oc | Monday 19th April

In our opinion, the Melbourne million-dollar-plus market could have risen by as much as 10 per cent in the past six weeks

Brighton, 36 Whyte Street: Auctioneer David Hart licking his lips as he conducts the classic auction in front of a large Bayside crowd. Sensible quote, set the tone, vendor bid, two bidders, pass-in and negotiate higher.

Brighton, 36 Whyte Street: Auctioneer David Hart licking his lips as he conducts the classic auction in front of a large Bayside crowd. Sensible quote, set the tone, vendor bid, two bidders, pass-in and higher.

raw_Saturday $1m+The James Clearance rate stands at 83 per cent on the 23 auctions of million-dollar-plus properties we attended today.

Please note James Market News is now translated into Chinese by Su who now works with us and can be viewed by clicking button to the right of this column.

This weekend, we thought you may be interested to read part of our initial draft for the James Million-Dollar-Plus Residential Homes Half-Year Report, due out at the end of June. Of course, things may change over the next month, but this is how we are reading things to date.

We feel the 2009 Melbourne million-dollar-plus market has risen by around 10 per cent this year. In context, that same market had fallen between 10 per cent and up to 40 per cent (in extreme cases) from its 2007 peaks by December 2008.

Good properties have risen in price since a turn in late January. Prices stabilised in February 2009 and gathered momentum, resulting in increases for high-quality homes, in the past six weeks (April to May 2009). It is also worthy of note that weaker properties have now become sellable, although, in many cases, still 10 to 25 per cent lower than the peak reached in Port Phillip and Bayside in late 2007, and the peaks reached in Stonnington and Boroondara in early 2008. The James Price Worm, showing our anecdotal thoughts on the market, is to the right of this article.

From what we have witnessed, million-dollar-plus Boroondara is the strongest area, then million-dollar-plus Stonnington and then the Bayside million-dollar-plus market.

Strong demand properties:

  • Rectangle house blocks around 750 m2 and more.
  • with “wow” and good floor plans.
  • Renovated period homes with good floor plans.

Weaker demand properties:

  • Single-fronted , especially in need of repair.
  • Over-quoted or higher than market-priced homes.
  • Difficult floor plan homes that require serious renovation.

Short-term factors driving current million-dollar-plus prices:

  • Shortage of stock.
  • Overseas demand from Asia with Foreign Investment Review Board rule changes.
  • Locals have decided to get on with life. They understand the global financial crisis but have found that its just not affecting them as much as the papers are implying (for now anyway).

Short-term factors restricting current million-dollar-plus prices:

  • Banks’ tighter lending policies.
  • General nervousness among 20-35-year-olds, who do not have the asset base of older people. This has been played out in the significant drop in single-fronted period home prices and the weakening of the sub-million-dollar apartment market.

Key long-term demand drivers:

  • Overseas people after schools for their children.
  • Overseas people after political stability and safe money havens.
  • Local population growth.

Key long-term supply drivers:

  • They’re not making any more in .
  • The contracting of the development market in mid-to-late 2008, which will be felt even harder around late 2009 and early 2010. There will be a 12-to-18 month lag after developers re-enter the market.

Some key James statistical evidence:

15 November to 6 December 2008 (four auction weeks): James $1m+ clearance rate: 35% on 53 auctions. Average bidders per auction: 0.8.

April-May 2009 (last four auction weeks)
: James $1m+ clearance rate: 75% on 80 auctions. Average bidders per auction: 1.875.

James Auction Success rates (eg what we actually buy vs what we bid on):
In the peak of the market (2007), our auction clearance rates dropped as low as 20 per cent. It’s a bit hard to recommend that your clients go even crazier than the market. By late 2008, our auction clearance rate had moved to almost 100 per cent. We were, in many cases, the only bidder; granted we had very few completed jobs. By April 2009, our Auction Success Rate was declining again and was around 35 per cent, in other words, if we attended three auctions on a Saturday to buy, we bought one. We have since taken a more aggressive line pre-auction, as you can see below, and our Auction Success rate has now moved to more than 50 per cent.

Real life anecdotes: in the past week, we have bought before auction:

  • Boroondara home, agent quote $1.5m+
  • Stonnington home, agent quote $2m+
  • Boroondara home, agent quote $1.5m+
  • East home, agent quote $800,000+

In the past month, we have missed at auction:

  • Hawthorn home, more than $1.5m (3 bidders)
  • Boroondara home, more than $1.4m (3 bidders)
  • home, private boardroom auction, more than $3m (3 bidders)
  • Prahran townhouse, more than $2m (4 bidders)
  • Brighton land, more than $1.4m (8 bidders)
  • As well, we have seen Expression of Interest campaigns not go our way.

If the market changes next week, we will write that up as well.

Finally, we have had conversations at opens and over coffee with Al Craig of , James Redfern of Marshall White, Jock Langley of ’s, Ian Jackson from JP Dixon, David Gillham from Noel Jones, John Bongiorno from Marshall White, Andrew McCann of , Barb Gregory of and Peter Kudelka from Kay and Burton, to name a few, and (accepting that selling agents’ views have some self-interest bias, as do ours, on wanting the market to be good), there is no denying that a significant majority of selling agents genuinely think the Melbourne million-dollar-plus market is improving (price-wise).

How long will it last? We’re sticking our neck out here and saying that it will last at least until next week! After that, we will have to wait and see.

Buy Well

Mal

This week, we would like to thank Madeline Kennedy of Marshall White for her efforts in the Another Point of View article.

We have had strong positive feedback from our Video Before the Auctions Segment (live every Tuesday) and a number of suggestions – thank you!

And Architect Adam shows us how we can improve 7 Parslow St Malvern, due for auction next weekend.

Agent Quoting is covered in a Million Dollar Melbourne Article below.

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