There was a real loathing from buyers today as they did what they had to - pay more than eight weeks ago.

It's 6pm Saturday and we have been to 16 auctions (less than usual because there is a real shortage of $1 million-plus auctions that are worthwhile covering) and the James Clearance rate is 81 per cent.  

Please note our Chinese translation and Wormy to the right (our price opinion and a general guide to trends over $1 million-plus, nothing more.) 

The dominating issue of the week is stock levels. Iain Carmichael, a respected 20-year-plus veteran and director of Bennison Mackinnon, said today that this market has the lowest levels of stock, at the top end, in his memory.

James Redfern of Marshall White, also an agent of 20-years-plus, agrees and adds that prices are rising and, although we are not quite back to the peak, we seem like we will get there soon.

Jeremy Fox, director of RT Edgar, says buyers are starting to get stressed. How long do you wait? Do you pay up now or sit it out and hope prices will drop, which he adds, no longer looks like happening any time soon. He then mentioned two properties as evidence: 43a Berry St East Melbourne, a brand-new family home, quoted and on the market at $2.2 million, sold for $2.7 million; and 760 Drummond St Carlton (see our rating below), a terrace in need of significant renovation (we estimated would cost up to $800,000) and no car park. It was quoted and on the market at $1.1 million and sold for more than $1.8 million.

Let's focus on the demand and supply equation. Why are stock levels so short?

Well, first and foremost, the GFC has squashed the natural flow of the market and we are now in a Joseph Heller Catch 22 situation. The Catch 22 theory is "If you went to war, you were crazy and therefore you didn't have to go; but if you said you didn't want to go to war, you were sane and therefore had to go to war."

At the moment, potential sellers do want to buy. They need a place to live, but they can't find anything to buy, therefore they are not selling. There needs to be selling pressure to act but with interest rates so low and now a rapidly improving market (from a sellers view), there is the opposite pressure on sellers and that pressure is to hold. This means more and more buyers (eg overseas influences plus natural increases) are looking at less and less stock, therefore, through demand and supply, pushing prices up further. As prices continue to go up, the "pressure" on sellers to hold increases and even less stock is made available in the established homes $1 million-plus market. Catch 22.

Further insights

Increasing demand:
(1) Expats. Tim Picken of Jellis Craig said today that many of his recent buyer enquiries have been expats wanting to return home and he cited the sale of a timber double-fronted home at 9 Carrington St in Hawthorn (1.3 million-plus quote and sold for $1.685 million) as a prime example. Four of the bidders/bidders if they had a chance, were expats.

(2) If I hear how expensive Melbourne homes are one more time, I will go heee. Expensive compared to what? Certainly not to Chinese buyers. These are notes supplied from Su our translator.

• 1 million AUD in Beijing would buy someone only a middle-tier apartment, and definitely not a house as we know them here.


• It is quite common for Chinese parents to buy a house for their children living as international students in Australia when they gain permanent resident status. However, because the Foreign Investment Review Board recently changed its policies regarding foreign property ownership, many of these parents are now buying these homes while their children are still studying (and haven't gained permanent residency).


• The large majority of Chinese business people or investors who can afford to immigrate to Australia are very willing to spend more than 1 million AUD on a house.


• After the US, Japan, Britain, and Germany, China has the fifth largest number of millionaire households worldwide.

(3) Another interesting point re demand pressures was from Peter Kennett at Hocking Stuart:

• Last year: the GFC, kids growing, let's not trade up honey, let's renovate, find a builder,

Not sure we have noticed a builder shortage, but we will do some research over the next month.

Decreasing Supply:
(1) Richer people no longer selling
Peter Kennett makes another very interesting point. Of the six bidders and numerous other enquiries he had on 7 Cosham St Brighton (sold today for $2.97 million), the majority were looking to buy and NOT sell their home but to hold their current home as an investment, if they were successful. This means less supply of saleable homes.

(2) More blocks of land needed for apartment living
More and more land has been taken up with developing apartments and townhouses and, when the developer market moves back into full swing, there will be even less family homes available than now. Please read Another Point of View below on St Kilda's Greasy Joe's and the Camberwell Station developments.

There are some other issues out there in Million Dollar Melbourne that relate to stock levels.

Buyer stress

Today the bidding process at auctions was sluggish - in many cases, it was not spirited and people tended to be grim-faced rather than excited. There's a feeling that people are loath to pay the prices being fetched at auction because they don't want to acknowledge that the market is rising, that the market has changed. But they're also accepting (being forced) that they have to put their hand up, otherwise they will miss out. People are realising that properties won't be falling in value any time soon, nor will they be falling into people's laps for a cheap pre-Christmas 2008 price today.

Old stock

When the market is rising, don't overlook old stock - properties that have been on the market for some time and that may seem stale. Properties tend to go stale generally for price reasons. But if the asking price has dropped or the market goes up or both, does that not then negate that price reason?

Older properties are selling in this market. In the past week, we're aware of six sales where the houses had been on the market for quite some time: one for eight months, one for six months and one for four months and so on. Properties in Balwyn, Hawthorn, Toorak, Malvern East and so on. Most were good houses and some received exceptionally high ratings from us, so it was simply a matter of matching price expectations with the market and then these properties sold. All of these have sold this week and all well over a million dollars; eg 53 Kinkora, 11 Crest, 4a Macgregor, 11 Torresdale and so on. This is also a sign of a rising market.

We bought old stock this past week. Yes, there is off-market, alerts and the auctions, but buying good homes is not all about a need for speed. To buy well, you need to look at all options.

A big thank you to Peter Small, director of Urbis, for his Another Point of View interview.

Thank you for the incredible response to our TV videos. Please keep saying hello at auction - we like it.

If you know anybody who wants to be an auction reporter, please let us know. You need to be able to use a camera, have a car and it's paid. We are looking to expand our auction coverage and we can't get to the outer areas, as well as bid and report on inner city auctions. One more thing - of course, it's a Saturday job. Please contact adam@james.net.au.

Architect Adam's article this week is on Andrew James's Gasgoine gem up for auction this coming weekend.

And, finally, a big thank you to editor Melinda Brown who helped greatly in putting together this edition of Market News.

Buy Well

Mal

Covering Hawthorn, Kew, Canterbury and Camberwell $1m+ homes

Some parts of the market may have risen by more than 10 per cent and up to 15 per cent in eight weeks, says Tim Picken of Jellis Craig.

By the way, we saw Tim sell three from three very strongly and all well above his quotes. But we digress. To be honest, we are not batting at 100 at James on home estimates in this rising market.

9 Carrington Hawthorn. This home told us just how few timber double-fronted period homes are available in Hawthorn and how much people still like them. Last year, this would have struggled at under $1.4 million, but it was a superior offering, so would still have sold. Today, it got $1.685 million and it was not a surprise to us. Brick versions of this in Malvern and Armadale have been on fire for around two months and selling well over expectations. Couple this with the Leslie St Hawthorn sale last week - not as good a home or position and it went mid-$1.3 million - add the facts that it reset the benchmark, that there were multiple unsatisfied buyers, that this had great rear access, was sexy and that the market is moving north, and a final price of $1.5 to $1.6 million had to happen. Above that, add emotion and this was an emotional home and auction. Well done to the buyer.

13-15 Harrison Hawthorn. The quote was not accurate for buyers ($1.05 million) but we were still surprised by the result ($1.53 million). This was a compromised block of land and, no matter how you look at it, a difficult build. It's a further $1 million to $1.5 million to build a home(s), with underground car park and you will still have no back yard. The land value works out at $2567 per sq metre and that's higher than Blytheswood at $2396 per sq metre with views and a bigger block only a few weeks ago. It's also higher than Kay and Burton's very strong Muir St sale at $1.6 million or $2534 per sq metre, which was next to the river and sold only a month of two ago.

Bruce Severns of Noel Jones, who is a good guy, texted us these thoughts after we questioned him about the sale: Anything that is in a good location and/or has a good home on it is keenly contested. That's agent code for the market is almost flying. The above was a very strong result for the seller by any criteria.

5 Marlborough Camberwell. Golf Links Estate. We like the area but found the back of the home needed a big, big fix and it wasn't an easy reno; plus

Issue of the week: stock levels

Tim Picken went on to say that there seems to be a fantastic energy in today's market. He said there was some buyer urgency coming back - that is agent code for buyer stress, which means potential for rapidly rising prices. He added that nobody wanted to write a cheque three months ago on homes (and he added he was nervous as well), but now the market has changed and changed dramatically.

Richard Winneke, Jellis Craig's top-selling agent for a number of years running, made these observations over a quick chat in the street.

He was surprised at the high sale for Carrington, claiming that "it may not even have sold for that much back in the peak price times of 2007." For certain properties, the market has definitely bounced back.

James Redfern of Marshall White gave us his take: if a home ticks the boxes and has no compromises, then we are almost back at the peak; however, the market is not behaving as it was in 2007 where keen buyers were actually crazy buyers. James feels there is still a rational market and buyers are in control and will not exceed certain levels.

He added another gem: it's the estate sales or top precincts that are really pushing back up hard. Grace Park, Golf Links, Tara, Reid, Armadale and so on. This is a fresh observation and rings true in our mind.

This week at auction

31 Rockingham St Kew. Interested to see if the Top End market responds to this offering. With 21 Ross St Kew selling north of $4 million but 17 Grange Road Kew (asking around $5 million) still remaining unsold, we think the $4 million to $5 million market has a few wobbles but this auction may help clarify things.

2a Oak Hawthorn. Wonder if Marshall White will adjust their quote after the sale across the road at Harrison Crescent today?

9 Boronia Canterbury. Another land indicator in Canterbury's Golden Mile fringe.

Pricing

Wormy is on the juice and firing upwards in Boroondara

Design Smart

Covering Albert Park, St Kilda, Elwood, Brighton, Hampton and Sandringham $1m+ homes

Hocking Stuart's Peter Kennett stated he had four auctions today and 18 bidders in total.

Let Hocking Stuart's Barb Gregory tell us about the story of the lady in Sydney who, on Saturday morning, was eating porridge when she had a thought about 10 Murphy St Brighton. This is a home she had seen on the internet but NOT in real life. Anyway, she had a feeling, so she ordered a plane ticket, drove to the Sydney airport, landed at Tullamarine, caught a taxi to the auction where she met some friends. She put her hand up at auction, beat off another bidder and bought the home ($3.5m). She caught the 3pm flight back to Sydney. Absolutely true story, says Barb.

Big sales

We talked about $3 million sales last week and three in Brighton. This week, there were five reported around the $3 million mark, with the largest being 28 Cole St, believed to be just over $5 million. The Golden Mile is showing few signs of seller stress and 10a Dawson, also Golden Mile but a townhouse, sold for a tick under $2.9 million. Both sales were by Kay and Burton and Stewart Lopez and his team seems to be starting to take it up to Dixon's in the high-end areas again.

2 Lorac Avenue with James Paynter of Buxton sold at auction for $3.475 million. That was a very good seller result. The home was an interesting design on a very difficult triangular block and had a Bali feel, brought in a lot of north light and, because of shape, gave good separation of rooms. Not for me, but I thought it was smart designing.

The two Hocking Stuart $3 million-plus auction sales gave us good insights into the Bayside market.

10 Murphy Brighton - sold under the hammer for $3.5 million. Not a booming auction, with 2 bidders, it was on the market at $3.4 million and sold under the hammer. This, we think, confirms that the old Gardenvale - North Brighton is a $3 million-plus new home destination. BUT PLEASE NOTE that is only for the bigger homes that lie within a few hundred metres of North Road in streets such as Foote, Drake and Murphy.

7 Cosham Brighton - sold with six bidders for $2.97 million or $3,000 per sq metre for north-facing premium Brighton land (not on the Golden Mile). House value was zip. The unsold but beautiful 23 and 25 Cosham Streets are now confirmed in our minds as north of $5 million based on home quality and proven land value.

We are not ignoring Albert Park to Elwood along the bay but so little is happening - they must have the fittest, thinnest, leanest agents going around, as there has been so few sales of note this year. One result this week at $2.75 million at a Chisholm and Gamon auction was for a block of older style flats on 450 sq metres of land at 32 Vautier St Elwood.

Issue of the week

Is Peter Kennett the best big-time auctioneer going around Bayside? Don't know if we could rule out Hocking Stuart's other Twin Tower, Steve Tickell from Sandringham, or if

If you can get past the Hocking Stuart blurb, you will also find Peter Kennett an interesting man and, while having a latte at Bay Street's Pod (great coffee), he outlined some thoughts. Do you agree with them?

• We are back to where we were in 2007.


• Increasing number of buyers as frustrated home renovators can't find builders so they are looking to buy.


• Many of the Cosham buyers said to Peter that they would not have sold their home if successful but kept it as an investment. Maybe they didn't want Pete to sell their home (only joking) - we have personally used his services and our current home was bought off him in 1992.


• We had 10 years of massive growth, then the drop, but who is to say we are not starting back on another 10 years of growth?

Coming up this week

40 Elwood Brighton: It's a south-facing rear, it's a townhouse, it's only got three bedrooms, but we think this home has a really great feel about it and therefore should sell well. Justin Follett from Kay and Burton is handling it and he is on fire at the moment in the selling stakes, so let see what happens. We're interested in this one for telling us how the market is viewing feel vs issues right now. It is a good home.

66 Black Brighton: Land sale in the heart of Brighton. South-facing land but it is on the high side of the street. James Paynter of Buxton is handling it and, although it is no wider than an average block (15.4m), luxury homebuyers prefer 18+m frontages, it should sell. James is quoting $2000 per sq metre, so its sale price will give us a pointer to Church Street land values and his quotes.

Prices

Wormy our Price Worm has a headache and he doesn't want to go up but he has to. It's not the amount of stock, it's the amount of quality stock and other Inner Melbourne prices that are forcing Bayside Wormy to catch up.

Footnote: Ian Jackson has left JP Dixon, just after we gave him a big wrap in the last week or so. He is a James Market News favourite for his friendly banter, generous sharing of knowledge and the fact that you can shake hands on a deal and he sticks to it. We will miss him for now, hopefully he isn't lost to Golden Mile Brighton for too long.

Buy Well

Covering Toorak, Malvern, Armadale, South Yarra, Caulfield and Elsternwick $1m+ homes

Andrew McCann of Bennison Mackinnon says we are now very close to 2007 prices.

Apartments
Sam Wilkinson and Tim Blackett of Kay and Burton got 2-4 Lansell Road Toorak away pre-auction. It was a $2 million-plus sale but the apartment market at the Top End really does appear to be non-existent right now. Unless this offer was considered a stand out, it was sold because they felt the auction may have proved embarrassing. Chastleton in Toorak, asking $4 million and one of the best apartments we have seen this year, still hasn't attracted a suitor, despite Peter Kudelka's best efforts. We may look stupid some time soon, but we really don't think there is a $2 million-plus apartment low rise market (now ), of course there will be one in the future. Also with Asian buyers now being able to purchase land, we think a driving force in high-end high-rise may have also moved on.

Big Sales
1 Horsburgh Grove Armadale: As a postscript to last week's auction, during this week, the sellers took the antidote to "40Lambethitis" and accepted the top bidders' very good offer of $2.3 million. Eventually, most people come to their senses. Well done to James Redfern of Marshall White for a good result.

55 Ardrie Malvern East: The Ardrie Park area is a precinct to watch. We remember buying a little single-fronted in Repton Road (around the corner) post-auction for $600,000 only a few years ago. Today, we saw five bidders fight it out to more than $1.2 million for a double-fronted home that needed a big reno. But the buyers were smart. North-facing rear, good feel to home, across the road is an almost completed French Provincial (worth north of $2.5 million?), the tram is 100 metres away and access to the fantastic Ardrie Park just across the road. Speaking of roads, what a beautiful olde English type street Ardrie is. Don't worry about the price, this was a great buy - well done to whoever it was. Tim and Michael Derham of Abercrombys managed the sale and managed it well - except the usual courageous quote. We required two quick visits on the same day and they accommodated at short notice - good agent work. 55 Ardrie confirms to us the young renovator

68a Clendon Toorak: Nicolas Day home. Auction report: "A huge crowd of 150 people turned up to this auction but just one bidder was prepared to play. The bidder opened proceedings with a $5.6 million bid but, with no further bids eventuating, the property was passed in." This auction was to tell us if the jury is still out on $5 million-plus homes. It still is out.

Stock levels are the issue in Stonnington.

Jeremy Fox, director of RT Edgar, says he has almost nothing in his forward auction book for the 8^th, 15^th and 22^nd of August weekends. He says the Top End $5 million-plus market is still not moving like other markets but there are both buyers and sellers, so it's not interest but price discrepancies that are holding things up. He re-emphasised buyer frustrations: do you go now or wait and is waiting going to mean lower prices? Jeremy says no, because there is little stock coming on.

Andrew McCann, director of Bennison Mackinnon says there is no pressure for sellers to sell and August auctions are looking very quiet. He says sellers are still watching the market. Finally he doesn't see Spring homes flooding the market and dropping prices and, even if there is an increase in stock, there is enough pent-up buyer demand to soak up increased stock levels without a noticeable price drop.

Next auction weekend seems to be a renovators auction week.

We think the renovators and developers are coming back. Here are two of a number of sales that will tell us one way or the other. See our ratings on:

33 Murray St Prahran - Guy St Leger of Biggin and Scott - great area - love the Flying Duck pub.

25 Central Park Road Malvern East - Andrew James of Hocking Stuart - how much will the $4 million renovated version across the road affect things?

Pricing

Wormy's not seeing a lot of action in the Stonnington area, so we need to be careful predicting any medium-term trends but pricing action to date seems upwards.

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