by Antony Bucello & Catherine Cashmore
We’re slowly approaching the winter market, and in line with seasonal expectation, quality listings are reducing and state wide median prices softening. RPData’s daily index shows a decline of 1.2 per cent in capital city home values and SQM’s ‘stock on market’ data indicates a -1.1 per cent fall over the month of April.
It’s important to get some kind of contextual overview whenever statistics are cited, because although on the face of it, the index shows a slight softening city wide, in the inner and middle ring suburbs, where most properties are auctioned, the reduction in quality listings, is concentrating competition around desirable homes and in some instances, pushing prices back towards their peak of 2010.
Results in the established sector are still strong, and therefore I’d imagine any softening in the price data is more to do with a drop in available ‘good’ listings than individual house prices themselves.
The weekend produced a 71 per cent clearance rate with a total of 932 properties set to change hands when combining both auction and private sales.
Year to date, we are ahead in total transactions, with 27,370 properties recorded as ‘sold’ compared to 26,061 for the same time last year.
I attended four auctions on Saturday – all of which sold ‘under the hammer’ with 3/4 bidders competing at each. Year to date, over $4 billion homes have been sold via auction (compared to $2.9 billion for the same time last year), a number which would include properties sold ‘prior to’ and via a ‘passed in’ negotiation, all of which count towards the weekly clearance rate.
The auction process obviously thrives in an atmosphere where confidence predominates and most selling agents are well educated in the means of manipulation to inspire buyers to openly state their interest in front of a crowd of individuals on a Saturday morning.
If a couple of bidders are brave enough to commence the battle, others have their initial attraction to the property demonstrably ‘fed’ by the competition and join in – conversely, if no-one openly states an interest, the reverse can be the case, leaving potential buyers wondering ‘what’s wrong with the home?’
In a market where auctions predominate, the price multiplier effect buoyed on through the physiological stimulant this method of selling promotes, results in prices gaining much stronger traction that would be possible in most private sale campaigns – something that has been well documented in various scientific studies.
And as we’ve seen in Australia – irrespective of lending rates which reached close to 9% in the lead up to the onset of the GFC – when such an attitude takes hold, it is remarkably difficult to break or ‘deflate’.
Australia wide, home buyers make up roughly 46/47 per cent of the buying market, whilst investors hold a rough 44/45 per cent. The average home loan is around $400,000 and the vast majority of buyers choose to pour these funds into the established market. Therefore, it stands to reason, that the strongest competition can being witnessed in the pre $600,000 price range.
Considering the levels of private debt – mostly leveraged against housing, and the long term acceleration in the investment sector, which currently makes up around 44 per cent of Australia’s buying market, it’s clear prices are once again moving northwards as a number of social and economic factors collide.
Increased confidence, availability of cheap credit (such as our current low interest rate environment,) and more importantly, the continuation of a cultural illusion that forgoes any financial prudence as investors pull their finances out of savings accounts before it’s purchasing power is diminished completely in an attempt to beat the well contained genie of inflation and shore up future security in an environment where basic living costs are high and growing.
Therefore, it’s unlikely we’ll see much change to the current status quo in the weeks ahead. The biggest challenge for home owners as well as investors will be sourcing the ‘good’ stock which I expect to reduce further. In markets where prices are rising, vendors often choose to delay going to market in anticipation of a ‘future’ higher price.
I would therefore caution buyers to keep a level head in what could turn out to be a rather competitive atmosphere.
| Clearance Rate: | 71% | ||
| Total Auctions: | 665 (40 unreported) | ||
| Sold: | 473 | Passed in: | 192 |
| At auction: | 401 | Vendor Bid: | 110 |
| Before auction: | 71 | Real bid: | 82 |
| After auction: | 1 | ||
| Total Private Sales: | 459 | ||
| Weekly Turnover: | 932 | ||
| Source: www.reiv.com.au | |||
The NPB clearance rate is representative of the results evidenced in the ‘quality’ end of the marketplace. We take the results from a range of suburbs; however please note we are not ‘suburb specific’. NPB Melbourne, negotiate on hundreds of properties for their clients each year throughout all areas of Melbourne and the Bellarine Peninsula. The properties we highlight are taken from a selection which we carefully analyse for quality assessment and revise daily.
NPB’s clearance rate is moving in line with REIV data – however it should be noted, the quality and quantity of ‘good’ listings are slowly reducing as we approach winter and it’s expected this could increase competition.
| NPB Clearance Rate: | 87% | ||
| Total Auctions Reviewed: | 40 | ||
| Sold: | 35 | Passed in: | 5 |
| Under $600k: | 17 | 1 | |
| $600k-$1m: | 13 | 3 | |
| $1m+: | 5 | 1 | |
Why is the NPB Clearance Rate always higher than the REIV Clearance Rate?
The NPB clearance rate is a snapshot of ‘investment grade’ or ‘cream of the crop’ properties representing only those we recommend to clients. These are properties that hold the best potential for a long term capital growth and rental demand. Whilst the Real Estate Institute of Victoria include all properties scheduled for auction (as reported by their members) – including those that are poorly located and unlikely to attract demand even in a robust climate; our clearance rate is far more representative of the market that represents our client’s best interests. It’s an important part of how we assess the best negotiation strategy for your needs.
The full list of the 40 properties reviewed by NPB this weekend:
| Suburb | Type | Beds | Quote | Result |
| Fairfield | Apartment | 2 | $350-380k | SOLD $391,000 |
| Balwyn | Apartment | 2 | $380-420k | SOLD $426,000 |
| Balwyn | Apartment | 2 | $400-450k | SOLD $430,000 |
| Kew | Apartment | 2 | $380-420k | SOLD $450,000 |
| Thornbury | Unit | 2 | $390-430k | SOLD $450,000 |
| North Melbourne | Apartment | 2 | $400-430k | SOLD $450,000 |
| Essendon | Townhouse | 2 | $410-450k | SOLD $454,000 |
| Fairfield | Apartment | 1 | $400k+ | SOLD $460,000 |
| Reservoir | House | 3 | $430k+ | PASSED IN |
| Carnegie | Apartment | 2 | $390-430k | SOLD $463,000 |
| Reservoir | House | 2 | $400k+ | SOLD $506,000 |
| Brunswick | Townhouse | 2 | $420-460k | SOLD $507,000 |
| Box Hill North | Unit | 2 | $410-450k | SOLD $510,000 |
| Clifton Hill | Warehouse | 1 | $400-440k | SOLD $515,000 |
| Box Hill | Unit | 2 | $450k+ | SOLD $527,500 |
| Coburg North | House | 2 | $460-520k+ | SOLD $575,000 |
| Prahran | Apartment | 2 | $470-520k | SOLD $580,000 |
| Brunswick West | Townhouse | 3 | $550-595k | SOLD $597,000 |
| Sold | 17 | |||
| Passed In | 1 | NPB Clearance Rate 94% | ||
| Total | 18 | |||
| Suburb | Type | Beds | Quote | Result |
| Brunswick West | Townhouse | 3 | $530-570k | SOLD $600,000 |
| Ormond | Townhouse | 3 | $500-550k | SOLD $625,000 |
| McKinnon | Unit | 2 | $450-495k | SOLD $641,000 |
| Thornbury | House | 2 | $540-585k | SOLD $641,000 |
| Doncaster East | Unit | 3 | $450-495k | SOLD $650,000 |
| Fairfield | Apartment | 2 | $550-600k | SOLD $650,000 |
| Doncaster East | Townhouse | 3 | $550k+ | SOLD $707,000 |
| Box Hill North | Unit | 3 | $540-600k | SOLD $710,500 |
| St Kilda | Apartment | 2 | $600k+ | PASSED IN |
| Richmond | Apartment | 2 | $600-660k | SOLD $740,000 |
| St Kilda | Apartment | 2 | $600-660k | PASSED IN |
| Brunswick | Townhouse | 3 | $630-680k | PASSED IN |
| St Kilda | House | 2 | $650-700k | SOLD $750,000 |
| Brunswick | House | 3 | $700-770k | SOLD $888,000 |
| Richmond | House | 3 | $850k+ | SOLD $955,000 |
| Prahran | Townhouse | 2 | $880k+ | SOLD $990,000 |
| Sold | 13 | |||
| Passed In | 3 | NPB Clearance Rate 81% | ||
| Total | 16 | |||
| Suburb | Type | Beds | Quote | Result |
| Ivanhoe | House | 3 | $900-990k | SOLD $1,195,000 |
| South Yarra | House | 4 | $1-1.15m | SOLD $1,370,000 |
| Newport | House | 4 | $1.1m+ | PASSED IN |
| Camberwell | House | 3 | $1.7m+ | SOLD $1,860,000 |
| Surrey Hills | House | 4 | $2m+ | SOLD $2,250,000 |
| Hawthorn | House | 4 | $1.9m+ | SOLD $2,550,000 |
| Sold | 5 | |||
| Passed In | 1 | NPB Clearance Rate 83% | ||
| Total | 6 | |||
| Sold | 35 | |||
| Passed In | 5 | NPB Clearance Rate 87% | ||
| Total | 40 | |||
AUCTIONS IN THE SPOTLIGHT
15 Neptune Street ST KILDA
1/56 Mimosa Road, Carnegie
Comment:
This two bedroom renovated unit in a block of only 6 attracted a large crowd of around 90 people. Opening with a real bid of $390,000, the auction soon gained traction. At $445,000 it was announced ‘on the market’ and with some last minute tit for tat bidding, sold for $463,000.
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Regards
Antony Bucello and Catherine Cashmore
Comment:
15 Neptune St is a modest two bedroom ‘one of a pair’ renovated Art Deco house on a decent land size for the suburb of just over 300 sqm. Opening with a genuine bid of $620,000, competition in the initial stages was relatively soft. However, following the traditional midterm break, the pace picked up as two bidders battled out the final stages. Announced on the market at $740,000, and following a bit of final encouragement from the auctioneer, the hammer finally fell at $750,000.