It’s good to catch up and hear from the best auctioneers as to what has been happening this year at the Melbourne Auction coalface.
The two questions we asked the Auctioneers were
1. What will happen next year and why?
2. What are the changes/trends in auctions this year and why?
Our Words: You know our thoughts on Andrew – you could easily dismiss him as happy go lucky and maybe we did in the early years. We were wrong – happy go lucky doesn’t prepare meticulously for an auction delivery nor consistently get the bigger homes to sell. Pleasant and funny yes but he also works smart.
Andrew’s Thoughts: 2010 will follow on with demand stabilizing and prices leveling. Interest rates will play a role in the second half if the current pace of increases continue.
Agents choosing to display vendor price selling expectations in marketing and those choosing not to, has created a clear choice for potential vendors and buyers in the market place.
Damien Davis - Jellis Craig
Our Words: He was the Solo man in advertising in the 1980’s and he is the solo man in auctioneering in 2009. Why is he good? Results. Damien does the work beforehand and delivers his message quieter than most but with just as much punch. You don’t need to be loud and unprepared to be an auctioneer.
Damien’s Thoughts: Next year I expect the market to level out. I think the huge Asian led push has passed by and with interest rates rising I think we will return to gradual growth over the coming couple of years.
Trends this year have been a greater acceptance by the Asian buyers of the auction system and a willingness to open the bidding by buyers rather than wait for vendor bids.
Justin Long – Marshall White
Our Words: Another great technical auctioneer who challenges Iain Carmichael as or maybe is Stonnington’s best. Justin has a warm and engaging personality and the other reason we find buyers like him is he tells us the truth as he knows it. Good, not easy, good to do business with.
Justin’s Thoughts: Given the ongoing pent-up demand from reduced stock levels in the first half of this year, interest rates maintaining at very low levels and a surprisingly stable economy, prices will rise consistently throughout 2010 in all parts of the market. Buyers at the top end have found their confidence again and that part of the market will be strong tempting many vendors to act (especially those who have been sitting on their hands for some time)
Early in 09, the better auctioneers became wary of starting bidding too high and were been prepared to back their judgment in negotiating post-auction. The big issue has been CONTROL – those who have maintained their balance and poise when the chips have been down have been rewarded with good outcomes as buyers, sensing an opportunity, fought to gain an upper hand position.
Now with the market strengthening, auctions have returned to favour after Expressions of Interest became popular (even if not necessarily successful) early in 09. Bidders are returning in numbers and vendors are, on occasion, becoming overly optimistic. The challenge in a strong market is to act for the vendor zealously but also conservatively.
Phillip Kingston – Gary Peer
Our Words: Phillip gets people comfortable with the process better than almost all. I think he is the best I have seen at getting a bid from the nervous nellies.
Phillip’s Thoughts: What a difference 12 months has made. On December 17, 2008 we stated the following, “While many experts are informing us that it seems unlikely that property prices will escalate sharply in the short term, recent history shows that prices can unexpectedly increase. Factors such as strong rents, low vacancies, steady immigration to the area, low interest rates, the increased first home buyer grant and blue-chip nature of property may provide a market bounce back." “I would not be surprised if the correction in prices has settled at its lowest level…”
It appears that the above statement could scarcely have been more accurate as within months of the real estate market reawakening in 2009, prices not only firmed up but started to rapidly return to previous historic records and then further continue into unchartered territory.
As for 2010, the experts are predicting further growth in property values which does not seem inevitable as we predicted last year, however on what we have witnessed in the last 6 months, it is entirely possible if not probable.
Our auction style did not change in 2009, however our clearance rates were significantly higher than the previous year and the industry average. Buyers bid boldly, usually in strong numbers and recognised the need to ensure they held the final bid in a pass in situation. Due to intense competition many properties achieved significant premiums from “on the market” figures.
There was much controversy in relation to quoting ranges of auction properties resulting in various authorities stipulating a price range being quoted rather than a figure plus. This directive was provided to our industry by the REIV some years ago and has been our standard “modus operandi” since.
Mark Earle - Buxton
Our Words: Easily the most improved auctioneer I saw this year. Still has a little way to go until at his peak but in the auctions I saw he was impressive.
Mark’s Thoughts: I believe the market will settle down as the pressure of interest rates settles in. Given what seems to be Australia’s unique place in the world economy it would be hard to imagine to much negativity influencing a change like we had last year. I think what has come out of the GFC last year is an under tow of confidence particularly in the blue chip property markets of Melbourne given the volatility of the global share markets. Surging population is still going to be a factor in our favour with the basic economics of demand outstripping supply and the Asian community since the relaxation of the FIRB laws has had and will probably continue to add strong impetus.
We have gone from a market 12 months ago that was very reluctant to auction given the poor clearance rates and the perceived risk of advertising for possibly no outcome to one that is now 70% auction (compared to 40%). In a confidant market there is no better way to sell in my view as the emotion of an auction in an environment where there is an under lying confidence really can maximize what somebody’s home could be worth as genuine market forces determine the outcome. Fear of loss can drive prospective purchasers to heights that aren’t always rational and predictable which can be terrific for vendors. This way of selling can drive prices up quickly in a strong market with anyone that misses going to the next property with a new set of higher price expectations! These situations witnessed by prospective vendors give them great confidence in the auction system wanting and hoping for a similar intensity with their own home!!
Our Words: Peter is old school – a bit of fire and brimstone and he does still crack it occasionally, however he has a real presence which is so important when you are taking bids off wealthy and/or experienced bidders. As far as Bayside auctioneer’s go he is right up there when under the hammer.
Peter’s Thoughts: As long as we don’t get too many more interest rate rises and a big influx of property, I am fully confident that this robust market will continue. Generally speaking, there is still a large shortage of property in Melbourne and our population is predicted to increase by up to 30% by 2030!!!!! There seems to be more talk about the current Fed Gov possibly introducing a tiered capital gains on principal place of residence at the top end. If this gathers momentum after the next election, it will also stimulate the market, as it would not be retrospective one would presume.
Auctions have still outshone private sales and expressions of interest, in giving vendors the best chance to inflate their house prices. Even though there seems to be a common trend to not want be the first to bid, once the auction/ action is happening, the bidders are very competitive. This competitiveness is more prevalent up to about $3,000,000 or $4,000,000, but after that unless it is a prime location or 6 star home, it is usually down to private post auction negotiation, or expressions of interest.
Richard Earle – Jellis Craig
Our Words: When you think of Richard – you think the words consummate professional. I find he is incredibly accurate in his predictions and therefore I tend to follow his lead more often than with the bull……. of the world. Always feel he gives everybody a fair shake.
Richard’s Thoughts: Given the market holds 80 % plus clearance rates on the 12 and 19th December , and there is not an oversupply of stock in 2010, the market should maintain its strength although its difficult to see prices continuing to rise at the rate they have done for the first half of this financial year.
Limited supply, historically low interest rates have fueled clearance rates to 80 % + for virtually 6 months of the year. The changing exchange rate has moderated the strength of Chinese buyers who held up the top end properties in Boroondara in the first half of the year, and modest interest rate rises failed to slow the market in the latter half of 2009 despite increases in stock levels .
Scott Patterson – Jellis Craig
Our Words: He is the best auctioneer either side of a $m in this hot market.
Scott’s Thoughts: The fact that we have experienced clearance rates above 80% on every week-end bar one since May means that there will be significantly less opportunities for buyers over the Summer Break. Normally this is the time of the year where a lot of left over stock is “mopped up” however this year will be different. Therefore, in my opinion 2010 will be strong, particularly the first half where we will see limited offerings, historically low interest rates, continued foreign investment (mainly from China & India) and a rising population far exceeding the number of new homes being built. By the middle of 2010 the Government will have introduced a series of interest rate rises which might take a bit of steam out of the market. I hope this does happen because the rapid price rises we have seen in 2009 cannot be sustained and nobody wants to see a repeat of the price crash in 2008.
Without a doubt the single biggest change has been the profile of the buyer at auctions in 2009. In September we did some statistics and found that 36% of our sales had been to Asian clientele. This showed a 125% increased compared to the corresponding period the year before. The relaxing of the foreign investment rules certainly encouraged this situation. It added a new level of value, perhaps as much as 10%, and we noticed some fiercely contested auctions. The market was soon back to the strength it had in 2007.
Steve Tickell – Hocking Stuart
Our Words: Steve is a thoughtful, quiet and low level bulltish man and he is an auctioneer. Hard to believe they go together. Steve is spot on most times as to what will happen and what he is really good at is pass-ins where his persona allows the extracting of more dollars for his client.
Steve’s Thoughts: Though much of what happens next year will depend largely on the movement in interest rates and the world economy over the next month or three, unless there are any significant changes in both, I see things moving forward as they are. Business as usual, with clearance rates at auctions remaining relatively solid (80% and up), prices stabilizing (inferring that the rapid hike this year may steady a little) but remaining firm, and general demand for properties in all sectors remaining strong, particularly in the first home buyer sector. I see a continuing trend of ‘off market’ sales, as shortage of stock sees buyers (and agents) keen to secure property before it hits the wider market. There will also be a return of medium to larger developments commencing construction, and more off plan sales taking place with the recent resurgence of sales giving developers greater confidence to take more risks.
What are the changes/trends in auctions this year and why?
Generally more willingness of bidders to actually bid! It would seem the average (if there is one) bidder has learnt that there is more to gain by bidding at auction than holding back and negotiating after a property is passed in. With demand strong and buyers realizing that more aggressive posturing during auction is only going to assist their cause, we’ve seen a trend towards more lively auctions with high participation and more trust in the concept of bidding. No doubt the less experienced bidder (ie first home buyer) is often more anxious to bid, and never having bid before or at the very least never having experienced auctions in their former guise (ie dummy bidding), they trust the system far more than the typical buyer of the past 20 years. This filters through the whole auction market, and generally makes for a more trusted and open environment. Of course, Buyers Advocates are also now more trusting of the auction system and generally will always make it their business to be involved from the outset. This of course encourages others to bid, sending the right message for the auction system itself.
In all, the auction system is alive and well, and performing its function for the benefit of both buyer and seller.