This kitchen is hot. Especially at the top end there’s still too little to choose from, but when quality does raise its head (forgive this) it goes like hot cakes.

If you were looking for evidence of the strength of the market, you could have spent an instructional half hour at 49 Urquhart Street, Hawthorn on Saturday. It’s a good 20′s style home, north facing, and ticks a lot of boxes. The quote range was $1.4-1.6 million. It was on the market at $1.7 million and sold for $2,110,000.

What makes that instructional is that there were four parties still bidding beyond $2 million.

It breaks all records for the area. It suggests that the market has in many cases passed the peak of the 2007 boom and, if anything, is still moving up.

We spoke to one of the underbidders – still in a state of shock – who thought $2,050,000 would have been enough to buy the property. Bewildered and frustrated, they just want to buy a house and there are none for sale. They’re reaching boiling point.

In real estate terms, Melbourne appears to have repealed the law of gravity. We’re defying national and international trends and historic norms of what’s affordable.

What explains it?

Scarcity is the great contributor (no prizes for pointing that out), but no matter how scarce, buyers still need money and, theoretically, there’s not a lot of that about.

Peel a few layers from that onion (we’re still in the kitchen) and you start to uncover some significant exceptions:

• there’s the just plain wealthy and they’re still rich
• there are people such as medical specialists who have done well, who continue to do well, and who had planned to use the downturn to trade up
• there are younger couples who are being underwritten by parents who believe there is more benefit in helping their kids now than by making them wait ’til the will is read
• there’s the view expressed by a client of ours that he needs a house for 300 sleeps a year and they may as well be good ones because he doesn’t get that out of a stock certificate – suggesting there has been some flight from the stock market

So what does Spring promise?

Certainly not the bonanza predicted by many agents. There is no sign yet of any great upturn in listings. And certainly certainly certainly not the 30% drop in values predicted by the doomsayers. The truth lives somewhere in-between and if you have a functioning crystal ball, we’d like to borrow it.

Other sales of note?

A trickle off-market, plus some which seem to have been on the market since the dawn of history:

• a surprising sale down at Portsea; on the market for over six months, finally sold for somewhere north of $8 million
• 23 Canberra Road (the ugliest house in Toorak?) finally sold for $2.9 million
• 12 Cloverdale Avenue sold for $1,720,000
• 19 Oak Street, Hawthorn big Victorian, twice a bridesmaid at auction, finally sold for more than $3.6 million

These were not the most desirable properties in the land and it’s not so much a case of the market catching up to their vendors’ expectations as simple frustration among their buyers. There is so little choice.

And then there was one of the auctions of the year: 88 Millsywn Street, South Yarra; a little building of three flats. It was on the market at $1.2 million and sold for $2.1 million. No. That’s not a mistake: It was on the market at $1.2 million and sold for $2.1 million.

It does makes some of the purchases have made in South Yarra over the last six months look like absolute bargains, but you have to ask the question: where were the people with $2.1 million when the market was on its knees earlier this year?

And at last the truly exceptional: a property which sold for what it should have: 58 Hampden Road, Armadale sold for $1,890,000 after being passed in.

And now some quick advice for the Real Estate Institute of Victoria:

Do your job

We have been shouting from the rooftops about underquoting. The media has been drenched with it (see last week’s Top End Trends and below). Then what have we heard from the industry’s own policeman? Nil. And when the police go on strike, the lawless rampage. If the system has honesty and integrity, we have a happy public. It’s time the REIV woke up.

David Morrell

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Bayside: More of less …

Not much on in Bayside: over the past week both auction and private sales were down.

The standout auction was a huge (52,000 sq ft/4842 sq m) site at 76-80 Fewster Road, Hampton. While it has a 6-room timber house, the property has a multitude of residential options and will doubtless be redeveloped. Quoted at $4.55 million plus, it sold for exactly $5 million. Fairly quoted and a reasonable result for both buyer and seller.

However and but, the very same firm also offered the following:

20-22 Balcombe Park Lane in Beaumaris. A contemporary single level house of 8 main rooms on 14,740 sq ft/1370 sq m. Quoted at $1.5 million plus, it sold for $1.88 million. The difference? $380,000, or 25% above the agent’s “estimate”.

12 Love Street, Black Rock. An unrenovated timber period house on 10,800 sq ft/1003 sq m, it sold for $1.4 million. That is 22% above the agent’s “estimate” of $1.15 million plus.

Two weeks ago, the same firm sold 43 Victoria Street, Sandringham for 33% above their agent’s “estimate”. From their point of view, serial underquoting works. Why offer an honest answer to a buyer who asks what a property is likely to sell for when a misleading answer does the trick?

Not a lot happened in Brighton for the week, but:

More angst at the outcome of the auction of 1-4/2 Drake Street, Brighton. It’s a block of four older style apartments on 11,340 sq ft/1054 sq m. Originally listed for private sale with an expectation in excess of $3 million, the property was “estimated” to sell for $2.45 million plus. Three bidders took it to $2.66 million before it was passed in with a reserve of $2.8 million and the underbidder is still waiting for the agents to get back to him.

42 Montclair Avenue, Brighton sold for $1,550,000

70 New Street has finally sold for $1,431,500 after many months on the market.

There was a strong sale at 66A Hodder Street, East Brighton a new townhouse which sold for $1,498,000 after an expression of interest campaign.

Until we speak again.

Damian Taylor

Morrell & Koren in the news:

• on movers and shakers in the Herald Sun
• on publishing reserves in the Herald Sun

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Underquoting. It’s epidemic. It is cheating and it hurts buyers, sellers and the reputation of the industry. In the words of the REIV:

“The commonly held view is that a 10 to 15 per cent margin of error is reasonable given that the market is so volatile . . . if there are a string of results of 15 per cent and higher, then agents have a case to answer and it is not enough to say it is a fickle market at work”

Problem is, those  words date back to Ian Carmichael, then president of the REIV, as reported in The Age in August, 1998* Things were bad enough then to be making the papers and, even in the face of changes to the law since, it’s now even more outrageous.

Consumer Affairs Victoria, despite their protests that they have inspectors out there, are toothless. Expensive hot air. As a taxpayer, you should ask for your money back.

The ACCC, maybe prompted by a complaint we lodged last week, is being very public about huge fines. Good. But finding the proof will still be the problem.

People, we have been in the industry for a very long time. We have seen and exposed more scams than most agents have even dreamed of. We have one simple rule change that would end this nonsense now and forever; and it doesn’t need inspectors and it won’t need court cases:

Make the publication of reserves mandatory.

Overnight, underquoting ceases. Overnight, dummy bidders disappear.

With time, the reputation of the industry will be restored. Over time, the many, many people who are unwilling to play blind man’s bluff at auction will return.

The week just passed?

There was some top-end action off-market and about that we must remain silent.

We’re also hearing reports of vendors going off-market; simply asking a number of agents to come up with their best offers and letting them compete for the sale. A neat reversal when it works.

Something like that finally did work for 10A Power Avenue, Toorak. An eight year-old 2-storey townhouse on 5000 sq ft, it finally sold for $3,125,000 after being on the market for six months at $3.5 million. Ouch. (They were offered $3,150,000 not so long ago; was there a hurry to settle elsewhere?)

Investors were also swarming, especially below $700,000, but it looks like many had missed the bus. There’s just too little available in that bracket to be buying well.

Next weekend looks like being Spring’s first real stress test. From what we have seen at inspections (are the footy crowds down this year? Is everyone inspecting houses?) the competition will be hot. Those who bought between August and November last year had first-class crystal balls.

David Morrell

* It’s a good article. If The Age gives us permission, we’ll reproduce it.

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Bayside: Underquoting? We can do that.

Despite the blowtorch being applied to those agents who consistently and systematically mislead buyers on the likely sale price of auction listed properties, the Bayside market continued to perform strongly across all price categories.

Most activity was in high turnover Bentleigh: 11 sales from 12 offerings; including some of the most blatant examples of underquoting we have seen in Bayside.

• 90 Parkmore Road, Bentleigh East Quote $490,000+. Result. Sold for $630,500. Analysis: $140,500 over (28%).
• 13/27-51 Charles Street, Bentleigh East Quote $460,000+.  Result.  Sold for $600,000. Analysis: $140,000 over (30%).
• 42 Lahona Avenue, Bentleigh East Quote $750,000+. Result. Sold for $1,000,000. Analysis: $250,000 over (33.33%).

When challenged over those whopping discrepancies, the common response was that everyone and everything else was to blame, but never the agent. No. Not me. Always something/someone else.

Why are we not surprised ?

Elsewhere in Bayside:

219 Beach Road, Black Rock sold for $2.82 million after the close of an expression of interest campaign

Beaumaris had three sales at more than a million:

• 15 Banksia Avenue: $1,040,000,
• 1/60 Reserve Road sold privately for $1,090,000
• 18 Cromer Road also sold privately for $1,240,000.

Brighton continued a kind of recovery at its top end:

• 23 Dawson Avenue finally sold for $4 million (the earlier expectation of the vendor?s was in over of $5 million – a truckload of painkillers may be in order).
• 19 Dawson Avenue, two doors down, had a prior to auction offer of $3.425 million accepted although this property was initially presented to us with an expectation closer to $4 million. Was that the only offer in sight?
• 22 Cadby Street also sold prior to auction. The agent initially anticipated over $3 million. It went for $2.675 million.
• 1/12 St James Park Drive was listed at $2.3 million and changed hands in a private sale for $2 million. Ask and it shall be given?
• 75A Halifax Street, a new townhouse (one of two) was auctioned for $1.83 million.
• 32 Grandview Road also sold; realising $1,390,000 against a quote of $1.2 million+

Hampton was quieter. Just two auctions:

• 38 Grout Street sold for $1,081,000
• 1/17 Kerferd Street sold for a more modest $493,000

Following Graeme Samuel’s ACCC headline over the weekend whereby new legislation due next January provides massive fines of up to $1 million to agents and vendors found guilty of underquoting, it will be instructive whether this sledgehammer will finally convince agents (and complicit vendors) to clean up their acts. Has Mr Samuel has been reading this column?

Damian Taylor

Morrell & Koren in the news:

• on underquoting in the Herald Sun
• on Dirty Secrets in the Sydney Morning Herald
• on land banking in The Age
• on unfazed buyers in BusinessDay

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… we wonder who the underquoters is?

OK. We weren’t wondering for very long. It’s all blatantly obvious. One agent underquotes and the rest fall into line. Yes, it’s deceptive, deceitful and misleading and Consumer Affairs and the ACCC have the power and responsibility to stop it. And they don’t. So we’re going to pick up the bat again.

Very prominent, very high profile firm. We believe they’re flouting the law. We’ll see them in court. Stay tuned.

We would also like to hear from you. Tell us what you’re seeing. You can do that in the comments area below or by clicking here.

(Thank you. We feel better now.)

And so to the market, or lack of …

Now that the end of financial year, mid-winter and school holiday dampers are all mostly behind us, how is the Spring market looking?

Sparse. There are very few buds emerging. That may change, but at the top end there’s little quality to be found.

What we are seeing more of is the re-emergence of the weeds in the garden. Those that failed to sell as early as last Spring are popping up again. While ever-hopeful, the issues which stood in their way continue to stand there. (And that’s not always price.)

And then came Google …

This is a possible game-changer and one that should put a chill down the spine of every estate agent, newspaper and real estate website. Google has put together simply the best, most complete, real estate portal we have seen.

But that’s not all. Anyone can list – be they agents or private sellers – and the cost is … $0.00.

Compared to? A one-time 4.5 x 6.3cm ad in The Age real estate section will cost you a shade over $850. A listing on the Fairfax real estate site, domain.com.au, will cost you $500 for four weeks. Listing on Australia’s dominant real estate site (close to twice the traffic of domain), realestate.com.au, is only available through agents.

Suddenly do-it-yourself has become a real option. The whopping commissions agents have taken for, essentially, hanging around doorways when inspections are on, are looking shaky. Advice on price? You can get that on-line. Help preparing an ad? That’s here. Legals? The hills are alive with the sounds of lawyers.

Have a quick look at how it’s working for a simple ‘Toorak, Vic‘ search. And that is just the start.

Meanwhile, back at the coal face …

Saturday was cold (that’s news?), the school holidays meant not a lot of auction action and there were stampedes where houses were open for inspection.

In one we counted over 100 couples crowded as Connex customers, in another – just around the corner – there were 80 more. We spoke to a good number of them and they were not just coming in out of the cold. They wanted to buy, they wanted to buy now (not always clever) and they had $2 million or more to spend.

So is the market holding up? Short answer? Yes. Longer answer: Who knows for how long?

• 20 Ross Street, Kew Land value – always the litmus test – sold last year for $1,901,000, sold last weekend for $2,335,000. 20%+ profit for doing … absolutely nothing.
• 4 Cross Street, Toorak a modern spec house on 620 sq metres sold via an expression of interest campaign for $5,250,000. Not a big block, yet there were several disappointed punters.
• Alexandra Avenue, South Yarra. New apartment, very busy location, also sold through an expression of interest campaign: $3.8 million.

The next few weeks? At the top end, the truffle-hunt continues. At the lower end, investors are flocking back in droves. Where were they six months ago when the real estate market was on its knees?

David Morrell

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Bayside: Auction clean-sweep pales before private sales

Melbourne’s top five auction sales for the week were all in Bayside. That’s a clean sweep which indicates the strength of the resurgence in the beachside suburbs.

It’s in stark contrast to less than six months ago when Bayside (Brighton in particular) was consigned to basket-case status with allegedly financially stressed vendors and a complete absence of buyers.

180-182 The Esplanade, Brighton a mortgagee-instructed auction last sold in November 2008 for $3.55 million. It’s 840 sq m. and includes a tired pair of maisonettes which will be demolished, yet two keen bidders pushed the price to a very strong $4,105,000.

Nearby, in leafy Sandringham, 43 Victoria Street, set in park-like grounds of 2600 sq m, sold for a more than respectable $3,350,000. Soon after, 163 Beach Road, Sandringham (on a more modest 616 sq m) was knocked down for $1,800,000.

Even discreet and private Black Rock made a podium appearance: 52 Stanley Street, an 8 room rendered house on a 453 sq m, sold for $1,440,000.

1B Lucas Street, East Brighton, in a classic example of underquoting, made it into the top five results for the week. Touted as $950,000+, the property attracted four bidders before being knocked down for $1,260,000, a mere $310,000 over the “quote” or close to 33%! Arrogant? Disrespectful? Mismanagement? Agents guilty of being so wide of the mark have little to be proud of. Their regard for buyers is clearly wanting.

And then came a couple of private sales …

1 Bay Street, Brighton finally changed hands for a price understood to be in the vicinity of $12 million. It’s over 2,000 sq m, it’s on the foreshore, it overlooks the yacht club. The new owners plan to build six luxury apartments and a penthouse.

A few hundred metres away at 25-27 Glyndon Avenue, a local buyer has forked out $15.5 million for a Jon Friedrich house with court and pool on 1500 sq m. It has uninterrupted views to the city, across the bay and down to the Brighton yacht harbour. This shatters the previous record price for a beach front property in Brighton by over $3 million and makes a strong statement about the health of the local market.
Damian Taylor

* Author? 38 seconds of web search suggests it wasn’t Ogden Nash nor ee c; Anon rides again. Apologies to Anon.

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