Market Comment - Monday 13th December 2010

Channel Nine news ran with a lead story on Saturday night, saying the market in Melbourne has definitely faltered and talked about the bubble bursting. The “expert” they interviewed was a reporter from the Herald Sun. The talk of only 60% clearance rate shows the market in Melbourne is lost!!

There were more auctions held than any weekend since March 2008 and the clearance rate remained at the same level as it has been since October this year. I think it was a slow news day on Saturday. The market is tilted in the buyers favour for the moment. The market is hardly in free-fall. We will not see 40% drops in property values. We will not see people “giving” away their properties. In fact, I think we will see modest growth throughout 2011 in the top third of suburbs in Melbourne.

The consistent clearance rate of 61%, and a recorded 1210 total sales for the week, is indicating we have a market which is neither hot nor cold, but rather best described as a ‘negotiators market’. This was fairly obvious when looking at the number of unreported results – 195. We purchased seven properties in the last 4 days with another 5 still under negotiation.

17 Northcliffe Rd, Edithvale– 3 bedrooms 2 bathroom house, renovated and on 822 sqm of land. Quoted $610,000 - $670,000, the auction opened on a vendor bid of 610K, however despite a good crowd there was zero activity from buyers. The agent worked very hard to get things started – going into see the vendors more than once and sending his agents into the crowd to chat with buyers whilst he did so. Finally someone offered 620K and this set the ball rolling. 2 bidders fought it out to 690K where it passed in, (despite the agent stating one more bid would probably put it on the market). The property sold via negotiation for 695K.

Taurus Rd, Doncaster East – a 4 bedroom, 2 bathroom house verbally quoting high 600K – low 700K. The auction opened on a genuine bid of 650K, In contrast to the other auctions, the pace was fast with 3 bidders and a lively atmosphere. The bidding slowed at 727K at which point the agent put it on the market and, with no other bids knocked it down at 727K.

8 Black St, Brighton – 4 bedrooms 3 bathroom, 2,000 sqm of land, and a vendor that had lived there for 38 years. A premium spot in Brighton, the agent was quoting 5Mil – 5.5Mil. There was a large crowd and seemed to be good interest, however another slow opening. I’ve never heard an agent go on so much about a properties potential before asking for bids. He seemed to be thoroughly enjoying the attention or just avoiding the inevitable pass in which was becoming an all too familiar pattern. Once he did stop talking, one buyer was willing to open on a bid of 4Mil. This opened the way for someone else to get involved, and for a moment there I did think it might just reach the quote range. However alas – no such luck. The house was passed in at 4.8Mil and was later sold via negotiation for $5,125,000.

And so the pattern continued throughout the day. Few properties sell under the hammer these days but good negotiators will make the difference in walking away from a good property and securing it for a good price.

If you are considering a purchase of property in Melbourne, please do not hesitate to give our office a call. We will be taking a short break after next weekend but our emails and office phones will be managed throughout the festive season.

This will be the last market comment for the year. We will start again early in the New Year. Our last newsletter will go out later this week. From the team at JPP, I want to wish you a safe and happy festive season.

Ian James

Market Comment - Monday 6th December 2010

Clearance rates remained at 60% on a similar number of auctions to last week. There were 1205 sales reported the REIV last week. This is substantially down on this time last year, when around 1500 properties a week were being reported all the way through to Christmas. With the biggest auction weekend of the year gazetted for next weekend, I would not be surprised to see a drop in the clearance rate.

However, if the clearance rate remains resilient at around 60% this bodes extremely well for vendors next year and means purchasers will be looking at increasing prices for property. Total sales will also help work out what next weeks “litmus test” will mean for early next year.

The REIV have also reported that this year will have been the most auctions ever, surpassing the figures for 1999. That was a year where growth in the Melbourne median had come off a decade low growth after Paul Keating’s “recession we had to have.” Interest rates were very similar to what they are now. Most of 1999 the RBA cash rate was 4.75%. Unemployment rates were dropping until after “9/11” when the World Trade Centre was attacked in 2001. Australia’s Population growth rate was rising, and even our inflation rate (CPI) was climbing. All of these indicators were similar to what we have now. In the years 2000, 2001 & 2002 we had median house prices in Metropolitan Melbourne increase 9.2%, 18.42% & 15.56% respectively, according to Valuer General Data. I would consider the last decade to have been different to the ‘90’s’ and this is the reason I do not foresee exactly the same results but would assume a trending upward of the Melbourne median price to be a foregone conclusion over the next five years.

Some sales of note for this week:

10/120 Ferntree Gully Rd, Oakleigh East. Not the best location, however from an affordability point of view it had attraction for home buyers looking for a nicely renovated 2 bedroom villa unit for the same value as a one bedroom in a better location. Quoted $310,000 - $340,000, the auction opened on a genuine bid of $310K and took no time at all to exceed the quoted range and be declared ‘on the market’ at 350K. It sold 37K above reserve for at $387,000

31 Hopetoun Rd, Elsternwick - A beautiful location – 450 sqm of land, with an original Edwardian ‘renovators delight.’

This result was outstanding and surprised even those well-educated on sales in the suburb. Quoted at $1Mil - $1.150Mil. The agent opened conservatively on a vendor bid of 1Mil. There were 5 bidders keen to get involved (with 2 buyer advocates attending), however the next bid surprised all and knocked a few out before they’d even had a chance to raise a hand. A lone voice from the back of the crowd shouted out 1.2! – And resulted in the property going immediately on the market. Only one other bidder was willing to get involved over this amount, and after a speedy back and forth battle, the final selling price was $1.350 Mil. The vendors looked very happy, and I understand the purchaser is an owner occupier who plans to renovate rather than rebuild.

There are still over 2000 gazetted auctions scheduled for the rest of the year. If you are considering a purchase before Christmas, or early in the New year, please give us a call for a no obligation chat.

Ian James