It wasn’t ideal weather for auctions this weekend. Despite the promised sunshine, the day didn’t brighten much from the morning cloud and drizzle. However this didn’t dampen events. Although crowds attending auctions were modest, with neighbours generally choosing to stay indoors rather than stand out on the street – last week’s change in atmosphere continued, with a slight increase in the number of homes selling ‘under the hammer’.
Much of the change is a result of diminishing supply. Until now, the increased level of stock witnessed throughout the first half of the year has watered down the markets overall performance. However it’s dangerous to generalize. Some suburbs, such as Bentleigh and Kew for example, have continued to perform consistently throughout the 12 month ‘correction’. Albeit – a general perception of a falling prices, along with economic uncertainty, has to this point kept most results modest at best.
Stock always diminishes in winter – especially as we approach the end of the football season (with vendors not wanting to compete against more popular crowd pullers.) However the drop in supply also represents a growing uncertainty from prospective vendors who will choose not to sell until they have certainty the market has turned. This has resulted in a higher concentration of buyers around listings – especially those that represent the current major ‘home’ buying demographic – principally couples, upsizers, and ‘second’ home buyers. With rents increasing, we’ve also seen a modest increase in the number of investors – a trend I expect to continue.
There’s an increasing number voices predicting opposing RBA outcomes with the majority favouring rates will rise 0.25% or hold. However it’s doubtful a 0.25% rise will have an immediate effect on the buying market. Most purchasers planning to buy factored in a while ago that rates could increase and budgeted accordingly. On top of this, a number of banks have reduced their fixed term fees and increased competition from smaller players has kept deals favourable. However the continued uncertainty is not going to encourage anyone to stretch too far above budget at this stage.
When purchasing the biggest item in a lifetime, caution must always rule the heart. And at this stage, buyers cannot afford to enter the market on a whim without plenty of due diligence. However, if you are planning on purchasing, waiting for certainty to set in and the spring market to kick off is not necessarily the best answer. As soon as it does, we’re likely to see this slight change, evolve into a marked change – and once that happens, it will place upward pressure on prices.
28 Montclair Ave, Brighton was the auction of all auctions. Although Brighton hasn’t fared all that well this year, dropping a full 7% in the first quarter, nothing of the sort was witnessed at this auction. In drizzling rain, a crowd of around 50 turned out to watch this renovated 4 bedroom Californian house take centre stage. The auction started late, and the pre-amble was anything but short. However it didn’t deter anyone from staying the course, and as the auction started, events unwound in such a way that no one would have walked away. 9 bidders were in attendance – more than anyone had accounted for. The quote was 1.490Mil -1.590Mil and with little prompting, the auction opened on a genuine bid of 1.5Mil. It didn’t take long before it was announced on the market at 1.620Mil, however it took over 80 bids, and a good 30 mins from the pre-amble, for the auction to conclude. With new bidders joining in half way, and increments changing from 1K bids, to 10K jumps, the property finally sold exactly 200K above reserve,(to an applauding crowd), for 1.820Mil.
19 Johnstone St Malvern recorded another robust result. The house is a classically renovated 3 bedroom Edwardian with off street parking at the rear, and therefore it was well set up to attract interest. 3 bidders were in attendance, however no one wanted to start, so in traditional fashion the auction opened on a vendor bid of 950K. In no time at all fast paced bidding started to push the figure towards reserve. It was announced on the market 1.060 Mil but didn’t stop there – vendor expectation was satisfactorily exceeded, and it sold under the hammer for a healthy 1,170 Mil.
10 Cavalier Street Bentleigh East, provided no exception to today’s ‘under the hammer’ trend – however unlike the previous two examples, it was anything but renovated. Quoted at 570K – 630K the neat exterior concealed a very original interior. It really did represent the best ‘roughie’ of the day. A shy crowd wasn’t going to show too much enthusiasm, so the auction kicked off with a vendor bid of 570K. With more than two bidders competing, a second bid of 580K quickly followed and the pace of bidding signified confidence. It took till the top end of the price quote (630K) to be announced ‘on market’, however despite all the auctioneers best efforts to warn bidders not to end on an ‘even number’, limits had been reached and the house was knocked down at this level.
Just in case you were beginning to think the market had swung into boom times, I did witness the odd disappointing result today. 34C Napier St, South Melbourne is located in a block of apartments which has shown consistent interest from buyers and renters principally because of its location. Finding a one bedroom large enough to fit lenders requirements for first home buyers on a limited budget is challenging. Many lenders require 50 sqm of floor space before they’ll approve a loan, and although some will accept 40 sqm, the requirements for such acceptance are stringent and limited. This property however would have appealed to both investors, and first home buyers, and therefore it was no surprise to see a healthy sized crowd arrive to watch the auction. Quoted at 390K – 430K, the auctioneer was optimistically expectant as he jollied his way through the pre-amble. For a while he refused to make any hint of a vendor bid expecting – if he waited long enough – someone would come to the fore. However it wasn’t to be. Despite all best efforts – and a crowd of buyers who were prepared to hang around a good while after the auction entering into what looked like private negotiations – the property failed to sell and passed in on a vendor bid of 390K, with a reserve of 425K.
And potentially the most disappointing result of the day was witnessed at an apartment in Mentone which probably should never have been listed for auction in the first place. Considering the strict lending requirements which I pointed out above, studio apartments have a limited market at the best of times. Although they will often provide a good rental yield, capital growth is restricted, and its likely only investors will show an interest. Quoting 200K plus, an agent based in Yarraville made a lonely figure at 6/173 Balcombe Road, when auction time ticked around. With no one to perform to – and not even a sticky beak neighbour in sight – the auction was called off with the sale price yet to be announced.