The current real estate market – can it stay this way forever? Don’t second guess the market, take the opportunities now…
by Antony Bucello & Catherine Cashmore
At 57 per cent, there was an improvement in the clearance rate this weekend from last weekend’s rate which only came in at 53 per cent. However due to the long weekend, there weren’t enough auctions to give a good indication of overall demand. Quality homes are rarely auctioned on long weekends, therefore not only are auction volumes reduced, the choices are generally ‘sub par’ to say the least
Figures pulled from RP Data-Rismark’s new daily hedonic index series and featured on Christopher Joye’s blog last week – prove the extraordinary boom that occurred in Melbourne over the Jan 2009 – Dec 2010 period, during which prices rose a whopping 34 per cent. This level of growth is clearly unsustainable therefore a correction was necessary, as a subsequent 9 per cent drop in the median to date (most of which has occurred since April this year) proves.
However, the average home buyer shopping in the established housing market may be wondering why they’re not noticing a great drop in prices considering the lackluster clearance rates and falling median prices? For this, we need to delve a little deeper to assess exactly where the price drops are occurring.
Thanks again to Christopher Joye’s blog which has a wealth of interesting data, further information based on RP Data-Rismark’s house price data reveals once broken down, the most expensive suburbs nationally (accounting for 20 per cent of the market) – have experienced the largest falls to date (3 per cent). However, the middle 60 per cent of suburbs have sustained market prices and properties in the lower price bracket – the cheapest 20 per cent of suburbs – have shown a marginal upswing in growth.
This largely corresponds with on the ground ‘agent’ feedback. Weekly I attend 8 – 10 auctions across Melbourne, covering a broad range of house prices and wide span of suburbs. There’s little evidence to show properties around the state median (currently $490,000) are dwindling. Providing the property has been marketed and priced ‘at value’ and appeals to the predominant homebuyer demographic shopping in that particular suburb, it’s more common to experience relatively strong demand and competitive bidding. Many times, I’ll walk away from an auction because a property has exceeded comparable value – on some occasions of late, it’s been well in excess of 10 per cent.
Having said this, there is still a looming gap between vendor expectation and current market value. It never seems to diminish unless there’s an urgent need to sell. This coupled with general hesitation from buyers still assuming there’s more drops to come is likely to stagnate any immediate growth.
Is it a good time to buy? Well in short, ‘yes’. Providing your finances are in order and you have stable employment, prices for inner and middle ring ‘quality’ real estate are showing a marginal uplift due to reduced seasonal stock. It’s not about second guessing the market over the coming months; it’s about taking the opportunities when they arise. The property clock won’t stick at the bottom perpetually.
| Clearance Rate: | 57% | ||
| Total Auctions: | 553 | ||
| Sold: | 315 | Passed in: | 238 |
| At auction: | 255 | Vendor Bid: | 148 |
| Before auction: | 60 | Real bid: | 90 |
| After auction: | 0 | ||
| Total Private Sales: | 530 | ||
| Total Sales: | 845 | ||
| Source: www.reiv.com.au | |||
The NPB clearance rate, which represents the ‘quality’ end of the market place shows consistency. It’s unlikely this will change in the near future, however as expected, it’s exceeding the REIV clearance rate and representing where the ‘real’ demand is for quality prime investment material.
| NPB Clearance Rate: | 80% | ||
| Total Auctions Reviewed: | 35 | ||
| Sold: | 28 | Passed in: | 7 |
| Under $600k: | 10 | 2 | |
| $600k-$1m: | 11 | 2 | |
| $1m+: | 7 | 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 35 properties reviewed by NPB this weekend:
| Suburb | Type | Beds | Quote | Result |
| Yarraville | Unit | 2 | $290-320k | SOLD $337,000 |
| Reservoir | Unit | 2 | $350k+ | PASSED IN |
| Footscray | Apartment | 2 | $350-380k | SOLD $385,000 |
| Heathmont | House | 3 | $400-440k | SOLD $447,500 |
| Richmond | Apartment | 2 | $420-460k | SOLD $470,000 |
| Surrey Hills | Unit | 2 | $430-470k | PASSED IN |
| Prahran | Apartment | 2 | $430-470k | SOLD $475,000 |
| Ormond | Apartment | 2 | $440-490k | SOLD $505,000 |
| Greensborough | House | 3 | $460-500k | SOLD $510,000 |
| Yarraville | House | 3 | $480-520k | SOLD $520,000 |
| Southbank | Apartment | 2 | $480-528k | SOLD $521,000 |
| Ashwood | House | 2 | $490-530k | SOLD $542,000 |
| Sold | 10 | |||
| Passed In | 2 | NPB Clearance Rate 83% | ||
| Total | 12 | |||
| Suburb | Type | Beds | Quote | Result |
| Kensington | House | 2 | $540-590k | SOLD $612,000 |
| Burwood | House | 3 | $600-660k | SOLD $660,000 |
| Murrumbeena | House | 3 | $630-680k | SOLD $685,000 |
| Kingsville | House | 3 | $630-680k | SOLD $687,000 |
| Brunswick | House | 2 | $660-725k | SOLD $705,500 |
| Yarraville | Townhouse | 2 | $600-660k | SOLD $710,000 |
| Box Hill South | House | 3 | $650-700k | SOLD $745,000 |
| Blackburn | House | 3 | $690k+ | PASSED IN |
| Mont Albert North | House | 3 | $690-740k | PASSED IN |
| Northcote | House | 3 | $690-750k | SOLD $765,000 |
| Collingwood | Townhouse | 3 | $750-800k | SOLD $830,000 |
| Essendon | House | 4 | $800-850k | SOLD $852,000 |
| Camberwell | Townhouse | 3 | $800-900k | SOLD $953,000 |
| Sold | 11 | |||
| Passed In | 2 | NPB Clearance Rate 84% | ||
| Total | 13 | |||
| Suburb | Type | Beds | Quote | Result |
| Elsternwick | House | 5 | $900k+ | SOLD $1,022,500 |
| Balwyn | House | 4 | $950-1050k | SOLD $1,050,000 |
| Williamstown | House | 4 | $1.1-1.2m | SOLD $1,205,000 |
| Toorak | House | 5 | $1.4-1.55m | SOLD $1,615,000 |
| Brighton | House | 4 | $1.3-1.4m | PASSED IN |
| Elsternwick | House | 5 | $1.7m+ | PASSED IN |
| Northcote | House | 4 | $1.85-1.95m | SOLD $2,020,000 |
| Templestowe | House | 5 | $2.8-3m | SOLD $2,915,000 |
| Fitzroy | House | 3 | $2.8m+ | SOLD $3,410,000 |
| Kew | House | 5 | $3.4m+ | PASSED IN |
| Sold | 7 | |||
| Passed In | 3 | NPB Clearance Rate 70% | ||
| Total | 10 | |||
| Sold | 28 | |||
| Passed In | 7 | NPB Clearance Rate 80% | ||
| Total | 35 | |||
AUCTIONS IN THE SPOTLIGHT
23/114 Dodds St, Southbank
17 Neville St, Box Hill South
Comment:
4 bidders competed for this 3 bedroom ‘updated’ family home. The auction opened on a genuine bid of $630,000. The property was announced on the market at $680,000, and sold under the hammer – with continual competition – for $745,000.
2/11 Fielding St, Yarraville
Comment:
It was quiet an eventful auction for this brand new two bedroom town house, situated in a good pocket of Yarraville. Opening on a genuine bid of $650,000, 3 bidders competed to push the price northwards of reserve. The crowd of people was interspersed with photographers and film crews from various media outlets, therefore it was hard to keep track of the action. I didn’t hear the reserve price announced, however approaching 700K, the auctioneer made it clear the property was ‘on the market’. It sold for $710,000 – a strong result.
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Regards
Antony Bucello and Catherine Cashmore
Comment:
This 2 bedroom, well presented apartment with an abundance of natural light in a ‘low rise’ development – a growing rarity in southbank – attracted a fair amount of interest, however as is typical to the Metro market at present, the action was marginal at best. One genuine bidder opened the auction at $450,000. This was followed by some tit for tat bidding from a second buyer who pushed the number to $480,000. After the ‘half time break’ there was no further interest and the property passed in. Negotiation was successful and the home sold for $521,000