See it's not all bad news! ST KILDA, 30 Crimea St: A happy couple embracing. John Carter (Hocking Stuart), under the hammer $1,450,000. 4 bidders.
At 6pm on Saturday the James Clearance Rate for the 35 $M+ auctions we covered was an almost icy 51%. Bidderman, our demand indicator showing average numbers of bidders per auction, remained at a market-cooling 1.4 bidders per auction. We seem now to be firmly in the grip of a Winter chill.
Market Summary:
March 2011 has seen a $M+ auction clearance rate averaging in the high 50s.
As the market continues in its cooler mode, an overhang of unsold homes continues to build. Two-thirds of homes passed-in are still for sale. Add to this the Expressions of Interest campaigns ending in no result and there seems little doubt we are in a softer, cooler, lower market than a month ago – especially at the high end.
Last week we produced a special report on the fate of $M+ properties that had passed in at auction this year and found that only 3 of the 26 $M+ pass-ins we monitored had since been bought a fortnight later. Seven days on from that report only a further two of those pass-ins have been reported as bought. Some of these properties went to auction 3 weeks ago. Of the 13 properties that we monitored last week as having passed-in, four have since been bought.
It seems it’s a tough gig right now for sellers whose property passes in at a price over the market.
Buyers – this is opportunity! You may think it will get worse (or better depending on your point of view). But what is likely is that after Easter sellers simply won’t put their homes on the market, creating a shortage of stock choice resulting in firming prices. We are not economists but the bad news does not seem to be anything other than transient to us right now – especially when the media are carrying credible news stories on housing shortages (supply) and increasing internal and external immigration (demand)
The $1 million to $1.5 million market is different to the rest and is still rocking along. The best description we feel is not ‘cool’, but ‘balanced’ – leaning in fact slightly to ‘warm’ for this dollar segment. This is the ‘hottest’ market at present and still has a reasonable depth of bidders. Prices are not shrinking as much in this price range.
The one thing that differs in this market segment from this time last year is the number of volcanoes (runaway 4+ bidder auctions). Today we saw 3 volcanoes from 19 auctions on properties between $1m and $2m we covered. This time last year (March 27th 2010) there were 9 volcanoes from 14 such auctions. That is a volcano rate of 16% today compared with 64% this time last year in that $1m to $2m range. So, even the early $1m+ market has slowed.
Back to to the Overhang or Hangover: If you accept we are in a Buyers’ market until Easter, then the question for those who haven’t gone into mental lockdown is:
What is happening to price?
That depends on the quality of homes you are looking at. If you just took your information from the results on sales of Red Hot Homes, you could interpret we are in an improving market. These top quality homes seem to be going even better than last year, as we show in the diagram below. (Although it is important to remember that these homes are understandably the focus of the selling agents – given they are marketers).
It is possible to read positive agent news, see some red hot results and look at selected median price changes and see a different story to what is happening to a lot of the market since the Labour Day weekend.
But for many homes where the vendors have circled $3 million as their hoped for price tag, the end result has been below rather than above $3 million.
In a slowing market with dropping prices as well as a fall in turnover (actual deals done), when the median price falls it does so in smaller doses than does the TOP of the TOP END market, because the TOP END tends to fall to the middle while the bulk of the lower end sales tend to hold up the median price. The reverse is not true when a rising price market comes with big turnover increases, because this tends to exaggerate the increases. This is not to say median prices are not useful – they are.
We are not saying the market is bad – we are saying it is good, in fact very good. You as buyers have opportunities to buy well – either by buying at a lower price or by securing a better home than you could have afforded this time last year, maybe even this time six weeks ago.
To buy better you need to be able to
- Act not freeze.
- Calculate correct market price ranges in this new market, i.e. when researching past prices it shouldn’t be an automatic plus 15% on last year.
- Remain flexible if your targeted home is high quality. The market may view it as a red hot and these are still going well and selling occasionally for better prices than a year ago.
- Adopt strategies to lower the price, or if that is too difficult for you then look for the buys that present opportunities to sell at a lower price without you asking. An alternative is to get a professional who can assist you in price strategies or take advantage of the opportunity to buy a better quality home than you thought possible.
Lower prices and choice can’t be a bad thing for buyers – even if only temporary.
If now is good news for buyers, how will the post Easter market be?
The important issue is stock supply, and to give us an idea of how this is going here are some thoughts gleaned from our ‘Round the Grounds agent opinion about upcoming stock levels:
- There is not a lot of new stock on offer in Port Phillip due to Grand Prix interruptions. With Easter approaching it is lean times for new offerings.
- Stock in Stonnington is now starting to dry up as Easter interrupts the market. With the vibe dropping since Labour Day we may well see limited stock in the discretionary upper end market coming on post Easter. 19 Huntingfield Toorak (Justin Long) was a classic example of a limited offering that captured the market’s attention. Even allowing for building value at $2,000,000 (and that is generous) that meant that land value with a north orientation was around $5,000 per sq metre – not exactly a giveaway price, and certainly higher than 2010.
- Peter Kennett, Hocking Stuart, Brighton, believes the window of opportunities and fair choice in Bayside won’t last long. “Currently the best opportunities for buyers are at the top end. There are great negotiation opportunities at the top end. (But) school holidays and winter coming means less stock available for buyers… “
- In Boroondara there has been tremendous change within the business of real estate. The May and Winter markets will all be determined by stock levels – the size of the overhang, how it’s mopped up and whether or not we will see nervous vendors putting their quality stock up for sale post Easter. For buyers, now may simply be a window and not a trend.
Runaway of the Year to date:
208 Drummond Street Carlton: James Keenan of Nelson Alexander: Terrace home, quality and around 255sqm. This was quoted and on the market at around $1.5million and two bidders fought it out until, wait for it, around $2.5 million (undisclosed final price). WOW!
$3M+ Market:
STOP PRESS: March, while not huge in numbers, did finish the month with three solid mid-week $3M+ buys – including four bidders at $7 million or better at two auctions.
- Toorak Ottawa Avenue : Jeremy Fox of RT Edgar – quiet sale off market in the mid $8 millions
- Toorak 19 Huntingfield: Justin Long and Peter Bennison of Marshall White – mid-week auction, 3 bidders and on the market at $6,700,000. Bought under the hammer for $7,060,000.
- Canterbury 13 Rubens: Jeremy Desmier Fletchers and Tom Ryan, Sold before Auction: Over $3,000,000.
A sea of umbrellas and a solid result for Justin Long (Marshall White) SOUTH YARRA, 66 Hawksburn: Under the hammer, $2,440,000, 5 bidders
Biggest Sale: $7,060,000: Toorak 19 Huntingfield: Justin Long and Peter Bennison of Marshall White – Mid week auction, 3 bidders and on the market at $6,700,000. Bought under the hammer for $7,060,000. James Connell said afterwards that this market was not all bad news and he added Huntingfield proved that.
Bidderbuzz Auction: 66 Hawksburn Rd, South Yarra, Justin Long (Marshall White); under the hammer, $2,440,000, 5 bidders
“Despite the abysmal weather, a crowd of no less than 90 people attended this South Yarra auction. Auctioneer Justin Long did his best to entice an opening bid from the crowd, but to no avail, and instead decided to make a vendor bid of $1,800,000 to break the silence. Mr Long did not have to wait long for his first legitimate bid from the crowd, which came within moments of his vendor bid. Four other bids soon joined in the mix pushing the price past $2,000,000, then $2,100,000, and finally slowing at $2,400,000. Sensing the conclusion of the auction, Mr Long cannily attempted to extract one or two last bids from the interested parties. The home was eventually bought under hammer for $2,440,000 and applause were heard for the winning party.” (Daniel Ehrenreich)
Biggest Pass In we covered: 79a Harcourt St, Hawthorn East, Mark Dayman (Marshall White); passed in $3,300,000; no bidders
“No shoes were allowed in this property, which happens from time to time. What I wasn’t prepared for were the sixty pairs of shoes that made it difficult to access the front door! The attending crowd of over 130 surely gave auctioneer Mark Dayman some confidence that there might be a genuine buyer amongst the group. With a succinct preamble it was now up to the crowd to play their part, however the silence led to a vendor bid of $3,300,000 . Still nothing and half time was called. After the quickest half time I have ever experienced, Mr Dayman didn’t mess around and the property was passed in. Negotiations were commenced with interested parties.” (Guy Angwin)
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Auction Video: Klarity Kris reports from leafy Malvern on the Jeremy Fox (RT Edgar) auction at 4 Beamsley. Click on the live action.
Buyer Masterclass: What should you look for when buying a home when there are kids in the picture? Klarity Kris discusses this scenario in this week’s Buyer Masterclass.
We Only Buy Homes
Do you know where all the bidders have gone? Sorry Nathan no! GLEN IRIS, 1/292 Tooronga Rd passes for $975,000 in front of a small crowd.