July 27: Move over MasterChef

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In real estate terms, Melbourne appears to have repealed the law of gravity.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:

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