short succession – 780K, 790K, and 800K – he finally paused long enough to get a ‘reply.’ One genuine bidder offered 810K, but with no more forthcoming, the property soon passed in. It was later negotiated successfully behind closed doors for 845K.
Sold under the hammer
15 Closter Avenue, Ashwood produced an exciting end to the day. Offering ample sized family accommodation with a back yard to make a traditional Aussie proud, the agent couldn’t speak highly enough of this property – so much so – could he have purchased the home himself I wouldn’t have been surprised to see him do so! The pre-amble didn’t seem to stop as he frequently launched into declarations of praise in-between bids. Arguably the crowd agreed whole heartedly with him and bidding from at least 5 bidders, was forth coming from all corners. Quoting $900,000 – $990,000 the auction opened with a somewhat modest bid of $850K. Despite having ample competition, the auctioneer felt a desire to needlessly squeeze in his own vendor bid of 890K which thankfully was both the first and last. With over 60 bids – most in 1k jumps – the auction flew into its half time break pausing at $985K. Coming out to announce the property ‘on market’ inspired a new wave of bidding, and as the price climbed past the magic 1Mil market, it became a case of deepest pockets wins with $500 bids spotted in-between the tit for tat exchanges. The hammer finally fell at 1.026 Mil. A remarkable price in the current market.