by Antony Bucello & Catherine Cashmore
Once again, Melbourne is producing robust results with the clearance rate ‘year to date’ now residing at 70 per cent (up from 68 per cent in April) and the latest REIV house price index posting a 1.4 per cent increase for the month of May.
According to the REIV, this is the eighth consecutive month of ‘house price’ increases, with unit prices also showing a moderate boost – up 0.9 per cent for the month – which is the third consecutive monthly rise.
Not surprisingly, the biggest gains have been recorded in the inner and middle regions of the city – principally, the ‘auction dominated’ terrains – with the outer suburbs remaining stable.
When confidence improves and auction results start to ‘openly’ surpass their reserve, the number of vendors opting to sell using this method increases. As reported by the REIV – by the end of June approximately 3,175 auctions will have been held. Only once in the past decade (2010) have there been more auctions in June, and in the inner and middle ring suburbs there is no perceptible sign of the market weakening, if anything the reverse is occurring.
It’s not quite the rampant atmosphere experienced in 2007 during which the ‘lending frenzy’ leading up to the GFC was pushing excessive amounts of easy credit into the market. Prices are still well below their peak and results patchy.
Albeit, whilst the aggregated data shows only moderate gains, – in areas where auction sales predominate (such as Bentleigh, Hawthorn, Glen Iris for example) a number of economic and social factors have combined to push it well and truly into a sellers domain.
The recent drop in the cash rate, provided buyers will a little more spending power, however the 70 per cent year to date clearance rate with overall turnover increasing and prices swinging past the reserve, is more to do with the effect public auctions have on buyer confidence than anything else.
The physiological impact when bidding against competition for an emotional asset has been well documented – and when confidence improves, this method of sale does result in higher prices – prices which would be extremely difficult to negotiate in a private sale scenario during which there would be no undisputed evidence to the ‘leading’ buyer that a competitor is willing to pay more.
Not unlike sports gambling – a well staged auction actively encourages buyers to lose a sense of considered rationality, with a trained auctioneer pushing the ‘players’ to stretch their budgets past their pre-established limit, which when combined with a strong desire to ‘win’ at all costs, can result in a potentially dangerous set of circumstances.
According to SQM’s weekly “vendor sentiment index,” asking prices are – if anything – trending upwards which once again suggests there is demand in the market currently meeting expectation.
It’s clear, investors remain the most active demographic, with the value of investor finance commitments up by 1% in April, and 18% over the year – the highest level since January 2008, which would have a beneficial roll over effect for those relying on sales to ‘upgrade’ (which it should be noted, increases spending power without the need to increase borrowing levels.)
In a recent survey conducted by Mortgage Choice of a sample 1000 mortgage holders, 83 per cent (roughly four out of five) voiced consideration to use the equity in their principle place of residence to purchase an investment property – the trend is strong.
With the above factors combined, plus expectation of another rate cut (or two) over the months ahead, it’s unlikely we’ll see any change to the current status quo – for the time being at least.
|Total Auctions:||740 (39 unreported)|
|At auction:||417||Vendor Bid:||146|
|Before auction:||102||Real bid:||73|
|Total Private Sales:||425|
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:||86%|
|Total Auctions Reviewed:||52|
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 52 properties reviewed by NPB this weekend:
|Ascot Vale||Apartment||2||$385-420k||SOLD $415,000|
|Surrey Hills||Apartment||2||$480k+||SOLD $510,000|
|Box Hill||Unit||2||$390-420k||SOLD $515,500|
|South Kingsville||House||3||$480-510k||SOLD $525,000|
|Hawthorn East||Apartment||2||$440-480k||SOLD $538,000|
|Wheelers Hill||House||3||$490k+||SOLD $576,000|
|Passed In||2||NPB Clearance Rate 88%|
|Pascoe Vale||House||3||$400-440k||SOLD $605,000|
|Doncaster East||Unit||3||$520-570k||SOLD $605,000|
|West Footscray||House||3||$660-710k||PASSED IN|
|Caulfield South||House||3||$680-750k||SOLD $811,000|
|Clifton Hill||Townhouse||2||$700-770k||SOLD $846,000|
|St Kilda East||Townhouse||3||$770-850k||SOLD $865,000|
|St Kilda||House||3||$850k+||PASSED IN|
|Balwyn North||House||3||$800-880k||SOLD $920,000|
|Moonee Ponds||Apartment||3||$700-750k||SOLD $940,000|
|South Yarra||Townhouse||3||$900k+||SOLD $950,000|
|Passed In||4||NPB Clearance Rate 82%|
|St Kilda||Townhouse||3||$1.2-1.3m||SOLD $1,460,000|
|Passed In||1||NPB Clearance Rate 90%|
|Passed In||7||NPB Clearance Rate 86%|
AUCTIONS IN THE SPOTLIGHT
86 Hunter St, Richmond
- Reported by:Catherine Cashmore
- Agent:Jellis Craig
- Crowd:50 people (approx.)
- On Market:$895,000
- Result:SOLD $910,000
The auction started rather slowly with the auctioneer placing two vendor bids starting at $800,000. However, once someone decided to raise a hand, two buyers competed to push the result into the high $800,000s. At $895,000 the home was called ‘on the market’ and a few bids later, it sold for $910,000.
2/1B Kintore Cr BOX HILL
- Reported by:Antony Bucello
- Crowd:60 people (approx.)
- On Market:$460,000
- Result:SOLD $515,000
There was heated competition for this 2 bedroom unit in the heart of Box Hill. With five bidders competing, the price quickly exceeded its quoted range to be announced on the market at $460,000.
Unexpectedly, the final result exceeded $500,000 with the hammer falling at $515,000.
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.
Antony Bucello and Catherine Cashmore