by Antony Bucello & Catherine Cashmore
The jury’s out on whether Australia is entering the ‘mother of all dwelling booms’ as Robert Gottliebsen took note to warn in Business Spectator last week.
And whilst the construction sector continues to fall short of expectation, the established housing market, most notably in Sydney although also reflected in other states – has moved.
‘War stories’ are emerging from buying and selling agents of auctions attended where the prices have exceeded the reserve by 10-20 per cent. In turn, vendors are reassessing their expectation of value based on neighbouring results – and with more talk of prospected drops to the cash rate, purchasers are shopping lenders to see how far their budget will stretch.
The main force behind the buying market is a mix of investors and up-graders who – in turn are boosting the premium housing sector using funds from the sale of lower priced properties to leverage up which coupled with lower rates reduces the size of their loan – distorting the forward analysis of the lending data in relation to price growth somewhat.
In contrast demand from first home buyers has weakened significantly – waxing and waning only on the back of various grants and incentives.
Each are buying for different reasons, and as we know, in this sense, the environment has been nicely manipulated by supply side constraints which keep Australia in a donut like geographical outlook.
However, as Robert Gottliebsen points out in his column, and as I mentioned last week – a very low interest rate environment is one such condition that encourages investors to pull back on saving in favour of a spend/borrow mentality. And in our property obsessed culture – following years of woeful planning for population growth, most of this pent up demand is being fed into the second hand housing sector.
The effects are often amplified in areas where auctions sales predominate. When buyers see properties openly selling above their pre-conceived perception of ‘market value’ (something that generally doesn’t happen when the sale is conducted via ‘private’ negotiation) it provides very visible reality that the market’s ‘appreciating’ and the effects on the mindset act like a kind of contagion.
Interestingly enough, the reverse is the case when a larger proportion of properties pass in at auction – leaving buyers with the worrying impression the market’s ‘tanking.’
During a competitive auction buyers spend far less time thinking about exceeding budget constraints than they do when – in a rational ‘pre auction’ moment, they take time to discuss (usually with their partner) where to draw a sensible limit for the property in question.
In truth, when the market is buoyant, and competition evident, buyers don’t bid for the property – they simply bid to ‘win’ – something I witness weekly.
And of course, whenever rising prices openly occur, stock inevitably reduces. After-all, who wants to sell an asset that’s increasing in value, when the observation prevails that a vendor can get ‘more’ if they hold and wait for further gains to come? Especially as additional rate cuts are still widely predicted.
The other issue which Robert Gottliebsen touches upon is foreign acquisition. The falling Aussie dollar has given Asian property investors an opening to look favourably once again upon dwelling investment in our capital city markets.
As reported in the Australian Financial Review last week “A Sydney Property developer sold 90 off-the-plan apartments at the opening of a new tower in Bondi Junction in 5 hours” and whilst a large proportion of funds will be fed into off-the-plan construction, assisting developers in the approval process somewhat, it’s arguable as to how many of these new apartments will actually make it onto the rental market. With limited options for investment, real estate acts like a magnet for Chinese buyers – who are not averse to purchasing speculatively whilst leaving apartments sitting empty.
There will be plenty of argument yet to come as to the level of the current ‘boom’ and its longevity. But what cannot be argued is the conditions that took values to their 2010 peak following our ‘golden decades’ of growth, will not be replicated as we enter a very different and challenging macro environment than previously experienced – hence why I hold the opinion that we’ll see shorter durations to the traditional boom and bust “market cycle.”
The bottom lines remains, those looking to purchase in the current environment may well need to re-assess their budget ‘upwards’ in order to do so.
| Clearance Rate: | 75% | ||
| Total Auctions: | 555 (75 unreported) | ||
| Sold: | 418 | Passed in: | 137 |
| At auction: | 341 | Vendor Bid: | 86 |
| Before auction: | 76 | Real bid: | 51 |
| After auction: | 1 | ||
| Total Private Sales: | 458 | ||
| Weekly Turnover: | 876 | ||
| 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 moving in line with REIV data– however it should be noted, the quality and quantity of ‘good’ listings are slowly reducing now we’re in winter, and this has increased competition.
| NPB Clearance Rate: | 87% | ||
| Total Auctions Reviewed: | 49 | ||
| Sold: | 43 | Passed in: | 6 |
| Under $600k+: | 15 | 2 | |
| $600k-$1m: | 15 | 2 | |
| $1m+: | 13 | 2 | |
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 49 properties reviewed by NPB this weekend:
| Suburb | Type | Beds | Quote | Result |
| Fawkner | Townhouse | 3 | $340-380k | SOLD $385,000 |
| East Melbourne | Apartment | 1 | $370-400k | SOLD $435,000 |
| Elsternwick | Apartment | 2 | $390-430k | SOLD $440,000 |
| Greensborough | House | 3 | $390-430k | SOLD $455,000 |
| Reservoir | House | 3 | $420k+ | SOLD $465,000 |
| Preston | Unit | 2 | $380k+ | SOLD $471,000 |
| Donvale | Townhouse | 2 | $410-450k | SOLD $486,000 |
| Fitzroy North | Apartment | 2 | $450k+ | SOLD $487,500 |
| Caulfield North | Apartment | 2 | $430-490k | PASSED IN |
| Reservoir | Townhouse | 3 | $450k+ | SOLD $517,000 |
| Richmond | Apartment | 1 | $430-470k | SOLD $530,000 |
| Forest Hill | House | 2 | $450-490k | SOLD $530,000 |
| Greensborough | House | 3 | $450-490k | PASSED IN |
| Carnegie | Unit | 2 | $450-490k | SOLD $547,000 |
| Hawthorn East | Apartment | 2 | $500k+ | SOLD $555,000 |
| Ashwood | House | 3 | $490-530k | SOLD $557,000 |
| Thornbury | House | 2 | $520-570k | SOLD $585,000 |
| Sold | 15 | |||
| Passed In | 2 | NPB Clearance Rate 88% | ||
| Total | 17 | |||
| Suburb | Type | Beds | Quote | Result |
| Bentleigh East | Unit | 3 | $470-510k | SOLD $625,000 |
| Collingwood | Apartment | 2 | $500-550k | SOLD $630,000 |
| Thornbury | Unit | 3 | $550-600k | SOLD $650,000 |
| Blackburn | House | 3 | $500-550k | SOLD $661,500 |
| Blackburn South | House | 3 | $550k+ | SOLD $703,000 |
| West Footscray | House | 3 | $600-660k | SOLD $705,000 |
| Carlton North | Apartment | 2 | $680-750k | SOLD $720,000 |
| Fitzroy | Apartment | 2 | $575-625k | SOLD $821,000 |
| Thornbury | House | 3 | $700-770k | PASSED IN |
| Port Melbourne | House | 2 | $750-820k | SOLD $830,000 |
| Collingwood | Townhouse | 3 | $680-740k | SOLD $851,000 |
| Elsternwick | Unit | 2 | $750-825k | SOLD $851,000 |
| St Kilda East | Apartment | 3 | $750k+ | SOLD $915,000 |
| Ascot Vale | House | 3 | $780-850k | SOLD $945,000 |
| Malvern East | Unit | 3 | $780-850k | SOLD $950,000 |
| Kew | Apartment | 2 | $850k+ | PASSED IN |
| Heidelberg | House | 4 | $850-920k | SOLD $985,000 |
| Sold | 15 | |||
| Passed In | 2 | NPB Clearance Rate 88% | ||
| Total | 17 | |||
| Suburb | Type | Beds | Quote | Result |
| Brunswick West | House | 3 | $660-720k | SOLD $1,017,800 |
| Abbotsford | House | 3 | $950k+ | SOLD $1,065,000 |
| Heidelberg | House | 3 | $800-880k | SOLD $1,100,000 |
| North Melbourne | House | 4 | $950k+ | SOLD $1,175,000 |
| Ascot Vale | House | 4 | $1.15-1.25m | SOLD $1,260,000 |
| Elsternwick | House | 4 | $1.35m+ | SOLD $1,420,000 |
| Kew | House | 4 | $1.2-1.3m | SOLD $1,460,000 |
| Brighton East | House | 4 | $1.3m+ | SOLD $1,466,000 |
| Mont Albert | House | 4 | $1.35m+ | SOLD $1,670,000 |
| Glen Iris | House | 4 | $1.75m+ | SOLD $1,840,000 |
| Canterbury | House | 4 | $2m+ | SOLD $2,250,000 |
| Armadale | House | 3 | $2.2m+ | SOLD $2,530,000 |
| Canterbury | House | 4 | $3.9m+ | PASSED IN |
| Sandringham | House | 5 | $3.9m+ | SOLD $4,000,000 |
| Elsternwick | House | 8 | $6m+ | PASSED IN |
| Sold | 13 | |||
| Passed In | 2 | NPB Clearance Rate 86% | ||
| Total | 15 | |||
| Sold | 43 | |||
| Passed In | 6 | NPB Clearance Rate 87% | ||
| Total | 49 | |||
AUCTIONS IN THE SPOTLIGHT
5/47 Coorigil Rd, Carnegie
CONTACT US
If you need any assistance with searching, assessing or negotiating your next property purchase or simply wish to discuss your property buying needs, please don’t hesitate to contact us. Alternatively, you can complete our online Help Us Help You form and we will contact you.
Regards
Antony Bucello and Catherine Cashmore
Comment:
Last week 1/47 Coorigil Rd sold for $501,000 – this unit presented a little better, however the result was beyond expectation. 5 bidders competed for the little villa easily pushing past the reserve of $507,000. The result of $547,000 clearly represents of the current heat in the market.