There’s one school of thought which suggests that scarcity props prices. There’s another which argues that prices and incomes are related and a shakeout is inevitable.

Whichever proves correct in the long term, for now Melbourne is continuing to defy the gravity being felt elsewhere.

We have just experienced another more than interesting weekend. The contrast with 12 months ago in the inner suburbs is extraordinary.

Clearance rates at 85%? How does that happen?

Vendors are one factor: they (and their agents) have reaquainted themselves with reality and are now much closer to the market in their price expectations.

The other side of the equation is the buyers. Among them, confidence has been creeping back; particularly at the upper end. The sense is that, if you haven’t lost your job by now, you probably have a good chance of keeping it. Put that alongside low interest rates and the (only sometimes correct) sense that prices have fallen and it’s not hard to see why the crowds at auctions have been growing.

The blow-by-blow:

16/77 Caroline Street, South Yarra. Bidding started at $2.6 million, it was on the market at $3,020,000 and two bidders pushed it to $3,070,000. Perhaps reflecting the FIRB’s rule changes, the under bidder appeared to be new to these shores.

5 Montalto Avenue, Toorak (which seems to have been for sale forever) one bid of $3 million, passed in, and sold shortly thereafter. Around 50 witnesses.

138 Kooyong Road, Toorak Four bidders. Opening bid $2.65 million, passed in at $2.9 million and sold soon after. Around 60 witnesses.

4 North Street, Richmond, a converted warehouse next door to a tyre shop. At least six bidders. Got started with a vendor bid of $1,550,000, was on the market at $1.8 million and sold for $1.87 million. 120 witnesses.

Around the corner at 29 Waltham Street, Richmond Passed in on an optimistic vendor bid of $2.1 milion. 40 looked on.

A pretty double fronted timber Victorian at 20 Stanley Avenue, Hawthorn East Three bidders, on the market at $1,025,000 and sold for $1,135,000.

32 Brunel Street, Malvern East Got underway at $1.4 million and sold for $1.79 million.

How long can the strength of auctions be maintained? Left to the market, and providing that vendors are realistic about prices and the pent-up demand (the number of properties on offer has been low, low, low) it’s likely that auction clearance rates will remain high. It’s the ex-market factors which may upset the applecart: if the budget doesn’t achieve its projections and unemployment rises, the market can quickly come off again. If that happens, you can expect to see even more off-market dealing being done.

CK

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Bayside: Is this really happening?

Auction clearance rates above 80% over consecutive weeks. Consistent levels of private sales. Even the most hardened market critics (surely, not us) (OK, us) have to concede there may be merit in the “green shoots” theory; that what we are seeing may be the beginning of a sustained recovery in property activity.

Equity market analysts are still divided on whether the current share rally is sustainable or a dead cat bouncing and there are property analysts who are still predicting property prices will fall further this year.

But buyers, it seems, aren?t buying that theory; they’re buying property.

There’s a palpable buzz in the air at auctions. Agents are walking tall again. (We preferred them with hunched shoulders and defeated airs, but you can’t please everyone.)

When we see expressions of interest campaigns replaced with good old fashioned auctions, then we will know it truly is really happening.

The May 30 weekend is going to be the busiest it’s been in years (this is not usually a hot season for auctions). The high clearance rates we have seen recently can perhaps be explained by the relative lack of choice. Not next weekend. With around 700 auctions scheduled it will be a true test.

Our prediction: the Bayside market will hold up.

Last weekend? Crowds were up and bidders were present and bidding.

Bentleigh continued to shine: 12 sales from 13 auctions (and not one private sale reported for the week).

22 Strathmore Street was the highest: $875,000

11/2-4 Mcarthur Street found the other end of the spectrum: $363,000.

The growth area of Cheltenham was also busy. Eight sales, equally divided between auctions and private sales.

Brighton auctions were varied on low numbers: five sold out of seven auctions; including some strong results.

20 St Ninians Road (in the Golden Mile, blue ribbon, an agent’s fantasy in adjectives) was the standout: three bidders pushed the price well over the expectated. It sold under the hammer for $2.74 million.

39 Whyte Street a brand new and sharply presented town house, sold after auction for an uppish $1.71 million. It had been passed in to the ultimate buyer at $1.65 million.

8 Hayball Court an unrenovated maisonette, did things remarkably differently and may have demonstrated the resurgent power of the auction. The previous Saturday, boards went up offering it for private sale. 45 people duly trudged through. Heartened by the interest, the agency – no doubt with its client’s agreement – decided to run an on-site auction last Saturday. No long campaign, not even any ads, and no prior offers being considered because the agent would have had to call too many would-be buyers back. The quote was $690,000 +, the expectation was $725,000 and the result was $838,000. A new sales strategy is born?

Less action at 108 Dendy Street Passed in at $1,090,000 and a later offer of $1,100,000 was considered insufficient, it’s now available at $1,200,000.

Equally unsuccessful was 274 St Kilda Street $1.65 million was knocked back and the reserve remains undisclosed. Not disclosing reserves post-auction is a strategy we find more than a little puzzling. Are they afraid that a buyer may want to pay it?

A new spec home at 21 Foote Street on a compact 610 sq m and featuring an enormous basement garage and cinema, sold for $3.9 million after a relatively brief marketing campaign. No “expressions of interest” in sight. Rather, “Here is my asking price, make me an offer.” Welcome back, Real Estate 101.

Further down the Bay, Hampton had a very good week.

11 David Street was reportedly sold prior for $1.2 million and there is at least one disgruntled would-be buyer who was not referred to even though they had registered their interest and made an earlier offer. The excuse? Too many people to ring! It’s an excuse unlikely to amuse the client.

7 Lansdown Street was sold for $1,401,000, a whopping $351,000 above the latest published quote of $1,050,000+. A mere 33 % above the “estimate”. Surely we can get closer than that ?

8 Retreat Road was due to be auctioned next Saturday but has sold already for $1.4 million.

Finally to Sandringham’s stately Royal Avenue where number 2 sold the night before the auction for a price a little over $1.7 million. A seller with stage fright or a lack of buyer interest seems likely.

Until the next instalment.

DT

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Top End Trends has come late for some this week. Next week we’ll be working on less haste and more speed…

Lost: One Global Financial Crisis. Please return to…

The GFC appears to have gone missing in Melbourne.

Upper-end Sydney property has died a death, on the Gold Coast they have to give cars away to persuade people to buy, but ? Melbourne?

Clearance rates at auctions are bordering 90%. Of the 11 auctions we saw over the weekend, crowd numbers were down but multiple bidders were out in force. And they were serious.

7 Jaques Street, Hawthorn East got started with an opening bid of $1.1 million, was on the market at $1.3 million and sold for $1.4 million. Four bidders and a crowd of about 80.

18 Cromwell Road, South Yarra began with a vendor bid of $3,500,000, was passed in on just one genuine bid of $3,520,000 and sold later for $3,550,000. There were about 70 onlookers.

18 Rowena Parade, Richmond had an opening bid of $700,000, was on the market at $755,000 and sold for $816,000. Four bidders and a crowd of around 40.

6 Bowley Avenue, Balwyn had an opening bid of $1.95 million, was passed in at $2,150,000 and sold shortly afterwards.

Earlier this month we noted that the changes to Foreign Investment Review Board requirements appeared to be prompting more interest from overseas buyers. Asian buyers and investors were present at over half the auctions we attended over the weekend; and may be set to become a permanent feature.

Meanwhile …

Off-market sales are still taking place, notably one property in Albert Park: it was with one agent for private sale at $2.6 million and had no takers. The vendor moved the property to another agent and (look for the logic here) increased the price to $2.8 million. Lo and behold, a week later it sold to people from Geelong.

Presumably the lower price just wasn’t enough.

With that exception, it seems vendors and their reserve prices are at last meeting the market and competition is almost guaranteed at auction.

If that continues, what do such high clearance rates suggest for the newly-introduced ?expressions of interest? campaigns?

Going, going, gone?

CK

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Bayside habits immortal

Underquoting and dummy bidding. The most prevalent evils of our auction system.

They die hard.

Recently, as we have commented before, there has been too much underquoting in Bayside. Now it has been joined by its even less salubrious sibling. The dummy bidders are back.

Morrell & Koren has a long history with dummy bidders*. We have exposed them (sometimes loudly) at more auctions than we can remember. We also influenced legislation in Victoria and New South Wales which promised heavy financial and other penalties applying to those convicted of such deception, be it by the bidder, the auctioneer or the vendor.

And so dummies were banned. End of problem.

Well, not quite.

Dummy bidding is difficult to prosecute and the legislation is flawed in that respect.

And so …

Conclusion of a major Bayside auction on Saturday: a losing bidder is confronted by the principal of an opposing agency and loudly reminded about the law against dummy bidding. Affronted loser protests his innocence. Innocent bystanders (the jury?) unconvinced. The auctioneer, outraged, attacks his Blackberry in search of his solicitor’s phone number. Cacophony of denials all round.

Next step: Office of Consumer Affairs.

Meanwhile, back at the coal face …

Bentleigh’s big move is still on. 19 auctions and 16 sales plus a handful of private sales. Most falling within the “affordable” $550-750,000 band with one (in Somers Street) reaching $1,135,000

Beaumaris was also busy in private sales. The standout 170 Tramway Parade selling for $1,435,000. 3/427 Beach Road sold for $1,125,000.

In neighbouring, low turnover Black Rock, 56 Bayview Crescent has been sold for $1,252,500, $2,500 (!) above its quoted private sale price.

Two off-market sales were made in Brighton East during the week. In Shasta Avenue land (670 sq m) sold for $1,175,000 and a large near-new family home in Edro Avenue was quietly sold for $2.1 million.

Brighton saw the highest auction result in Melbourne for the weekend with the sale under the hammer of a brand new house on 615 sq m at 70 St Andrews Street. Two bidders competed after the auctioneer kicked off proceedings with an ambitious vendor bid of $2.4 million. After a brief referral, the property was knocked down at $2,630,000.

Against the trend, Brighton also recorded one of the lowest prices seen in the suburb for years: a one bedroom flat at 3/138 New Street which went for the princely sum of $340,000

2 Porter Street, Hampton has finally sold after languishing on the market since before Christmas. An offer of $1.2 million was agreed, a long way south of the pre-Chrissie expectation.

4 Retreat Road, Hampton is still available after a vendor bid of $1.3 million was as high as it went. They’re hoping (praying?) for $1.35 million.

And finally to Sandringham. Although no auctions were held, several private sales were made during the week, notably 34 Bamfield Street at $1,020,000 (less than the quote range) and a new house on a compact 641 sq m at 42 Harold Street which sold for $1,710,000.

Auction activity in Bayside returns with a vengeance over the next two weekends; and a number of expression of interest campaigns close within the same period.

Forward auction and private sale bookings for June are thin, so we anticipate a flurry of buyer activity for the stock which is available in what remains of May.

Savvy buying to all.

P.S.

If you have personal experience of under quoting or suspect incidences of dummy bidding, you are welcome to record your thoughts publically in our comments section (being mindful of the laws of defamation), or click here if discretion is required.

*For the uninitiated, dummy bidding is when an apparently legitimate bidder is bidding against genuine buyers. In fact they have no intention of buying and are there only to bid the price up to benefit the seller. They are usually acting under precise instructions from the vendor or from the auctioneer or its agents.

DT

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Melbourne’s temperature did not get out of the teens over the weekend.

It was hot!

The upper end defied belief and continues to befuddle the so-called experts (and there’s nothing so-called about us), but …

But it is very selective. You have a unique period home to sell? Yours is renovated and ready for new owners? Name your price.

That’s not the property you’re offering? Go back to bed.

There we were, back again in 2007, with half a dozen deep pockets at these rare auctions.

The Melbourne market continues to defy the gravity which rules practically everywhere else on the planet. The sense we’re getting is that there’s still a lot of old money around which is well insulated from minor irritants such as margin calls, recessions and global financial crises.

The great restriction remains: lack of choice. It’s why much of the market is stagnant.

Saturday’s surprise package was 67 Avoca Street, South Yarra; a double fronted 2 storey Victorian next to the school and in need of work. Its reserve was $5.75 million. Four bidders. Knocked down for $6,470,000. What’s an extra $720,000 between friends?

If that was a virus, it spread in a hurry.

40 Lambeth Avenue, Armadale is a small, well renovated, double-fronted Victorian. It should have sold for $2 million. Four bidders pushed it to the reserve of $2,010,000 and then someone paid … (drumroll, please) $2,850,000!

$840,000 over the reserve.

Yes. $840,000. Over the reserve. Pardon?

5 Howitt Street, South Yarra is a single fronted Victorian which had four bidders and sold for $1,405,000. Again, well over the reserve.

And there the heatwave ended.

Not period? Not unique? Not interested.

13 Murray Street, Armadale is a good Wayne Gillespie, but probably 20 years old and in need of work. It sold after being passed in for $3,775,000. Good buying, but against little competition.

Still less joy at the auctions of 23 Canberra Road, Toorak (modern ugly duckling with few swan prospects, passed in well short of its reserve at $2,750,000) and the townhouse in 57 Washington Street, Toorak (not one bid).

Elsewhere? Queues of investors at property inspections suggesting … it’s a Connex thing: too many passengers, too few trains. That said, we are beginning to see some small improvement in what’s on offer; especially off-market.

And then there’s the Budget. Any surprises in store?

One position we would not like to be in is foetal: waking up on Mother’s Day morn to the realisation that you were now the proud owner of a property that you paid seven or eight hundred thousand more than was even in an estate agent’s dreams.

DM

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Bayside bounces?

In recent times as the general auction clearance rate has remained steadily in the mid 70% range, we have made the observation that this high rate has predominantly been diven by properties up to $800,000 or thereabouts.

The past couple of weeks has seen that move. We are now seeing properties in the $1-1.5 million range regularly attracting multiple bidders and as momentum and confidence builds, properties in the $1.5-2.5 million range should feel the ripple effect over the next three to six months.

Buyers, increasingly, feel that we are now at the bottom of the property cycle. While few expect a sharp rebound in prices, they sense that now is a good time to get a move on with their lives and downsize, upsize, invest, get married, get divorced or  do whatever they may wish which involves a property transaction.

The lessons of history are not infallible, but if there’s to be a pattern similar to the 1990 recession, you could expect only a very gradual recovery in residential property prices. Then there were almost five years in which there was little growth before the market gathered momentum which began in 1995 and then grew for 12 years.

The message? Property is now about as cheap as it is going to get, but do not expect great capital gains in the short term. Let lifestyle, not capital gain, rule your decision.
The proviso is always to buy the right location, orientation, style, functionality and potential. It is properties possessing some or all of these attributes that will provide the best capital appreciation when the market next begins to grow.

The here and now?

Hampton and (no surprise) Bentleigh were the most active suburbs in Bayside this week: 7 from 8 and 10 from 12 respectively.

61 Orlando Street, Hampton finally sold. It went for $1.695 million, having spent months on the market at around $1.8 million.

22 Bridge Street, Hampton sold under the hammer for $1.22 million.

17 Smith Street, Hampton: $1.081 million.

7 St Kilian Street, Hampton sold privately for $1.4 million (they were asking for $1.45-1.55 million

71 Thomas Street, Hampton also sold privately, for $1.2 million.

Black Rock recorded a rare result with the auction of a three level town house, 3/366 Beach Road for $1.6 million.

Brighton was also active with 5 from 6, the standout being the auction of ?Otley? at 1 Clive Street, East Brighton. A meticulously restored grand tower Victorian on 1648 sq m, it was passed in at $2.72 million before selling later for $2.95 million.

Another Victorian, in a lesser state of refurbishment, at 130 Were Street, Brighton was about to be passed in on a vendor bid of $1.75 million when, to the auctioneer?s great relief, a hand went up at $1.8 million. The bidder had seen the property for the first time that morning and liked it enough to pay another $75,000, eventually securing the property for $1.875 million. Surprised expressions all ’round.

62 South Road, Brighton on the corner of The Avenue was described as from the “Arts and Crafts” architectural school. This quaint (and no doubt accurate) description certainly attracted the curious and several bidders moved the bidding quickly above the estimated quote of $1.15 million to a drop the hammer bid of $1.35 million.

The only auction blemish on the day was 2/5 Tennyson, Street Brighton. Passed in on a vendor bid of $1.4 million with an expectation of $1.65 million. Is there a dentist in the house?

Elsewhere in Bayside, the seldom-reported Elsternwick recorded two strong results above $1 million: 27 Oswald Street at $1.15 million, and 12 Regent Street, where several contenders pushed the bidding to an unanticipated $1.715 million.

Overseas buyers were noticeably absent in Bayside this week , but were apparently active in Toorak and Armadale. Stay tuned.
DT

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What planet do they live on?

Median: “Median (mathematics), the value of the middle member of a set of numbers when they are arranged in order …”

That’s clear enough. But it’s nothing but misleading when applied to house prices and it is out-of-date, has little relationship to what is happening now and is not comparing like with like.

And then it leads to you-beaut headlines such as:

“Victorian house prices suffer biggest drop in 40 years.”

Sure did. But so what?

Delve a little deeper into the REIV’s stats and you’ll come across such useful information as Toorak houses dropping 26% in the March quarter and 33% over the last 12 months.

It is high time the REIV and its so-called experts learnt that judging property by median values is useless and they should go back and do a valuation course. Regrettably there is still a lack of real information accessible to the buyer with respect to the property market; and apparently that’s the way the REIV likes it.

It’s not rocket science: start with land value (position, area and outlook), then add improvements and factor in scarcity and desirability (or lack thereof). And ignore misleading medians.

End of rant. Thank you, we feel better now.

Meanwhile, back on earth …

Things are still moving, but at their own more-considered pace. Not a lot of activity, and sales often at the lower end of vendors’ expectations, but sales are being made. They’re just tending to take weeks when days used to be the rule.

Not a lot of auction activity over the weekend, but those that did take place were not falling over a 30% precipice; no matter how much we wish they would.

100 Hope Street, South Yarra. Good townhouse, four car parks, sold above its reserve for over $2 million and had three bidders going hammers and tongs (they hadn’t read the papers?).

Another townhouse: 21 Trinian Street, Prahran sold for $2.5 million. Its twin sold off the plan last year for $1.8 million. Again, three bidders wanted it. No median value in sight.

3/4 Brookville Road, Toorak a two-bedroom plus study apartment sold on Saturday with three bidders It was on the market at about $1.3 million and sold for $1,420,000.

As for the bottom end, that juggernaught still rolls. Bidders, bidders everywhere and not a lot of think (sorry). Our worry, and we’re not alone, is that a lot people are going find themselves owing more they can handle post June 30.

Our tea leaves for the next couple of weeks? The GFC, Swine Flu and lack of stock still haven?t killed the market and there is every reason they could have. But, out there, buyers want homes and they’re not taking a short-term view. It all gets back to the quality of the house and the position.

DM

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Bayside: Invasion of the property snatchers.

Last December, while the rest of us were breaking up for Christmas, our Assistant Treasurer quietly announced proposed changes to the Foreign Investment Review Board regulations governing the purchase of residential property by foreign nationals. The changes were implemented in March and have greatly relaxed the restrictions and reporting requirements on non-Australian citizens buying a home or land.

For the observant, evidence of these changes has become apparent over the past three months; with a marked increase in the numbers of overseas buyers attending open houses and auctions.

Agents seem to have been caught flat-footed and are largely unaware of the amendments – but are obviously grateful for the increased traffic. No doubt some are even taking credit for attracting this new class of buyers claiming it is the result of their fabulous marketing or incredible web presence. Or charisma.

Whatever.

In reality, it’s the buyers who are a step ahead and are taking advantage of the changes to buy into the weakened top end of the Bayside market; Brighton in particular.

Last week we reported the sale of 49 South Road, Brighton for $4.25 million to a Chinese buyer. It seems this is only the beginning.

This week 15 Kent Avenue, Brighton has finally been sold after languishing on the market for almost 12 months. Originally being touted at over $5.25 million, agent number three has found a buyer at last. It sold before last Saturday?s scheduled auction for the sobering price of $4.225 million to another overseas buyer.

The same vendor has also offloaded a vacant allotment at 4 Miller Street, Brighton for $3.85 million. Originally marketed as the site of two luxury new homes with sweeping bay views, development plans were shelved recently due to lack of interest. This buyer is a local, having just sold a landmark residence at 32 Middle Crescent (see our report of the 30th March), for a price now believed to be much closer to $10 million, and intends to build a new family residence on the site.

Over in East Brighton, the agent has done the almost impossible by finally selling 13 Lysander Street. The newish house was not blessed with universally appealing looks, but was spotted on the internet by another overseas buyer and it was love at first sight. The keys changed hands for $1.85 million.

Last week we reported a passed-in result at 328 St Kilda Street, Brighton with a post auction price of $2 million+. The property has now been sold to another overseas buyer for $2.3 million. It’s 1500sq m and a potential development site, we will keep a keen eye out for a planning application sign to appear on the front fence.

Over the road in The Golden Mile, 4 St Ninians Court has been sold for $3.025 million. It’s 690 sq m (7425 sq ft), a level and vacant site carved from a neighbouring property.

The standout sale for the week is the relatively efficient sale of 19 North Road, Brighton. Designed by Charles Webb, the 1886 property sits on 2440 sq m (26,300 sq ft) and has not been touched in many many years. A local admirer has paid a price believed to be in the vicinity of $6.75 million against a private sale offering price of $7.3 million.

Bayside auctions (with the exception of Bentleigh) took a back seat to the number and scope of private sales negotiated throughout the week.

Following the disgraceful performance at 3 Butler Street, Brighton last Sunday, auctioneers and agents were largely on their best behaviour with most properties selling within an acceptable margin of the quote.

However words exchanged between a buyers advocate (no, not us for once, and it’s good to see others taking up the cudgels) and the auctioneer 4 Roseberry Avenue, East Brighton. Quoted at $990,000+, the auctioneer did a dummy spit with the advocate who continually and rightfully inquired if the property was on the market as the price bid was by then well in excess of the initial quote. The advocate then received some unexpected support from other outraged attendees who also pubically voiced their displeasure at the agent’s and auctioneer?s handling of the quote, the lack of transparency and there were references to mushrooms, among other things. Composure was regained and the property was eventually knocked down for $1,260,000 … 25 % above the quote! The locals were certainly entertained but the buyers are getting restless, so guys, let’s work a bit harder at getting the pricing right.

34 Rooding Street, Brighton East went for $1.25 million against a quote of $1,050,000. That additional 20% might pay for a calculator.

More acceptable was the outcome of 5 Roosevelt Court, Brighton East which sold for $1,020,000 a mere $30,000 above the quote.

31 Agnew Street, Brighton East a well-presented double-fronted weatherboard Victorian, sold for $1.1 million after being listed with a cheery selling agent for just five days. Why so cheery? Apparently the opposition had it for sale since July last year.

Elsewhere in Bayside, the standout suburb is again Bentleigh with 100% auction clearance (8/8) plus a handful of private sales.

See you next week.

DT

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