The REIV released its September quarterly results on Saturday showing the median house price has deflated $16,000 dollars – (2.8%) – to $551,000, this is from a previous recorded median of $567,000. The overall gain, year to date, is a meagre 1.4% – which is below the rate of inflation. However such small changes in the median are movements we negotiate daily and therefore mean little when it comes to purchasing property. For example, when assessing value in a flat market, a comparable sale 12 months old can be just as significant as a comparable sale a few weeks old – little changes. However it’s reasonable to assess if the market isn’t moving forwards it is – if anything – sliding marginally backwards and with this in mind we need to dig a little deeper if we’re to uncover reasons other than the usual statements of ‘low confidence’ and a ‘two speed economy’ – (which still have relevance, but don’t really tell us much. )
The only properties achieving competitive sales this weekend were those which really captured the attention of our current property shoppers. Well located, not overpriced with good presentation and offering quality accommodation – the ‘box tickers’ – and there is a distinct shortage of these types of homes for sale. You only need to jump on the internet and do a quick search in your local area to see that most of the properties on offer are ‘subpar’ at best. This was born out in yesterday’s results – out of the 6 auctions we attended on Saturday; there were only two properties we’d specifically highlighted for our clients that fitted the above description. As we expected, both sold with competition under the hammer for what could be described as ‘good market value’ – the rest passed in – (all but one on a vendor bid.) Obviously the two that sold were homes we’d marked out because they represented quality and the reason they sold at auction – without selling prior – was because of the intensity of competition they attracted. There aren’t many of them about.
In a good market even average properties opposite major freeways can sell well – confidence is robust and jaw dropping results are achieved. However for property to turn over in a depressed market it must have the features that encourage purchasers to buy and there’s a lot of rather poor to average listings lingering on the market increasing the stock supply disproportionally. The only way they end up selling is through a price reduction and this is what’s placing a drag on the overall median value. Hence why the results released by the REIV this weekend were no surprise.
This weekend’s clearance rate of 55% doesn’t tell us much – a percentage in the 50’s has become the norm for 2011. However what is interesting is 17 auctions were postponed or cancelled. This is slightly higher than normal and I can only put it down to the discretionary vendor’s who are now deciding to withdraw their properties because they can’t get the ‘wish’ price they expected – they don’t ‘need’ to sell, so they’ll wait the market out until things improve. However it only equates to more pain for home buyers who need to buy, because less listings will probably mean even less quality and once confidence returns, this could place inflationary pressure on prices.
65 Mortimore Street, Bentleigh, There was nothing essentially wrong with this property – 4 bedrooms, walking distance to station, a good sized plot of land and a north facing rear. Add also the fact that Bentleigh has averaged above an 80% clearance rate throughout the year and you’d be forgiven for assuming it would achieve an under the hammer sale. However it is located next to a vacant block of land and as anyone who resides in Bentleigh knows – vacant blocks often equate to large unit developments, or at the very least, multiple subdivisions. Therefore it was probably for this reason that the home – quoted $900-$990K failed to attract a bid. With only a few neighbours in attendance the auctioneer did his best to point out the good points about the property; however no one showed interest and it passed in on a vendor bid of $900K with a reserve $950K.
Quoted at 1.3 – 1.430Mil 38 Bertram Street, Elsternwick was one that bucked the trend. A beautiful home in a beautiful and tightly held location. Around 100 people turned up for the auction – all were squeezed into the back yard. Philip Kingston (the auctioneer) sang the glories of the home in his pre-amble, taking the opportunity to point out that there aren’t many auction days left till the end of the year and buyers better ‘take their chances’ now. Opening on a vendor bid of 1.3Mil to get things moving, it took just seconds for a counter bid of 1.31 Mil to come in from an interested buyer and from there on in, it was a tit for tat battle between two bidders rising in 10K increments. At $1.430 Mil one of the agents flew inside to talk to the vendor whilst the battle was still going strong outside the property. At $1.450 Mil it was announced ‘on the market’ and sold $10K later for $1,460 Mil. Even in a depressed market, the vendors made a healthy profit on their initial investment. The property was last purchased in 1997 for $470K. This equals an approximate return of around 8% capital growth per annum (around $70K a year).
121 Leila Rd in Carnegie is situated opposite a park and well located in terms of the local shops and train station; however it’s also positioned on a busy cut through road which – even outside of peak hour – carries a fair amount of traffic. This was a feature that couldn’t be ignored during the auction. The agent was struggling to be heard as he shouted out his preamble starting the auction off with a vendor bid of $730K. Failing to get any bites he exercised his right to make a second vendor bid at $750K, and when this didn’t inspire, he kicked in one further vendor bid of $770K before passing the property in before a crowd of less than impressed neighbours.
20 Keith St, Hampton East was another property which wasn’t really set up to attract a crowd in our current flat market. The un-renovated house had a decent land size for its location (531 sqm), however being an old Art Deco ‘one of a pair’ options for renovation were limited. It also only offered 2 bedrooms and therefore in a suburb which traditionally attracts interest from family home buyers with children, the turnout was low. However the agent wasn’t forced to open on a vendor bid, a single lady boldly put up her hand to offer $550K, but with no further interest the property passed in. Subsequent negotiations failed and the reserve has been set at $610K.
Unlike 20 Keith St, 9 Carramar Av, Camberwell was ideal for renovation and even without a bulldozer offered ample accommodation for a family with five bedrooms and two bathrooms. Located in one of the beautiful treelined streets in Camberwell the turnout was expectedly good. The agent had verbally quoted $1.3-$1.6 Mil, which wasn’t going to be much help to anyone not doing their research! However when some hopeful punter offered an opening bid of $500K the agent refused to take it and opted for someone offering a $1.2Mil bid instead. Two bidders initially took control and at $1,350 Mil the property was announced ‘on the market’. Once reserve had been met a 3rd bidder jumped in and the home finally sold for $1,412,500.
Finally 65 Addison St, Elwood was a property at the top end of the price bracket and suffered as a result. Quoted at $2- $2.2Mil, there just wasn’t the interest to generate a bid, however unlike the other homes that passed in on Saturday, the turnout was good and initially it did look as if a sale may be achieved. The auctioneer placed a vendor bid of $1.9 Mil to get things started, but was forced to pass the property in when it became clear no one there was intending to purchase. There were a few factors that may have affected its overall appeal. It was located in a street of period homes, most of which had beautiful facades; however 65 Addison’s façade had a 70’s look lingering from a previous renovation which dimmed the initial attraction. It was also situated opposite a modern ‘box’ style contemporary house which didn’t fit in with the general street aspect. The block – although a great size of over 700 sqm – was irregular in shape so development potential would have been limited. In a robust market none of this would have mattered, however in today’s market it can be the difference between a property selling for market value or one forced to drop its price.