It couldn’t have been a worst day to hold an auction – with rain pouring, wind blowing, and most people focused on listening to the pre-match coverage– some brave vendors had decided Saturday was going to be ‘their day in the sun’ as the sales agents so often like to term it. However the auctioneers were met with a sea of umbrellas as they hurried through their pre-ambles trying to minimise the damage done to expensive suits as the rain poured. For those who do decide to auction their homes on grand final weekend, it traditionally holds a sense of joviality as the agents dress up in football colours and declare their allegiance. At one auction, the auctioneer ordered his penciler (the chap who keeps note of the bids during the auction) to wonder into the middle of the crowd – lift up his trousers, and show his Collingwood socks! At another, the auctioneer emerged from the house donning a Geelong Cats scarf and a cry of ‘go the Cats’ before his pre amble. Underneath the festivities however it’s been a week of mixed market news.
R P Data released a report showing most Victorian households are enjoying the strongest equity position in the country, with 71.4% holding at least 50% equity in their property. Furthermore, Melbourne recorded the highest rate of capital growth over a 5 years period (to July 2011) with dwelling values up 51.5%. But for vendors with homes currently on the market, other news from R P Data indicating Melbourne’s house values are down 4.3% year on year (to August 2011), offered no comfort and only reminded how weak conditions have dominated the year. However with the grand final out the way we can comfortably call a start to the spring selling season and if there’s going to be any gain this year, it will be over the next 3 months.
The market is starting to sort the wheat from the chaff. In the inner city suburbs, within roughly a 15 km radius, stock is dropping and demand is generally strong. Vendors have started to drop their expectation and buyer activity is up. However the outer suburbs are still suffering from high supply and low demand, and the results are producing a two tier market. This was backed up with a report from the NAB noting in their ‘housing affordability survey’ that “The most notable deterioration in demand was identified in middle/outer ring”. Demand is still strong for those properties suiting our largest buyer demographic – young families and upsizers looking for established inner city, well located residential property – however other areas are continuing to feeling the pain. Suburb by suburb clearance data further highlights the split in demand. For example – Abbotsford (2 km from the CBD) has recorded around 80 auctions so far this year, with an 81% clearance rate. On the other hand Dandenong (30 km from the CBD) has also recorded around 80 auctions, however with a much lower clearance rate of 35%. It again proves the wisdom of location and position being the key to getting the greatest growth out of a residential investment.
At 539 Orrong Rd, Armadale apartment 2 & 4 were set to go under the hammer. Despite the cold, wet, windy conditions, a healthy crowd of around 60 populated the small side street at the side of the property where the auction was to be held. Interestingly enough, both units were only purchased a few years ago. Number 2 in September 2007, and number 4 in August 2008. In 2007 number 2 was purchased for $547,000 and in 2008, number 4 was purchased for $550,000. Considering current market conditions, and the busy road address, the vendor was obviously going to be lucky to break even and cover their selling costs. The apartments offered good accommodation, both Art Deco in style (which always attracts attention) and nicely renovated. The auctioneer explained clearly in his pre amble that the purchaser of the first unit to go under the hammer – number 2 – would have first right of refusal for unit 4 at the same price.
Not wanting to delay the event waiting for an opening genuine bid, the auctioneer opened with a 500K vendor bid, only to receive a swift counter bid of $565K before he’d hardly managed to get the words ‘vendor bid’ out. 3 bidders thereafter competed, and at $575K it was announced on the market. A few moments later the unit was sold under the hammer to the initial bidder at $587,000.
We only had to wait a short while before it was clear the buyer of unit 2 didn’t want to purchase unit 4. Therefore the second auction commenced promptly and thankfully (considering the weather) so did the bidding. Opening on a genuine bid of $500K, 3 bidders again competed for the unit. The increments increased at a slower pace – at one point as low as $500. It was announced on the market slightly earlier than unit 2 at $557,500, however the bidding didn’t cease until it reached a similar level. Selling for $6K less, and some 26 bids later, the unit was finally knocked down at $581K.
41 Dromana Ave in Bentleigh East didn’t manage to attract such a large crowd. Quoted at $570-$595K the un-renovated weatherboard home on 572 sqm of land was situated in an area picking up traffic noise from North Rd and a fair way from the closest train station. The crowd of 10 seemed to be made up mostly of neighbours and with the rain still pouring, it was clear no one wanted to waste any time.
The auctioneer gave a short pre amble offering just enough time to read the auction rules and highlight a few features of the home, and when no one came forward to offer an initial bid he opened with a vendor bid of $480K. After a few minutes, and a bit of encouragement from one of the sales agents, someone countered with $500K, however with little action to follow he took the traditional half time break to see his vendor.
Obviously not at a level to be announced on market, the auctioneer emerged to a wet miserable crowd. He opened the bidding once again by confirming the last bid of $500K, however when it was obvious there was no further interest he decided to throw in a second vendor bid of $520K. His efforts were unheeded and therefore with a final vendor bid of $540K he passed the property in.
Thankfully on Sunday the sun opened its doors to let some heat into the air and shine a light on the few remaining listings scheduled for auction. 2/2A Mayfield Ave in Caulfield North attracted a crowd of roughly 60 people and 7 bidders turning out to be a very lively auction which was surprising considering its position (close to a train line and busy main road). However, it’s further evidence of a reduction in stock which is starting to push somewhat compromised listings into the forefront, and thus gain attention from buyers.
After a bit of a struggle to get an initial bid and a staunch refusal from the auctioneer to make a vendor bid, the auction finally opened on a genuine bid of $550K – there was another pause waiting for a counter bid, however once it had been taken and $570K reached the auction took off with gusto. At one point 3 bidders put their hands up at the same time so it didn’t take long to get to its on market price of $628K. Squeezing every last cent out the buyers the auctioneer offered to take $250 bids, however funds had clearly been exhausted. The hammer finally went down at $654K – a strong result 26K above reserve.