‘Strange’ times abound: what does this mean for buyers?

‘Interesting times’ was the catchphrase during and just after COVID. Now the narrative is ‘strange times’. Certainly, there has been many things occur recently where we have shaken our heads and thought, ‘Gee, that is strange’. For example, buyers pulling good offers overnight, after having further thoughts about a property; buyers staying put in their current home because they can’t find a house that suits what they want or need; or houses being overquoted, rather than underquoted

From a buyer’s perspective, here is what we’re seeing in the market.

‘Overquoting’ rather than ‘underquoting’

This has been happening for more than a few months now. It most likely reflects the vendor’s/agent’s initial expectation being well out of step with what the market thinks their property is worth. Unfortunately, having a ‘high’ quote can penalise the seller, as fewer people inspect the open at the start of the campaign, thereby diminishing interest. When/if the quote does get lowered, this can confuse buyers and lessen interest levels, as most buyers have overlooked the offering and moved on.

Less buyers at opens

We’re not seeing as many buyers at opens, possibly because of the uncertainty of the times, rising interest rates, and in part due to the point above.

Fewer people wanting to take on homes that require work

Feedback from agents is that buyers are particularly fussy right now, often over very trivial things. Perhaps they think that the market will continue to fall. Who wants to buy something now when the price could be a lot lower in a few months’ time? A trend for a while now has been buyers’ reluctance to take on renovation or new build construction work. Such costs have gone up considerably in recent years, and this no doubt has had a negative effect on the market. But we contend that for the long-term purchase of a family home, the timing now represents a good opportunity to buy such properties (so long as the ‘unchangeables’ are there, of course – such as position, land size and orientation). Who remembers the line ‘buy the worst house in the best street’?

Auction system not performing that well

As a result of muted buyer participation, agents and sellers are opting for quieter selling campaigns. Perhaps this is seasonal thing – not many properties look great in Melbourne’s winter, and who wants to attend an auction on a cold Saturday morning/afternoon? EOIs, off markets and private sales seem to be a more popular way to sell. Yet the problem with these options is that buyers don’t always feel comfortable in a process that lacks transparency. The media also relies on reporting ‘clearance rates’ – and, if this is low, as it is now, a blanket of negative sentiment is applied to the whole market, heavily influencing buyers and sellers alike.

Most properties starting their marketing lives as off-markets/pre-markets

This is fairly normal, for this type of year, when people are looking ahead to sell in spring but may sell ‘quietly’ now at their dream price. We have been through a number of off-markets in recent weeks, and advised of many more than normal. That said, talking to experienced agents in recent weeks, pipelines for August and September are not looking great, so it might be a while before buyers find and buy the right one for them. Such decreased supply will no doubt result in increased demand. Melbourne is still a very good place to live, right?

A lot of large modern period-inspired homes on the market

In Boroondara, in particular, we have seen a huge amount of French Provincial inspired homes (see snapshot below) on the market. Generally, we would see 5-10 of these homes for sale at any one time, but at the moment there are 40-50. In our view, the market can’t support this volume of similar stock, and it will be interesting to see how many of these remain for sale at the end of the year. After all, we do have a housing shortage.

Multiple factors may be influencing this large volume, such as rising interest rates, increased land/vacancy applied taxes, reduction in immigration and the flow-on effect from the 2024 closure of the Business Innovation and Investment Program – 888 Visa).

Increasing buyer sensitivity around price

Properties are selling, yet the market is very sensitive towards price. Simply put, if a vendor’s product does not look like it represents good value to buyers, they are likely to remain an owner rather than a seller.

So where does that leave us? The market now takes its usual midyear break in July. But even if global events such as the Iran/US war subside, there are some local headwinds coming up for the rest of the year. These include new AML (Anti-Money Laundering) legislation, possible changes to the price quoting system in Victoria in October, possible interest rate hikes, and a state election at the end of November.

With less quality stock selling, statistics are naturally skewed to lower prices for the suburbs. This doesn’t mean the market has gone down, just that the better quality stock has not been sold. It’s easy to be persuaded by a media narrative of doom and gloom and prices crashing, but, from what we’re seeing on the ground, the reality is different. Good properties are still hard to buy.

 

Some of the better properties on the market; an architect’s view

 

24 Glendearg Grove Malvern – David Volpato/Joanna Nairn, Marshall White

20 Hodgson Street Kew – Paul Richards/May Zhu, Bekdon Richards

1 Park Street Brighton – Michael Derham/NellieJenkins, Whitefox

 

A selection of current ‘Off-market’/ Pre-market Properties:

• Near new 5-5-2, ~680sqm, pool, Kew – circa $5.15m
• Townhouse, north of the pair, 3-3-2, Kew – circa $2.3m
• Contemporary family home, 4-2-2, pool, ~700sqm, Canterbury – circa $3.15m
• Renovated period, 5-3-1, 3 living, north orientation, Kew – circa $3.65m
• Large, contemporary 5-5-2, ~650sqm, Balwyn North – circa $5.25m
• Period 4-2-1 looking for updates, Balwyn – circa $2.75m
• Fully renovated art deco, 4-2-2, pool, ~660sqm, Camberwell – circa $3.6m
• Fully renovated terrace, 3-2-2, East Melbourne – circa $5.0m
• Freestanding w/board, 3-2-1, fully renovated, Nth rear, Malvern East – circa $2.2m
• Brick Federation 5-3-2, pool, west rear, ~530sqm, Malvern – circa $5.25m
• Contemporary TH 3-2-2, North rear, Malvern – circa $2.1m
• TH w basement, 3-2.5-1, west rear, Prahran – circa $1.55m
• 2 storey brick Victorian, 4-3-4, ~410sqm, South Yarra – circa $3.7m
• 1940s brick 3-2-1, ~330sqm, east rear, Prahran – circa $1.9m
• Brick Edwardian single fronter, 3-1-1, ~180sqm, Toorak – circa $1.65m
• Brick single fronted Art Deco, 2-1-1, Prahran – circa $1.3m
• Renovated 2-storey Victorian 3-3-1, South Yarra – circa $2.3m
• ~860sqm development site (stca), west rear, St Kilda East – circa $2.35m
• Single level Victorian, 3-2-1, ~240sqm, Nth rear, Balaclava – circa $1.75m
• 2-storey, 4-bed family home, school zone, McKinnon – circa $2.65m
• Renovated 90s home, 4-5-3, ~540sqm, Beaumaris – circa $2.6m
• Original home, ~680sqm, reno or new build (stca), Brighton East – circa $1.7m
• 1940s brick on ~720sqm, 3-2-2, Brighton East – circa $2.55m
• 80s family home, 4-2-3, ~630sqm, Brighton East – circa $2.9m
• New home site (stca), ~760sqm north rear, Hampton – circa $2.0m
• Rear renovated villa, 3-2 w. OSP, near park/schools, Hampton – circa $1.65m
• Land w approved plans for two large THs, opp park, Sandringham – circa $2.3m
• New family 5-5-2 home, ~800sqm, west rear, Mordialloc – circa $2.95m
• Californian Bungalow on ~900sqm corner, 3-1-3, Brunswick East – circa $3.5m

 

Auction Spotlight:

1 Nyora Street Malvern East

• Quoted $2.4-2.6m
• Started $2.4m VB
• Ended, pass-in $2.4m
• Bidders 0

A crisp midweek auction saw about 30 people gather in the formal living/dining area for this unique offering, only stone’s throw from Central Park.

Auctioneer James Tomlinson gave a spirited preamble here – “Buyers asks us all the time what they want – single level, no body corporate, secure lock up garage into the house, north-facing rear – tick, tick, tick, tick – this has it all ladies and gentlemen.” Selling only few ago under very ‘hot’ market conditions for $3.0m, James looked for an opening bid, but when none were forthcoming placed a vendor bid at the bottom of the range. With no takers forthcoming the half-time break was taken then auction re-opened. But still no bidding, and the property passed in. Strange auction – strange times….So why didn’t this sell? Well one theory perhaps is that most buyers looking at this type of product (downsizers) are living in homes they need to sell, yet that market (dated large family homes, often needing update work) is quite cool right now – if they do sell before, where do they go?

 

57 Shepherd Street Surrey Hills

• Quoted $2.2-2.4m initially, then $1.8-1.9m, then $1.85m
• Started $1.8m VB
• On market $2.0m
• Ended $2.13m
• Bidders 5

A cool late Saturday winter afternoon saw about 50 people attend this auction, and Auctioneer Ming Xu with the help of a strong amplifier gave a good concise preamble, concluding within about 5 minutes. Well done, Ming – there should be more of this! This was a good property; north facing rear, pretty single level timber Edwardian updated inside, over 800m2 of land in the 3127 postcode.  Looking for an opening bid and understanding that none would be forthcoming, a vendor bid of $1.8m was placed. Still no crowd bidding and after a few minutes the half-time was taken.  Once the auction opened back up, it took a while but one bidder provided a $10K increase and the auction was up and running. It didn’t take too long for momentum to build and with the help of two other bidders the auctioneer announced on the market at $2.0m. Enter bidders four and five and the property sold for $2.13m. A solid result compared to the latest quote, yet well under what was originally quoted. A fairly predictable outcome but surely buyers would have been confused along the way here.

 

24 Balcombe Park Lane Beaumaris

• Quoted $1.79-1.96m
• Started $1.8m VB
• On Market $2.0m
• Ended, $2.16m
• Bidders 3

This 1966 modernist home, designed by architect Peter Carmichael, was commissioned and enjoyed for 60 years by the current vendors. Well maintained in its original form, the home is a testament to the design of the era.  Such offerings always attract crowds in the Beaumaris area, with the agents welcoming over 200 people to the property throughout the campaign. Many also came to the auction, although it took some effort for auctioneer Stephen Tickell to coax out active bidding.  Opening with a vendor bid at $1.8m it took until after the ‘half time’ break for bidder 1 to emerge. A few swift back and forth offers with bidder 2 quickly brought the home onto the market at $2.0m. Bidder two then fell away as a third party put their hand up.  After $2.1m, both parties were seemingly reaching the end of their limits but digging deep to secure the property.  The opening bidder, a couple with a passion for mid century design, was the successful party at $2.16m.  A good outcome we feel – quoted attractively, a realistic reserve and market competition setting the value for a unique offering.