When is a bubble not a bubble?
We’re hearing it shouted from the roof-tops of some top-end agents: “The good times are back!” “Or nearly back!” “Or will be along on the next bus!”
At the top end, we’re not seeing that in transactions. Is this the bubble you have when it’s all in the mind?
What are we seeing?
- More and more it’s off-market where the deals are being done. Nothing’s public.
- Some realistic owners are finding realistic buyers.
- At the top end it’s the locals who rule. A boardroom auction last week was typical: three bidders, two live within 50 metres of the property on offer. No ex-pats, no-one from anywhere but Oz.
- The Family Court, as usual, is doing its work. There are those with wedding photos and those without. Pay attention.
- Agents are living with greater than usual fear around getting and keeping clients. Ready to tell them what they want to hear rather than what they need to hear.
- Talk of stress sales persists and is still mostly talk – although there’s a mansion here and there where rates and land taxes are years in arrears.
- There are still vendors fishing for prices that buyers are not ready to pay – baiting their hooks with bricks.
- There are buyers who are keen to buy – but not keen to sell until they have found what the are looking for. Musical chairs and no music.
- As always at the top end, every property is its own market – and regardless of agents’ reports of massive interest it is rare to see more than a few buyers seriously interested in any one home (evidence? – we spent a fair part of Friday taking calls from agents hoping we’d attend their auctions).
- Imaginery buyers continue to surprise – popping out of some agents’ mouths and impressing us all with their ability to appear without warning and then disappear when challenged.
Patience. A bubble is most unlikely.
Auction clearance rates are their highest since 2010 and—the way the trend is going—soon it will be back to the heady days of 2007.
The Greater Metro Melbourne number is over 80%, but properties in suburbs in the coveted 10-12 km radius of the CBD are now seeing clearances above 90% with no end in sight.
Before getting overly excited about the headline figure, remember that auctions account for less than 30% of overall residential property sales in Greater Melbourne—but are of greater significance in the inner belt where auctions in a strong market can exceed 50% of the total turnover.
Buyers in these parts of Melbourne are on the move and there simply is not the supply to meet their requirements.
Seasoned investors, superannuants, first homers, double income young professionals, cashed up tradies, downsizers and off-shore buyers are converging and it has and will continue to drive a price spike.
Bargain price loans have also made it cheaper to buy than to rent for those starting on the property ladder and the same factor has forced those investors with term deposits to seek a vehicle that at least gets them a tickle over the inflation rate. As an investor if you don’t fancy equities or think they are already fully priced after the recent rally, property in the right location can be compelling.
However, move to the vast middle and outer suburbs of Melbourne and to the provincial areas and a different story is being told with relatively few buyers and plenty of choice.
Are these the signs of a bull market in inner Melbourne property—or is it that the fence-sitters over the dormant winter months are at last doing what they had long planned to do and the interest rate cut has finally galvanised them into action? A blip rather than a rising tide?
Too early to call yet, but unless there is a flood of property available in the middle to late Spring then expect more of the same.
And let’s face it, if you have an investment grade property in one of the good locations, why sell it? If there are no tenants (or rents drop substantially) because they have now become buyers there could be an argument, but otherwise why not sit pretty?
Meanwhile, at the coalface, the much underperformed top end in Bayside was given a boost with two recent sales. Hollyburton in Sandringham last weekend (rumour is around $4 million) and the private sale at around $7.5 million of 12a Glyndon Avenue. This follows the sale of two high-end apartments—also in Glyndon Avenue—each also for around $4 million.
The highest price at auction was at 11 Wolseley Grove where a brand new town house with a basement and much expensive detail was passed in initially at $3,060,000 and soon after a sale was made for a touch more.
However again it was the lesser light properties that generated the most attention and action on the day.
Two “land only value” (each under 400 sq m) offerings at 111 St Andrews Street and 34 Meek Street were both strongly contested by new home builders and renovators and sold well above reserve at $1.236 million and $1.17 million respectively.
With at least six bidders, Unit 5 at 6 Belle Avenue was by far the most competitive. Initially quoted in the high 700’s—we thought it would be more like $900,000 on the back of almost $800,000 being paid for 5/178 Church Street a few weeks ago—but buyer pressure and a seemingly insatiable demand for villa units took it to $955,000.
East Brighton was again strong—multiple bidders at most auctions—but brittle at the top.
13 Letchworth Avenue had aspirations of $2 million but struggled to a face-saving $1,920,000.
Later in the day, an upsized McMansion at 32 Welwyn Avenue was offered with a vendor bid of $2.1 million. An obvious buyer repeatedly offered to match this, leading to a standoff with an auctioneer who wanted to go further. There was a later bid of $2.2 million, but it’s still a fair way to a reserve which nudges $2.4 million—not far off replacement value.
3 Lorraine Street, Hampton Big house, OK land, views to the rear of bay and train line. Three bidders took it to $3.25 million.
2 Lily Street, Bentleigh. New “Brighton-like”(!) house, several bidders took it to a near-East Brighton $1.7 million.
Beaumaris. It’s Back. Maybe. Hibernated for the winter but came back with eight sales–including three auctions—during the week.
Beauie is usually the last cab off Bayside’s rank in any resurgent market. If this keeps up, maybe it’s on for real.
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