Confidence is evident in Melbourne’s property market despite softer statistics…

by Antony Bucello & Catherine Cashmore

Once again, the weekend produced some ‘healthy’ results with a clearance rate of 74 per cent based on over 700 auctions. Typically most sales in Melbourne are conducted private treaty with a rough 75/25 percentage split – 75 per cent being private sales and 25 per cent ‘sale by auction’.

However when confidence improves and results start surpassing their reserve, the number of vendors opting to sell via auction increases. This week, 56 per cent of results posted were private sales, the rest were ‘for sale by auction’ and there is no perceptible sign of the market weakening. If anything the reverse seems to be occurring.

All auctions I’m attending are managing to sell under the hammer – however it should be noted that I typically attend “above par” listings which obviously attract a larger buying market. In some instances, those sales are exceeding reserve by over 10 per cent, which as we’ve seen previously in bullish auction markets, cannot be sustained over the longer term.

There has been little change in the basic fundamentals of our market place – confidence is still waxing and waning, with the latest Westpac-Melbourne Institute index down 7 per cent in May, to 97.6 – below the ‘critical’ 100 point bench mark. Also, news of job losses have been filtering in over the past few months, initially from Ford and Holden – and most recently Crown, which should reflect badly on unemployment data.

The drop in the cash rate, which was passed on in full by most lenders last month has provided buyers will a little more spending power, however the 70 per cent + clearance rate with overall turnover exceeding 1000 properties most weeks and prices swinging past the reserve, is more to do with the effect public auctions have on buyer psychology than anything else – producing a stimulant across the market place and all price ranges, as those who miss out, stretch budgets to make sure they don’t lose out on the next listing, and vendors up expectation as they see neighbouring properties sell higher than comparable sales would suggest.

Furthermore, stock is dropping – particularity good stock. Once again, this is fairly typical of a rising market. After-all, who wants to sell when the perception remains that a vendor can get ‘more’ if they hold and wait for further gains – especially as additional rate cuts have been widely ‘predicted.’

Therefore, considering the clear reality that the market shows no current sign of weakening, it’s somewhat of a surprise to find RP Data’s ‘daily index’ for the Month of May posting a -4.4 per cent drop in unit prices whilst at the same time, there has been a 3.7 per cent ‘rise’ in house prices for the same period. It should also be noted, that the REIV – which arguably collects a greater proportion of Melbourne’s sale data, has posted a comparatively ‘modest’ 1.4 per cent gain in house prices for the month of May, which is far more reasonable as an overall percentage.

There has been plenty of criticism aimed at the daily index for the apparent ‘mis match’ with other market indicators – some of which I have mentioned previously in my weekly Property Observer column. It seems the general consensus of opinion revolves around ‘lagging’ results which are collected and shuffled into the index at a later date. This would make sense in light of the strong gains that were posted in the first quarter, but not immediately evident ‘on the ground.’

Regardless – investors and home buyers need to be extremely prudent when setting budgets and bidding on properties. It’s still possible to buy well, however, without adequate knowledge of where we started, taking full advantage of sales data for the duration of the ‘year to date’ time span, the possibility of overpaying on the back of a short term auction ‘rally’ is ever prevalent.

Catherine Cashmore

Weekend Clearance Rate Figures

Week Ending Sunday 2nd June 2013

Clearance Rate:	74%
Total Auctions:	721 (7 unreported)
Sold:	531	Passed in:	190
At auction:	418	Vendor Bid:	107
Before auction:	113	Real bid:	83
After auction:	0
Total Private Sales:	685
Weekly Turnover:	1216
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.

Weekend Clearance Rate Figures

Week Ending Sunday 2nd June 2013

NPB Clearance Rate:	87%
Total Auctions Reviewed:	56
Sold:	49	Passed in:	7
Under $600k:	15		2
$600k-$1m:	24		2
$1m+:	10		3

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 56 properties reviewed by NPB this weekend:

< $600k

Suburb	Type	Beds	Quote	Result
Box Hill	Unit	2	$370-400k	SOLD $422,500
St Kilda East	Apartment	1	$400-440k	SOLD $442,500
Thornbury	Unit	2	$360-390k	SOLD $430,000
Seaford	House	3	$400-450k	PASSED IN
North Melbourne	Apartment	2	$410-450k	SOLD $448,000
Essendon	Apartment	2	$340-375k	SOLD $451,000
Heidelberg	Townhouse	2	$430-460k	SOLD $460,000
Reservoir	House	3	$450k+	SOLD $490,000
Elwood	Apartment	2	$470-510k	SOLD $520,000
Moonee Ponds	Unit	2	$370-400k	SOLD $541,000
Prahran	Apartment	2	$510-560k	SOLD $551,000
Thornbury	House	3	$530k+	PASSED IN
Preston	House	3	$540-580k	SOLD $580,000
St Kilda East	Apartment	3	$520-580k	SOLD $582,500
Preston	House	2	$500-550k	SOLD $585,000
Footscray	House	2	$510-560k+	SOLD $590,000
Vermont	House	3	$450k+	SOLD $596,000
Sold	15
Passed In	2	NPB Clearance Rate 88%
Total	17

$600k – $1m

Suburb	Type	Beds	Quote	Result
Northcote	Warehouse	2	$600-650k	SOLD $615,000
Seddon	House	3	$520-570k	SOLD $618,000
Northcote	House	2	$520k+	SOLD $620,000
Northcote	Unit	2	$510-560k	SOLD $630,000
Doncaster	Townhouse	4	$500-550k	SOLD $637,000
Preston	House	3	$530k+	SOLD $640,000
Northcote	Townhouse	3	$560-620k	SOLD $645,000
Brunswick East	Townhouse	2	$580-640k	SOLD $650,000
Box Hill North	House	3	$500-550k	SOLD $663,000
Kew East	Apartment	2	$550k+	SOLD $664,000
Mont Albert	Unit	2	$550k+	PASSED IN
Bentleigh	House	2	$550-600k	SOLD $665,000
South Melbourne	House	2	$600k+	SOLD $670,500
Richmond	Apartment	2	$550-600k	SOLD $671,000
Collingwood	Apartment	2	$550-600k	SOLD $675,000
Thornbury	House	2	$590-650k	SOLD $689,000
Seddon	House	2	$600-650k	SOLD $700,000
Prahran	Townhouse	2	$620k+	SOLD $701,000
Box Hill	House	2	$600k+	SOLD $704,000
South Yarra	Apartment	2	$600-660k	SOLD $706,000
Thornbury	House	2	$680-740k	SOLD $740,000
Hawthorn	Apartment	2	$550-600k	SOLD $741,000
Pascoe Vale Sth	House	3	$670-720k	SOLD $744,000
Elwood	Townhouse	3	$750k+	SOLD $795,000
Box Hill North	House	3	$650k+	SOLD $800,000
Northcote	House	2	$660-730k	PASSED IN
Sold	24
Passed In	2	NPB Clearance Rate 92%
Total	26

$1m+

Suburb	Type	Beds	Quote	Result
Middle Park	House	2	$1m+	PASSED IN
Glen Waverley	House	4	$1.1-1.2m	SOLD $1,120,000
Carlton North	House	2	$1.05-1.15m	SOLD $1,180,000
Essendon	House	4	$1.1-1.2m	SOLD $1,264,000
Brighton	House	2	$1.2m+	SOLD $1,375,000
Clifton Hill	House	3	$1.25-1.35m	SOLD $1,389,000
South Yarra	Apartment	3	$1.2m+	SOLD $1,461,000
Alphington	House	3	$1.4-1.55m	PASSED IN
Hampton	House	4	$1.55-1.65m	SOLD $1,630,000
Carlton North	House	4	$1.9-2.1m	SOLD $2,320,000
Hawthorn	House	4	$1.9m+	SOLD $2,760,000
Brighton	House	4	$2.4m+	PASSED IN
Middle Park	House	5	$3.2m+	SOLD $3,930,000
Sold	10
Passed In	3	NPB Clearance Rate 77%
Total	13

Overall

Sold	49
Passed In	7	NPB Clearance Rate 87%
Total	56

AUCTIONS IN THE SPOTLIGHT

 

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Regards

Antony Bucello and Catherine Cashmore

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