Nov 17: Hurry up and … wait.
By admin | November 17, 2008
The world’s been watching re-runs of Hill Street Blues: “Let’s be careful out there.”
Capital preservation is the new mantra. We have been shouting that for months; and the weekend suggests we’re not alone.
However and but.
Just when you think you’ve got the market’s direction nailed down, some giddy optimist comes along at 180º.
A quiet sale on Shakespeare Grove, Hawthorn. Well-renovated Victorian on a postage-stamp block of land. We thought the vendor would be lucky to see $6.5 million. Ahem. $10.5 million bought it. In this market. Strewth.
And then there’s land in Armadale …
56 Adelaide Street, Armadale sold the night before auction for approximately $290 per foot. On Saturday afternoon, some who may have missed out in Adelaide Street went to war over 7 Erskine Street. Developer territory. Five bidders. Sold for $2,685,000 against a low $2 million expectation. Again around $290 per foot.
These against a background of the funeral for the auction system. Lots of people looking, no-one talking and definitely not a lot of bidding – bids as scarce as we have seen. Even auctioneers dropping vendor bids as much as 40% below reserves couldn’t raise a sign of life.
Plenty of people – many of them neighbours and window shoppers – all paying close attention to auctioneers sobbing their hearts out from here to the horizon (OK, benefit of the doubt, a few of them do have hearts, but before you rush for your sympathy cards, do remember that these were the people who were happy to take your hard-earned millions only last year).
It was like watching concrete set at some auctions we attended.
8 Kooyongkoot Road, Hawthorn actually got a bid (they got a bid!) of $2,050,000, but the owner wants $2.5 million plus; which is something of a chasm to cross before any deal is done.
Chasm? You want chasm? 4 Matthews Court, Toorak. Vendor bid $1.4 million. Reserve $2.1 million. Whoops.
Elsewhere the open-for-inspections had people in droves (and real estate website traffic is also trending up). Numbers were huge, but we doubt whether those numbers will translate to bidders. We have spoken to a great many people and the sense we get is that interest rates dropping is not going to persuade them to move. It’s confidence that’s lacking.
There are also many waiting to see whether or not prices will drop further in the short term, hoping to peg the bottom of the market. But they still have to live somewhere and as those few sales over the weekend confirm, if it’s a good property, they will still go for it with their ears pinned back.
DM
Bayside: the flood to come.
The last big push for 2008 has started. Bayside’s agents are being inundated by vendors wanting to sell before Christmas. All eyes will be on December 6th, now expected to be the busiest auction day for the year.
Given the odds that the majority of these properties will not sell at auction, or even attract serious buyers, the question must be asked: Why are all these sellers about to put themselves through such pain for so unsure a result?
They couldn’t possibly all have margin calls to settle by the end of the year, so why do it ?
Properties under a million dollars are still attracting varying degrees of interest, but anything with seven figures is mostly being ignored at auction.
An example of this is the auction on the weekend of 17 Byron Street, Brighton. A well renovated and extended single-level period home with a north facing rear garden on 700sq m in a quiet street near the Bay Street shops. It ticks all the boxes, but raised nary a sniff at the auction. Result? Passed in on the auctioneer’s bid of $1.55 million. The asking price is $1.65 million.
129 Cochrane Street, Brighton was finally put away for $1.2 million some weeks after a failed auction. The vendor’s initial expectations of something north of $1.5 million were well and truly shattered. This may be why a similar property at 36 Orchard Street was sold before auction for exactly the same price.
There was better news for the sellers of 181 Were Street, East Brighton where a bid of $1,150,000 was gratefully accepted.
Hampton appears to have hit the wall. Anything over a million has been ignored for the second week in a row. All three attracted only vendor bids; any real buyers went missing in action.
16 Orlando Street, passed in: $1.1 million, reserve $1.165 million.
51 Earlsfield Road passed in: $1.1 million, reserve $1.25 million
75 Thomas Street passed in: reserve $1.025m
Further down the Bay in Beaumaris, 74 Tramway Parade, a 10 room house on 865 sq m was sold for $1.72 million.
In Elwood, 45 Tennyson Street was sold at auction for $1.465 million, but 249 Brighton Road was not so successful: the reserve was $1.2 million and the best offer (the vendor’s) was $1 million.
The top of the top end in Brighton will be severely tested over the next three weeks. There’s a swag of properties over $3 million being offered either at auction or by what used to be called a private sale and is now the much more salubrious Expression of Interest (a euphemism for agents trying to claw back some kind of control).
43 Kinane Street (vicinity of $3.4 million)
180-182 The Esplanade ($3.5 million+)
24 Hanby Street ($3.1-3.4 million)
11 Gould Street ($3.6-4 million)
… all go to auction before the end of November.
32 Dawson Avenue ($5 million+) and 5 Brandon Close ($4m) will be auctioned early in December.
Expression of Interest private sale campaigns are closing over the next couple of weeks for “Blair Athol” at 5 Leslie Grove ($8 million+) and 49 South Road ($4. 5 million) and then there is “Camrock” at 25-27 Elwood Street for sale ($6.5 million+), “Tandragee” at 70 Halifax Street ($7.5 million+) for sale and “Nithdale” at 316 St Kilda Street ($6 million+) for sale.
There will be some long and anxious hours being put in to clear all of these major holdings and Santa can’t come quickly enough for some.
Meanwhile, it has been reported to us that a modern beach front property at 6 Brandon Road, Brighton, on 1250 sq m has been sold for around $7.1m.
Maybe Santa did come early !
DT
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Nov 10: The auction system. Going, going, gone?
By admin | November 10, 2008
A headline from today’s Financial Review:
“Home Auctions in Doldrums Despite Rate Cuts”
No. That’s not the real news. The real news is the failure of the auction system itself; and how agents and auctioneers aren’t coping with the pressure.
Right now the system is on the ropes because the market has tanked; but its problems run deeper than that. The elephant in the room is whether the auction system itself is working in vendors’ best interests.
The agents make the argument that auctions work because they bring buyers and sellers together at a known time and place and that they have the clearance rates to prove it. This while people, especially at the top end, are keeping their hands in their pockets and refusing to bid. “Ah!” counter the agents, “That’s only in today’s market and that’s when post-auction negotiations begin and the sales are made.”
Then why blow $30-40,000 marketing an auction if its only effect is to trigger a private sale? (OK, some properties are still selling at auction, some even against vendor bids, but that only illustrates Mr Barnum’s reported adage regarding the birth rates of suckers.)
Agents and auctioneers are suddenly having to earn their fees; and a lot who have known nothing but rising markets are now out of their depth. The cardinal sin that we’re seeing is starting with a vendor bid that’s way too high and is then greeted with stony silence. Where to from there? Plead with buyers? Sure. Here, help yourself to my millions, I hate to see you suffer.
Then why is it that the auction system itself should be called into question? (A disclaimer here: we have used the system for our clients’ and our own profit for a great many years. It’s not in our interests to see it die, but nor is it sensible to pretend that it’s not.)
A little bit of history: Wind the clock back 30 years and the only auctions on the landscape were Mortgagee or Deceased Estates. Everything else was a private sale.
So why and how did Melbourne become the auction capital of the world?
Short answer: The Money.
Agents realised that if properties were auctioned, auctions had to be advertised. For many, many years, they took commissions from the media and that alone was enough to keep them in BMWs.
Today they can’t take that commission, but still when a property is advertised, it’s also an ad for the agency. They build their brands and their vendors pay for the privilege.
It’s a great business model. All your stock is paid for by the vendors, who also pick up the costs of your advertising and marketing.
So the auctions continue and the agents are desperate to get sales at any price and the post-auction action is to beat up on vendors “to meet the market”.
The vendors who have paid for all this are the real losers. And they’re starting to realise that.
Then why is it not common knowledge?
Because both agents and media have vested interests in keeping things as they are. (We, too, would probably be wiser keeping our mouths shut; but that’s not something we’re very good at.)
So. Where to from here?
If you look almost anywhere else in the world, you’ll look hard to find real estate sold at auction. It’s not like it’s an essential.
And the marketing of properties is being changed by the internet in ways that could not previously be imagined. Evidence? Look at the Fairfax share price. From over $6 in early 2000, it’s now under $2. The classifieds, the rivers of gold, are running dry.
Vendors, especially at the top end, can now put their properties in front of 90%+ of potential buyers for a few hundred dollars. Why not, then, first try the market as a private sale? The auction, we predict, will become a last resort and come to be seen again as the vehicle of the desperate.
In the meantime, we have some interesting months ahead and some great value for buyers at the end of failed auctions.
The week’s foot-in-mouth award goes to … us.
And do you remember (Top End Trends, Oct 20):
And there’s a bit of strangeness about. We heard last week that the owners of a large block of land in Toorak knocked back a $14 million offer against a $10 million+ quote price. Big call. The would-be buyer turned around and bought a similar blockin Hopetoun Road for $12 million. That’s a gutsy vendor as that buyer definitely isn’t there any more; when expressions of interest close at the end of the month someone is going to be a hero or an idiot.
Just in case you (or we) thought we were infallible, it was the Baillieu Estate at 39-41 St Georges Road and it sold late last week for just under $16 million (um, the quoted price was “$10 million +” - does anyone remember a law about underquoting?). We thought they could have been idiots for knocking back $14 million – who’s the idiot now?
DM
Bayside waves, drowns.
With auction activity in the middle and at the top end of the market well and truly comatose, it was again privately negotiated sales which restored a degree of optimism in what has been a dismal Spring for sellers.
It seems that successful vendors are at last getting a message we have been shouting for most of this year (and, at last, agents are also becoming more realistic). Kids, the game has changed. The value revision is here to stay.
Even so, the number of properties that are still being put under the hammer with serious sums of money spent on marketing over a four week period – at prices which offer little or no prospect of receiving a genuine bid – beggars belief. A cynic might say that a large part of the advertising spend is agent self-promotion and vendors having to stump up significant sums on campaigns resulting in no bid, no buyers and no result is likely to make them just slightly testy.
Buyers are taking their time in assessing what is on offer and with no real pressure to jump in and commit immediately, the average property needs more time on the market than the usual four week auction-driven campaign.
Is this (see above) the death-knell of the auction system? That debate is just beginning, but what’s sure is that unless a property is well above average and ticks all the buyer boxes, including price, why would any vendor choose to go through the pressure of an auction when all there is to show at the end is a big bill?
The week’s results in upper-end Brighton were far better than has been the case for over a month. While some are results of auctions and post-auction sales, most are conclusions of private sale or internet campaigns.
The price leader for the week was the sale of 23 Sussex Street, Brighton following an expression of interest (read private sale) campaign that closed several weeks ago. Although the selling agent is playing coy, close to $4.5 million is believed to have sealed it.
44 St Andrews Street – a single level notable Victorian needing updating on 1476 sq m – was sold for $3.05 million after several months on the market.
10 Male Street, another Victorian on 910 sq m on the corner of Black Street, achieved an excellent price of $2.7 million after less than a month on the market.
397 New Street, on the corner of Elwood Street, was sold 10 days after auction. The best at auction was a vendor bid of $2.3 million, so the selling price of $2.52 million was a vast improvement.
62 Dendy Street was one of very few auction sale results and achieved the top gong for all of Melbourne. It sold as a result of post-auction negotiation for $2.3 million.
Another off the plan sale has been negotiated in Jonathon Hallinan’s “Provence” development at 15-17 Bent Street for $2.2 million, the second sale reported in three weeks.
A large town residence at 284 St Kilda Street on 447 sq m has sold privately for $1.87 million. 98A Dendy Street a well-built single-level townhouse, realised $1.675 million following another low-key private listing.
And finally a tale of two contrasts with real live bidding producing a sale under the hammer at 37 Male Street ($1.375 million) and a sold sticker has finally appeared on 64 St Andrews Street. Having been auctioned many weeks ago with an expectation in the vicinity of $1.6 million, the final result was apparently just shy of $1.4 million.
Further down the bay in Black Rock, a trophy home with a tennis court on 1959 sq m at 227 Beach Road has been sold after auction with a cone of silence on the sale price. It was being spruiked in the high $3 millions and presuming a result close to the expected, would make this one of, if not the strongest, results in the Black Rock/Beaumaris area for some time.
Everything over $1 million in Hampton was passed in with only vendor bids to be heard.
37 Sargood Street at $1.28 million, reserve $1. 38m; 4 Storey Avenue at $1.38 million, reserve $1.45 million and 71 Thomas Street at $1.26 million with a reserve of $1.35 million. Where have all the million dollar buyers gone ?
Unhappily, Bentleigh appears to have succumbed to the passed-in malaise so obvious in other parts of the Bayside with a only two results from 12 offerings.
Our current advice? Some very good opportunities are starting to arise in all price ranges, but particularly above $1 million. Keep your radar well tuned and be prepared to act decisively when the occasion presents.
DT
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Nov 3: All quiet on all fronts.
By admin | November 3, 2008
Melbourne is closed for the Cup. Nothing to report.
We’ll be back next week.
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Oct 27: Black Saturday. Bright for some.
By admin | October 27, 2008
The day the market stood still. It was buyers’ advocate Nirvana!
It was arguably the worst Saturday for auction clearances at the top end since the late 80s. The spring market failed its litmus test. Dismally.
Yes, many did sell afterwards; some near vendor’s expectations, others well short, but the clearest (and unreported) message of the day was the faltering of the auction system itself. They got the crowds, they got the buyers, but virtually all of those buyers’ hands remained firmly cemented to their pockets.
Many of the crowds were huge - 250 people and up (so it wasn’t just the friends and neighbours). It felt like a gathering of the throng — would-be buyers and would-be sellers — looking for some direction. Trying to decide whether this was a market they should be in.
The stark message for vendors? If you don’t have to sell, don’t.
For buyers? With extraordinary times come extraordinary opportunities; but livability should still be your deciding factor. If you’re not buying for the long term (and living long-term with that decision) you may find yourself selling into an unstable market.
Are there signs of distress selling? Yes. 12 Huntingfield Road, Toorak. While it wasn’t advertised as a mortgagee auction, the vendor was the mortgagor. Here, in one of Toorak’s better streets, there wasn’t even a cheeky bid to be had. It sold on Saturday night for the reserve of $4.1 million (a mortgagee auction with a reserve? — don’t we live in interesting times?). And there were, inevitably, some interested parties who blamed the agent for selling without referring back to them. May we suggest that there are some who have a little to learn about negotiation.
More cause for vendor alarm?
• 3a Irving Road, Toorak no bids.
• 17 Dunraven Avenue, Toorak no bids
• 31 Grandview Grove, Prahran no bids
• 1 Fairlie Court, South Yarra no bids
• 14 Horsburgh Grove, Armadale no bids
• 85 St Vincent Place, Albert Park no bids
All done, all finished, all silent, all despair.
And then …
Three bidders! 28 Thanet Street, Malvern was passed in at $2.6 million with a reserve of $3 million. The vendors may still be dreaming of last year’s prices, but at least they have bids to consider.
And …
Sold! 29 Rose Street Armadale passed in at $2.2 million and sold later for over $2.5 million. The buyer prepared to go $300,000 over the next bid is an almost extinct species. This one is museum quality.
Watching the few that did sell was like watching dentists at work. This was pulling teeth stuff. Some auctioneers ready and able to work to earn their fees, others demonstrating that their true calling is in some other field. Any other field.
Saturday’s bright spot …
18 Dunraven Avenue, Toorak Land which sold for $2.515 million against a $2.2 million reserve with three developers competing. Developers … develop. If they’re not doing that, what can they do? Even then, these three must believe the tide will turn by the time they’re ready to come to market. It’s an expensive punt if they haven’t got it right.
Where to from here?
This is, perhaps, the first sign of the auction system going through its death throes. It only works if you have bidders. Faced with the tens of thousands of dollars it costs to take top end properties to auction, we believe there will be a lot more private sales between now and Christmas.
For buyers, there will be some wonderful opportunities over the next month or two. Forced sales are becoming a factor; and that will affect the whole market. That said, if it is a triple-A property you will have competition.
And, forgive the repetition, but if you are buying, you have to like the home, not just the price. If it doesn’t work as a home, regardless of how much of a bargain it appears to be, wait for the right one to come up. If you don’t, it will almost certainly come back to bite you. Not only will you not enjoy where you are living, there’s a more than even chance that your exit strategy will be compromised in years to come.
DM
Brighton. Bewitched, bothered and bruised.
One can almost feel sorry for Brighton’s once proud coterie of alpha auctioneers as they struggled to extract real bids from an increasingly reluctant market on the weekend.
On the back of a major lift in the number of offerings, there were few takers in sight; the clearance rate in Brighton and Brighton East plunged to a navel gazing 20%. Brighton East was particularly savaged with a solitary sale from a total of thirteen offered. The absence of an auction sale in excess of $1 million anywhere in Brighton is significant in a suburb that boasts a median price in the vicinity of $1.7 million.
It is obvious to buyers that a number of properties are still being quoted at overly optimistic levels. Reports abound of sellers refusing solid offers before auction only to be greeted by an ominous silence on the day.
So much wailing and gnashing of teeth by sellers, hyperventilation by agents anxious about when their next sale will be while buyers are biding their time ready to move in at the first sign that the rot has stopped.
The release of the September quarter sales data and median prices is much anticipated; although it will merely confirm what we already know. Extrapolating those figures through the current quarter will only help potential buyers sleep better at night, knowing their patience is about to be rewarded.
It is satisfying to know that Top End Trends has a broad reader base and it seems the local agents are also clicking on.
How do we know?
Because of the number of phone calls and comments made to us by sellers’ agents bemoaning our “negativity” and “talking the market down”.
While it is flattering that agents believe we have such influence, in reality we do not make the market but have attempted to interpret the changes over the course of 2008 and to offer an alternative and more realistic view than that often put by agents representing sellers.
In fairness, we do applaud a sale result of note in the current market but in reality those results are few and far between.
Take Beaumaris:
A staggering 17 properties offered, with a very modest 5 sales.
17 Rosemary Road sold for $1 million on the knocker with the next best published result at $910, 000 for 491 Balcombe Road.
26 Deauville Street a brand new and well fitted and designed five bedroom family home was quoted at $1.58-1.73 million. Although the agent was coy about the exact sale price, we believe it was in the lower end of the range. That’s below replacement cost and good buying. A gem, but only the buyer is grinning.
In neighbouring Black Rock, one of the largest allotments in the area (3364 sq m) at 10 Iluka Street close to Royal Melbourne Golf Course, was passed in on a vendor bid at $2.75 million with a reserve of $3.15 million.
Hampton and Sandringham fared better with more than half finding new owners.
12 Imbros Street sold for $1.375 million, 6 Karoola Street was knocked down for exactly $1 million.
Typically, Bentleigh and Bentleigh East continued to achieve solid results: 15 sales from 23 on offer. The highest result was 98 Brewer Road at $982,000.
11 Cushing Avenue was not so fortunate: $1,125,000 refused against a reserve of $1.25 million.
Next weekend is for the punters with the Flemington Spring Carnival relegating auctions to a distant second.
It’s fortunate timing: it gives sellers’ agents a chance to clear Black Saturday’s passed-in properties and buyers an opportunity to cherry pick a market that is theirs for the taking.
DT
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Oct 20: Can you hear the band?
By admin | October 20, 2008
There. In the distance. A band is playing. But it’s so far away that you can’t tell whether the tune is Auld Lang Syne or Happy Days Are Here Again.
At the very top end, in real estate if not the share market, the trumpets are soaring. In a roller-coaster week there were four sales above $10 million; perhaps the biggest week at the top end in over six months.
Elsewhere? Gloom is the new black. Confusion, deep pockets, trepidation.
But if you were looking for evidence that the AAAAA top end is not a prisoner of the share market, you’ve found it. It’s also a comment on the lack of genuinely premium housing stock in Melbourne.
Sydney is different. A quick look here will give you some idea how big their problem is.
Melbourne has vendors who are ready to sell, but buyers are either running scared or bargain-hunting. Bargains, where they exist, too frequently lack the quality to make them interesting.
And there’s a bit of strangeness about. We heard last week that the owners of a large block of land in Toorak knocked back a $14 million offer against a $10 million+ quote price. Big call. The would-be buyer turned around and bought a similar block in Hopetoun Road for $12 million. That’s a gutsy vendor as that buyer definitely isn’t there any more; when expressions of interest close at the end of the month someone is going to be a hero or an idiot.
(A client of ours describes this as peak cycle stuff - before suggesting he’s happy to sit and wait like a tiger in the long grass.)
Blocks of land were certainly the flavour this week with a block of land at 4195 Frankston-Flinders Road in Shoreham selling under the hammer for $10 million against a quote price of $9 million with two bidders (finished on a round number – clearly they had set their limits!).
14 Church Street, Toorak sold for more than $3.8 million after being passed in with two bidders against a $3.7 million quote and a $4 million expectation.
Elsewhere? Feel the gloom.
The lowest clearance rates for some time are finally reflecting the real state of the market (even the REIV is now admitting concern – its members must be squealing).
Next weekend will see all sectors tested. The sense we’re getting, from our own clients and others, is that houses are being seen as a safe option. As one client put it “I get 365 sleeps a year, they may as well be good ones as opposed to staring at the ceiling worrying about shares”.
Our expection is that investment in units will suffer. That negative cashflows will only be borne when there’s an expectation of a decent capital gain.
But a soft landing may still happen in the housing market. Unemployment and interest rates are half what they were during the 80’s bust; and there’s Melbourne’s chronic lack of housing stock.
There’s gloom; but not doom. Or, at least, not yet.
DM
Bayside: Where to now ?
While the Spring selling season grinds on, last weekend it became apparent that it will take more than a boost in the first home buyers’ grant and further easing in bank interest rates to kick-start the Bayside market.
The official (read REIV) auction clearance rate fell to 57% from last week’s 62%.
The real clearance rate (read Morrell and Koren) of properties actually put to auction was only 46%. If that rate continues, with over 1,000 properties scheduled for auction next weekend you’d see over 500 disappointed vendors.
Buyers are marking time and are, as with the stock market, they’re looking for solid evidence that the bottom is in sight before committing to a purchase. That said, the continuing volatility in equities is starting to impact on those seeking the relative stability of property. Canny home occupiers and investors will not wait for the herd, they’ll grasp the opportunity sooner rather than later.
48 Martin Street, Brighton had the relative luxury of three bidders competing before being bravely passed in at $2.1 million. This bravery was rewarded with another $85,000 being put on the table to secure the home for $2.185 million; a solid result for a well presented but somewhat compact residence.
24 Roslyn Street, Brighton did not fare so well. It sold only 16 months ago for $2.3 million. Last Saturday’s most optimistic bid was the auctioneer’s: $2.1 million with the reserve not disclosed.
Brighton East had a better day with 1 Farmer Street achieving $1.36 million, 2 Stone Street $1.11 million and an excellent new home in the Landcox Park Precinct at 26 Milroy Street achieving a vendor-pleasing $1.75 million.
Not so pleased were the vendors at 17 Connor Street. The bidding was kicked off at a modest $1.7 million with the auctioneer countering with vendor bid of $1.9 million. This was enough to prompt the $1.7 million man jump into his car and roar away as the auctioneer was referring the vendor bid. Reserve is set at $2.2 million.
No joy (for the second time) at 6 Imbros Street, Hampton. Auctioned last year, this well renovated single storey timber residence then had a reserve of $1.7 million. It has now been passed in on a real bid of $1.31 million, further discussions came to naught and the vendor is resolute at $1.43 million. That’s brave.
Bayside’s Beach Road, from Brighton to Mordialloc, is often regarded as a barometer of the local market. In good times all eyes are on the sweeping bay views and prices soar. In poorer times all buyers see is the traffic and buyers’ backs are turned. And so at 85 Beach Road, Mentone a two storey family home with pool and “views from Arthurs Seat to Ricketts Point” attracted a vendor bid of $1.2 million and was passed in with a reserve of $1.35 million.
Bentleigh and Bentleigh East felt the pain with uncharacteristically low clearance numbers of four from nine offered.
The real test of the Spring market will be next weekend, but in times of what seems to be unrelenting change, the stock market constantly discovering new directions, CPI figures due in the next few days and who can tell what levers are left to be pulled by Canberra…
DT
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