It’s a Buyer’s Market…Isn’t It?

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Of the 6 auctions we attended on Saturday only 2 sold under the hammer. However all but one was negotiated after the auction and therefore it’s evident that although the market has suffered ‘low’ demand, it’s not suffering ‘no’ demand. However with a 57% clearance rate it continues to be a negotiators domain

We may have formally entered spring; however don’t be fooled, the traditional buying season doesn’t really kick off until after the Grand Final. No one wants to run an auction on Grand Final day, therefore we’ll see existing stock peter out as agents work to tie up any loose ends on properties already scheduled for auction and a short delay marketing new stock until we move closer to the event. The reports are still telling us it’s a buyer’s market – however this isn’t the case across the board! The last thing you’d expect to see in a buyer’s market is heated bidding and above average prices; however this is what’s happening at certain price points of the Melbourne real estate landscape – principally the price bracket that attracts investors.

Whilst homes in excess of 1 Mil continue to suffer a disparity between vendor expectation and buyer motivation (resulting in most agents working that little bit harder to resolve the issue via negotiation) homes in the 500K-800K ‘affordable’ range are not only selling well, they are producing some difficult buying conditions for current property shoppers – as can be seen from the results below. This is partly due to the extreme volatility in world stock markets, and yet the exact opposite in our political leaders who are firmly stuck in stalemate. Therefore there’s been slow but steady increase in the number of investors who have moved their attention towards more tangible assets (a number we’ve seen increase over the last three weeks as a company and a trend that seems to be playing out generally). This isn’t surprising when you take into account information I received this week from a highly regarded finance executive who told me 2,500 property trust accounts are set up in Australia every week! Moreover, the banks are awash with deposits, and as a result have been wooing investors with cheaper rates and lower fees for both fixed and variable loans. We’ve also seen an increase in rental stock (good news for tenants) and this has equated to a slight lift in demand at Melbourne’s median price point which the other end of the market isn’t yet benefitting from.

Turnover above 1Mil hasn’t stalled – most of the homes I witnessed pass in on Saturday did manage to achieve a result (even those that passed in on a vendor bid) – however this market is largely made up of ‘home’ buyers, rather than investors, and therefore demand is marginally lower.

One of the highlights of the day had to be the auction where seven buyer advocates turned up with interest in the same property and yet it was a lone buyer bidding without help who purchased the apartment. Why? Well, all the buyer advocates stopped at the top of the range which arguably still presented ‘value’, but the winning bidder – buoyed on with confidence that so many were interested in the home – carried on regardless!

Passed in on a VB

17 Bent St, Malvern East

17 Bent St, Malvern East – Quoted at $920,000- $1,020,000 attracted a good crowd of neighbours all emerging from their homes throughout the open in order to view the event, however it was uncertain whether there were any ‘real’ buyers there. Aside from a rather compromised position (being opposite a rather scruffy block of apartments) the home ticked all the right boxes for an owner occupier – good floor plan, convenient location, off street parking, plus an attractive renovation with period features to suit its street facade.
Its one down point was the unfortunate fate of falling into that rather sticky price range which isn’t exactly ‘flying’ in our current market. Opening on a vendor bid of 940K the agent struggled valiantly to inspire the multitude. After a quick half time break, and another good attempt to motivate the crowd, the property passed in with no bids. However the disappointment was short lived. Resulting interest ensured it eventually sold for $1,012,500.

16 Findon St, Malvern East

16 Findon St, Malvern East suffered a similar fate – however this time without the happy ending. Another attractive residence – well renovated in a style suited to the main buyer demographic in this location; however the south facing rear, and lack of any off any street parking, was always going to work against a positive result (especially in a soft market.) Quoting in excess of 1.1Mil, the auctioneer inspired the crowd with a pre-amble full of encouragement on why they should opt for a renovated house, rather than playing ‘The Block’. However no luck came from it – he opened on a vendor bid of $1.1Mil and after what I have to admit was an entertaining auction – passed it in with no further interest.

20 Lindsay St, McKinnon

20 Lindsay St also threatened to produce a disappointing result however thankfully (for the vendor,) the day wasn’t totally lost. Located in the much converted McKinnon secondary school zone but suffering from a few negatives such as its position on the ‘bend’ of the road and south facing rear, the house still attracted a good deal of interest as the lack of parking places on the street attested. Quoting $920,000 – $1,020,000 the auctioneer (Nick Renna) looked confident when he called for bids despite being met with silence. Finally he placed a vendor bid of 900K, followed a little later by a second vendor bid of $940K before passing the home in. Obviously not understanding the rule of ‘first right of refusal at the vendor’s reserve’ granted as a ‘gift’ to the top bidder in Melbourne’s property auctions – a family approached after the auction wanting to negotiate. With a reasonable reserve the property sold for $980K.

Passed in on a genuine bid

61 Repton St, Malvern East

61 Repton St, Malvern East was one of the few that did provide entertainment in the 1Mil plus range. Quoting in excess of 900K, the house couldn’t have provided a better prospect for a home buyer attracted to the popular single fronted Victorian period façade. A nice renovation with a northerly aspect, off street parking and located on one of the nicest streets in Malvern East, it was no surprise to see a bit of heated competition between bidders. The auctioneer didn’t ask for an opening bid. Instead he chose to open on a vendor bid of 900K (low enough to build momentum for the buyers in the crowd feeling the need for a ‘safe’ level to start). However, even with 5 bidders the pace was slow. The auctioneer went inside to ‘discuss’with the vendor as the price pushed passed 1Mil, however on return it still wasn’t ‘on the market’. At $1,079 Mil the property passed in and was successfully negotiated for an undisclosed price which wasn’t too far from the passed in figure.

Sold under the Hammer

In case you’re under the impression I saw nothing sell under the hammer today, the next two results will prove the points I made above showing where the main demand lies.

6/15 Denbigh St, Armadale

It was a ‘buyer advocates party’ at 6/15 Denbigh St, Armadale when no less than 7 of us turned up to the auction of this larger than average apartment quoted at $530-$580K. With buyer advocates dotted all over the horizon there was no doubt we’d see competition and yet also provide a challenge for the auctioneer who was faced with continuous demands as to whether the property was ‘on the market?’. Obviously there was going to be no show of coyness when Adam (the auctioneer) asked for an opening bid – one buyer advocate launched in at $550K and it was battle on! The increments between numbers were being negotiated down as the property reached its market value of around $580-$590K. At $590K Adam went inside to ‘consult his vendor’ and emerged to announce the home was ‘on the market’, however as would be expected, all advocates had all estimated value at ‘around’ the same level, and at 600K the dollars were all but spent. It was for this reason that the winning bidder ended up being an average punter who happily secured his new home for the grand price of $606K.
Considering the apartment last sold for $551,500 in December 2009, the result proves not all sales are suffering from our flat market.

And finally as if that wasn’t enough buyer advocates to meet in a day, 4 turned up to the auction at 5/95 Addison St in Elwood.

5/95 Addison St, Elwood

Offering something that was seemingly appealing for a property investor, this set and forget 2 bedroom apartment is located in one of the best streets in the suburb. Quoting $490-$530K the auction opened with a genuine bid of $500K. It hit its ‘on market’ price just above the quoted range at $540K, and sold under the hammer for $571K.

Catherine Cashmore

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