Why property isn’t selling…

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Emotion rules the auction market – there’s nothing like the street theatre of a good auction with 4 or 5 willing participants and a never ending flow of tit for tat bidding giving a feeling somewhat akin to the suspense built up on an episode of ‘Who Wants To Be A Millionaire ‘. However, in our current market – just heading into the milder weather of spring – it’s still a rare event as this weekend’s mundane clearance rate of 55% demonstrated. However, if ‘The Block’ was going to teach us anything, it demonstrated that when a property passes in to later be negotiated – an excellent price can still be achieved belying the impression some may have of an ever falling market. In other words, although not a lot is happening in full view of the buying public, there’s plenty happening behind the scenes providing vendors are reasonable with expectation.

On the note of vendor expectation, there’s a large number who still have their eyes firmly fixed on the stars resulting in massive amounts of lingering stock on the market which is simply not going to budge. As I’ve said I previous weeks, there’s plenty of buyers out there and big crowds attending the auctions. However if you can imagine a market place full of purchasers ruled by cautionary fear on the one side, and ample stiff necked vendor’s unwilling to shift their expectation on the other, then we have a case of stalemate and is it any wonder overall year to date turnover is low!? (Down 20% on this time last year).

Not a week goes by without hearing sales agents report their frustration with vendors who are only willing to sell ‘if’ they can get their 2010 ‘wish’ price. Unless the agent can find a ‘wood duck’ buyer, we can safely assume this stock is not going to move and therefore not really for sale. After all, most people are happy to sell for a dream price – however most of us would also like to win the lottery…. I expect this stock to gradually drop as the agents cull the 15% they can’t earn a commission on, and concentrate on those willing to negotiate at today’s prices. However, prices being achieved on the stock that is selling are better than we saw earlier in the year and the true picture is more a case of ‘steady as she goes’. Therefore don’t be surprised to see a slow increase in the median as the spring market progresses and the window shoppers currently ‘monitoring’ the market slowly turn into buyers.

As you’ll see from the results below – if you’re entering the property market with a long term plan and plenty of due diligence, regardless of what atmosphere you find yourself selling in, you’re – highly likely to make a healthy profit on your initial investment.

899 Centre Rd, Bentleigh East

899 Centre Rd, Bentleigh East was last sold in 2007 during the ‘boom’. It achieved $861K under the hammer which was an excellent result. Therefore observing if the vendor’s could achieve anything better in our current flat market was always going to be interesting. It’s not a well located property, however the land size (over 800 sqm) and internal renovation was always going to appeal to the family buying market. Quoting $830K-$910K the auction attracted a crowd of roughly 70 buyers and neighbours however few were stirred into action and the auction was forced to open on a vendor bid of $860K. It was some time later that the auctioneer was able to inspire the confidence needed for a genuine bid of 870K. Always entertaining – the auctioneer Nick Renna entertained the crowd with a few quips before passing the home in for negotiation. A result has yet to be recorded.

7 Thorburn St, Hampton

7 Thorburn St, Hampton fared slightly better – just. The agency had been quoting 1.2-1.3Mil. However like the example above the last sale had been just 3 years ago in 2007 for $ 1.155Mil. The house is nicely located and renovated with 4 bedrooms and a back yard pool and therefore had a good chance of attracting a buyer – and attract a buyer it did – albeit just the one!

Opening on a vendor bid of 1.2Mil, a genuine bidder placed a second bid of 1.205Mil before the home passed in. A sale was later negotiated for $1,280Mil ensuring the vendors made a slight profit on their initial investment.

5 Dennis St, Highett

5 Dennis St Highett was another somewhat eventless auction. Offering development potential on 585 sqm of land, the three bedroom home would have provided a good stepping stone into Highett’s market for young home buyers not afraid to roll up their sleeves. The agency was quoting $550K-$600K however the atmosphere was full of despondency. The auctioneer was forced to make two vendor bids – one at $500K and a second at $520K – followed by a lengthy half time break before a sole buyer conceded and offered an increment of 10K. Passing in at $530K, the property was later negotiated and sold for $590K. Considering the last sale was in 2002 for $220K the result nicely exceeds Highett’s average 10 year capital growth rate of 10.24% (valuer general data) –providing a strong outcome for the vendors.

1/5 Marma St, Murrumbeena

1/5 Marma St, Murrumbeena was presented with wow. A brand new townhouse built on a block of land purchased in 2009 for $922,000 and quoted at 1-1.1Mil. The crowd was small, and full of neighbours rather than buyers. The agent made a beautiful job in his pre-amble citing the assets of the location. However this may have pleased the neighbours, but it didn’t inspire any potential bidders. Opening on a vendor bid of 1Mil followed by a second vendor bid of 1,020Mil, the house disappointingly passed in with an undisclosed reserve.

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