Archive for June 2018

How has the first half of the property market faired for 2018?

We see the market as more ‘balanced’ now, which is very different to 12 months ago.  Stock levels and bidder numbers are both down and the market is far more discerning (and sometimes not even interested) when it comes to the B and C grade homes.

In this market, experience and knowledge counts.  Being aware of a property’s history and what is happening in the precinct is becoming more important.  This information is not always easy to obtain – full due diligence is up to the buyer of course as the selling agent is engaged by the vendor to represent the vendor.

 Half year observations:

• Many agents do not have as many properties ‘locked in’ for spring campaigns as they did for the same period last year and we are noticing a number of changes within agencies regarding staff levels and office relocations.  Buyers may have to be more patient in the coming months and perhaps not pin too many hopes on the traditionally plentiful Spring options.
• A lot more ‘stale, old or repackaged’ properties are around, some of these with their third or fourth agent/agency campaign, hoping to achieve a sale.  For many, unless the change is combined with a price reduction, they may be for sale a while longer.
• Advertised quotes are being wound back on properties, and while the ‘new’ quoting laws have largely achieved the Andrew’s Government’s objective, the understanding of price and value for buyers is as confusing as ever. 
• Suburban towers and/or medium density developments are having a big effect on nearby residential homes.  We are noticeably increasing our time spent at council deciphering nearby proposals and how they may affect properties we are considering buying for our clients. Knowing what to look for now may prevent unknown surprises in the future.
• Off-street parking does not appear to be as coveted as it once was, and position is becoming even more important, particularly for teenage families and downsizers.
• Schooling in Melbourne continues to be a prime consideration for many families.  In addition to buying close to schools (or public transport) to combat the traffic congestion, we have noticed a swing toward buying in public school zones keeping secondary schooling options open too.
• Less bidders at auction (sometimes due to the quality of offering and sometimes because vendor expectations are too high).  We are also noticing less buyers through mid-week inspections.
• Money is harder to get from financial institutions and the impact of bank/government reforms for overseas buyers is starting to take effect, with much less activity from Chinese buyers in particular.
• More people are considering staying where they are – “Should I renovate or relocate?” Talking to architectural colleagues and builders, they are commenting that the enquiry is still strong. 

We have many discussions with clients about their options.  Having both a buyer advocacy and architectural services branch to our business allows us to have qualified informative discussions about the best options for each individual situation.

The market is quickly slowing down for Winter and the school holidays.  Many agents (and Melburnians in general) are getting away from the cold for a month or so in June/July and the future is now fully focussed on the Spring market and what may be coming up for sale in August.

That said there are still a number of homes around for sale privately.  Some have been around for up to a year or more, others are testing the market to see if they can still get last year’s price without the preparation, costly advertising and public auction.   In amongst all of these, there is occasionally a genuine seller ready to transact.  Buyers can waste a lot of time investigating these properties, however, particularly if they don’t have a full understanding of the market and the process.

In the short term buyers may see opportunities, however, in a tightening market we are likely to see even fewer properties for sale and even less of the ‘A’ grade properties (see our previous blog for more information on our thoughts regarding A, B & C grade properties https://www.woledgehatt.com.au/2-june-2018/ ).

As always, we think buying the right house first, is the most important goal.  Price can quickly wear off and you may find yourself left with a bargain you won’t enjoy living in or lose significant money on if you decide to re-sell it. As a growing family, that can really set you back.

Highlights:

Off Market:

• good period home in Hawthorn, updated with garaging – circa $6m
• renovated period home with good garaging, Prahran – over $4m.
• modern townhouse, Prahran – circa $2m.
• period home, Brighton – mid $2millions
• large land (potential development site), Camberwell – $5m
• modern home with court, Brighton – $6m
• period home, low maintenance block, South Yarra – over $3.5m

Auction Spotlight

7 Auburn Grove Armadale

Andrew McCann was made to work hard with the crowd spread along both sides of the street at the auction of 7 Auburn Gr Armadale

7 Auburn Grove Armadale offers enormous potential to renovate and extend the existing period home into a family home for the next decades.  More than comfortable to live in as is while developing plans, the home offers good land at the rear, including OSP from the ROW and is well positioned to amenities.

A crowd of about 40 people attended the auction led by Andrew McCann and the Jellis Craig team.  Following the preamble, Andrew was met with the currently customary silence from attendees.  Eventually placing a vendor bid of $3.5m, no one was prepared to enter a counter-bid and the home was eventually passed in at this level.

Perhaps this is an example of the shifting market and vendor expectations exceeding those of buyers’ for a property such as this.  Quoting $3.7-3.9m before the auction, the home remains on the market, now seeking $3.695m.

11 Valetta Street Malvern

James Tomlinson working the bidders at the successful auction of 11 Valetta St Malvern.

The home at 11 Valetta Street Malvern attracted over 50 people to the auction.  Positioned only metres from Glenferrie Rd, the Victorian double fronter on approx. 416sqm of north rear land has recently had a full makeover within the original footprint making the home more comfortable for the short term.  At some stage, the good sized land then provides opportunity to take the property further (STCA) when desired.

Hugh and James Tomlinson from Marshall White ran the well-attended campaign, with James calling the auction on Saturday.  An opening bid of $2.4m was quickly received, followed by a second bidder and the 10k bids went back and forth swiftly.  At $2.5m the home was called on the market, eventually settling with bidder one for $2.525m.

Adam evaluating a property from an architectural perspective – quickly assessing what can easily be improved

With almost half of the year gone, the Melbourne property market has slipped back to a more ‘balanced’ clearance rate.

We are currently seeing the following:

• Less bidders at auction (sometimes due to higher vendor expectations or quality of offering)
• Apartments and construction works are having an effect on traditional neighbourhood areas. The major planning changes of March 2017 are noticeably impacting on suburbs now
• More people are prepared to stay where they are – “do I renovate or do I relocate?” We have many discussions with clients and prospects about this, and having both a buyer advocacy and architectural services branch to our business allows us to provide the pros and cons of both options to our clients in a timely manner

A real focus now is the Spring market and what stock is coming on in a few months, as most agents (and Melburnians in general) concentrate on getting away for a month or so in June/July. That said, there is a lot happening (or properties being tested) off-market.

The market has changed and we are entering a ‘buyers’ market.  The REIV clearance rate was 62% at 6pm on Saturday and 35% of the passed in properties were passed in on vendor bids.

For buyers, this may mean opportunities; however, in a tightening market we are likely to see fewer properties for sale and even less of the ‘A’ grade properties.

One question may be, what is a bargain?

For discussion purposes, if we break the properties in three categories – A, B and C, let’s focus on the things we can’t change.

We think an ‘A’ grader is a property that is well positioned, well oriented and has a functional floorplan, often fully renovated. Finding an ‘A’ grade bargain is hard. The properties are usually easy to spot and (with less choice) buyers will gravitate toward the good ones, potentially increasing the competition.

We regard a ‘B’ grader as a property that is still well positioned, has good land content and has the potential to become an ‘A’ grader with some thoughtful changes to the property.   We have the ability (Adam is a registered architect who has been practising for nearly 20 years) to identify these properties and quickly work out whether they can be easily improved. He can also make quick assessments regarding zonings, neighbours, council setbacks and overlays. This has helped our clients immeasurably, as they can make timely buying decisions and they have often been able to pursue properties at more affordable price points.

The properties where we have seen the biggest change in the market over the past six months are the ‘C’ graders. Thus time last year, properties positioned well away from amenities, with homes that were poorly designed/positioned for light, often located on busy roads or with negatively impacting neighbouring properties (ie apartment blocks) were attracting as much competition and emotion as the ‘A’ graders.  Buyers for these properties have all but disappeared or the buyers are now at much lower price levels than vendors. That said, the odd one has been selling, more often than not to a desperate or ill-informed buyer.

The googled definition of a bargain is ‘something bought or offered for sale much more cheaply than is usual or expected’.

Sometimes waiting for a bargain may mean you miss an opportunity to purchase the property that is going to suit your emotional and lifestyle needs.

You could hold out and wait to buy a property that has been sitting around for sale for the last 3-6 months or more. There are plenty of them around. Many of them have had asking prices well above even the top prices achieved in 2017. If the vendor expectations have changed, you may get lucky and buy a good property; however, just because it is ‘cheap’ may not mean it is the right property for you.

If it is not an ‘A’ or ‘B’ grader, consider how long you may need to hold the property until the next boom, where you may be able to see some good growth. The last boom we recall like 2017 was back in 2009 when the government relaxed the FIRB rules – that’s a long time to wait if the property doesn’t meet your lifestyle needs.

There will be some good opportunities around for buyers; however, we think it is important to buy a property that still meets around two-thirds of your key wish list, focusing on the things that can’t change. And unfortunately, that can mean waiting.

As the market continues to change, waiting to buy at the bottom of the dip may be short lived. Vendors are more likely to hold their properties and only sell if they need to; therefore, stock levels will also tighten further and, with limited choice for buyers, we could quickly see an improvement in the market and an upward trend returning towards the end of the year.

Highlights:

‘Off-market’ Properties:

• A number of properties for sale on large land, Hampton – $5m plus
• Corner block close to amenities, Brighton – circa mid $2m
• Period home requiring renovation, Canterbury – circa mid $2m

Auction Spotlight:

18  Plant St Malvern

A large crowd came to see and participate in the auction of 18 Plant St Malvern, successfully sold by Andrew Hayne and the team from Marshall White

The near new, modern townhouse on offer at 18 Plant St Malvern was always going to attract a strong crowd.  Well suited to families with older children or early downsizers the home delivers space, light and very comfortable low maintenance living.  Andrew Hayne called the auction in front of the 50 plus crowd standing easy in the cul-de-sac. Opening with a $3.0m vendor bid, an offer of $3.3m followed by $3.5m – clearly showing the high level of interest in this property. A third bidder entered at this point and brought increments to a more sustainable level. At $3.6m the home was called on the market with steady bidding continuing, as a fourth bidder entered the action.  The property was eventually sold under the hammer for an undisclosed amount just under $4m.

14 Airlie Avenue Prahran

It took a while for the auction at 14 Airlie Ave Prahran to warm up in the crisp morning sunshine, although falling slightly short of vendor expectations, selling afterwards.

14 Airlie Avenue Prahran offers fully renovated family living with period features in a prime location.  An oversized master suite, spacious open plan living and off street parking (note garage too narrow for most cars) are highlights. The secondary living zone is on the smaller side.  Marcus Chiminello and Nicole French led the Marshall White team for the campaign and auction.  With no opening bids forthcoming, a vendor bid of $3.5m was placed to get the auction started.  This did not have the desired effect and Marcus was made to work hard, give everyone time to think with an early half time break and almost passed the property in when a last gasp offer of $3.52m was made.  A second couple joined in and the two parties traded offers with varying speed, finally settling at $3.715m where the property was passed in to bidder two. The home was sold in post auction negotiations at a level slightly above this.