Melbourne Auction Results – June 2, 2014

Market Strength Showing, Warning on Hot Spots!

There is no denying that the Melbourne auction market has held its ground in what has been an avalanche of auctions for May. With both Marshall White and Bennison Mackinnon recording their best month.

The auction clearance rate over the weekend was reported at 73 per cent from 1107 auctions according to the REIV compared to 71 per cent last weekend and 73 per cent last year.

We have certainly seen an improvement in clearance rates in past few weeks after declines over the previous few months. According to the REIV there have been more than 10,000 auctions held so far this year.

On the Ground

Over the weekend we found ourselves in Brighton willing and ready to bid a beautiful property for my client. We had done our due diligence on the property and had an idea of expectations come auction time, so we thought we were in a very good position.

Photo courtesy of: Marshall White

The property above was quoted $1.1 million however was placed on the market at a staggering $1.4million. Yet, we weren’t surprised and in fact had allowed for this scenario because of all the interest and our intel. Despite our aggressive bidding and having done all our homework we became the under bidder, not prepared to pay over the $1.455million price tag.

“Perhaps buyers are sensing the drought of properties to come during winter.”

Furthermore, another local agent called to say his property passed in Elwood and having seen it before we were back Saturday night for another look. We are currently negotiating, (stay tuned).

Dining area at 27 Rusden Street-Brighton
Photo: Marshall White

What’s Happening in the Market?

In short properties are clearing, some before and after auction and some on the day, but any way you look at it they are selling on very big volumes.

Vendors expecting runaway auctions with big reserves are having to revise their expectations either on the day or during the campaign but no doubt many are reporting multiple bidders at auctions at the moment. Perhaps buyers are sensing the drought of properties to come during winter. Something that will ensure property prices remain stable and perhaps peak during this period in tight supply areas.

On the Economic Front

Two conflicting pieces of data were released last week. One showing the affordability levels are at a decade low while the other showing that were are at pre GFC levels on our debt to income ratio – 149 per cent in December 2013 is just off its 153 per cent peak in 2006.

Warning on Hot Spots

We have continually warned our clients about buying in areas where there are high proportion of other investors. Some of these “investment hot spots” have had issues with finding quality tenants, capital growth and recent resale values.

According to RP Data, Melbourne’s top investment spots for houses are, Point Cook with 41.9 per cent of houses owned by investors, in Tarneit it’s at 40.9 per cent and Truganina at 39.8 per cent. And of the city’s top 10 suburbs for house investors, just three have a median house value above $500,000.

Meanwhile, a staggering 89 per cent of units in Travancore are investor owned. Investors make up 83.2 per cent of total units purchased in Kingsville, and in Carlton the margin is 82.5 per cent.

“In short properties are clearing, some before and after auction and some on the day, but any way you look at it they are selling on very big volumes.”

Mr Larocca mentioned to the Herald Sun that investors in these areas should note that rental growth and capital growth is often slower in growth suburbs. He also noted that suburbs with the highest level of owner-occupier houses were generally in the hills to the east of the city.

Finally a Big Thank You to Annette and Robert who bought last month. Ross and Rose who sold their property and David and Fiona who bought in Anglesea. Thank you very much for all your support, it’s been fantastic working with you.