Our Auction Cross-Section – Where is the Market Right Now?

Many of us receive the auction reports on a Saturday night with the clearance rates, but in the sea of contradicting media articles about our housing market, how can we digest the auction reports and make sense of them?

As at this morning, Melbourne’s auction clearance rate is 75% for this pre-Queen’s Birthday weekend. Not surprisingly, we had just over 1200 auctions yesterday in an effort to give Vendors and Agents a break next weekend when many will take advantage of the long weekend and go away for some R&R.

Our team was out in full force yesterday with six auctions to attend. They ranged from Reservoir to Geelong West, Brunswick to Yarraville and Albion to Williamstown.

Interestingly, our day went almost exactly as the auction clearance rates would suggest.

For this week’s blog, I’ve cross-sectioned our auction day to demonstrate that not only is our market strong, but the real-time data is what we need to focus on to determine how ‘hot’ or ‘not’ our market actually is.

Yesterday’s official breakdown for auction results was:

• 210 sold prior to auction
• 608 sold at auction
• 12 sold after auction
• 241 passed in

Our official auction success rate was:

• 2 purchased under the hammer
• 1 purchased after the auction pass-in
• 3 auctions lost – all sold to another buyer under the hammer

Our cross-section shows an 83% clearance rate under the hammer with one sale after auction. 100% sold.

Our first three auctions were all at 10.30 and 11am… no mean feat for a fleet of three bidders.

This glorious old 1970’s villa in Blyth St Brunswick was the first heartbreaker. More than 100 people gathered in the carport area to watch the dated two bedroom villa with generous private yard find it’s new owner. Another advocate fought it out with a confident buyer, eventually winning the bid some $80,000 over reserve for $730,000. Sadly our budget didn’t compete at this level but the investment returns determined our limit. Our appraisal suggested high sixes for this gem, but a couple of factors pushed it out of our reach: a shortage of well-located mid-priced stock in Brunswick, and what seems to be a Melburnian growing love of blank canvas villa units.

Meanwhile in Geelong West, this Victorian double-fronted cottage in beautiful Waratah St (just off popular Pakington) surpassed the best of our data and predictions. “Appraised at mid sixes, but suspected to go higher” was our suggestion to our excited renovation-clients. Apparently others felt the same, and a complete shortage of such properties in Geelong’s “West” meant that yesterday’s result of $735,000 came at little surprise.

Amy’s efforts in Reservoir rewarded her this time around. After several failed bidding attempts on quality townhouses in Reservoir, we finally experienced the real estate Good Luck fairy’s presence. Secured on a pass-in bid at meant that Amy could negotiate inside. Based on the rental appraisal and our previous auction efforts, $625,000 was a pleasing buy.

Like one client said to me yesterday “Cate, auctions are like black magic. You can’t predict when luck is on your side.”

Back in our own neighbourhood, we fought it out for an investor when we bid against another advocate for this pretty single-fronted Victorian in the heart of Yarraville Village. Selling under the hammer for $950,000 was a thrill for our excited investor who was away for the weekend and receiving live updates from Renee and I.  

With my trusted shadow bidder Ren handling the contract finalisation in Yarraville, I headed straight to Williamstown for two lovely home-buyers who were away also, and anxiously awaiting my updates. The auction was exciting, fast and a real privilege to bid at. Securing a home is always particularly special, and this assignment was memorable. Live streaming the auction meant our clients could enjoy the virtual experience…
Amy’s auction at 2pm was in Norwood St Albion. We’d carefully targeted this pretty little neighbourhood next to Sunshine for our investor clients and this little gem met our full-block, character home criteria. Sadly our appraised figure wasn’t quite enough to fight the competition and the hammer fell on $800,000. Yet another example of the need to set a budget on a quirky number.  

Every single auction result of the day ended on a 0 or 5.

As Buyer’s Advocates we like our auction success rate to sit around 50% when we factor in the investor returns, appraised value and market demand for each property. Ideally a higher proportion of auction-wins would be enticing but competing buyer sentiment in a Sellers Market means that we must draw a line in the sand and recognise when a property price tag exceeds our client’s budget or metrics. 

Our current market is particularly interesting because we do have some competing drivers. Investment lending restrictions have certainly slowed down the investor proportion, but low stock numbers and strong owner-occupier demand continues to drive our market, particularly in the inner-ring and gentrifying middle-ring suburbs. Overlaying First Home Buyer sentiment, we have also observed many are holding back and waiting for 1 July to be able to increase their borrowing capacity with the assistance of the increased Stamp Duty Concession. 

Unless supply outstrips demand, our market’s competitive buying conditions will continue.

The segment of the market which will be feeling the brunt of APRA’s enforced lending scrutiny will be the investor market. Properties which have traditionally been pitched broadly at investors will have lower sale rates in Buyer’s Market conditions.

Now like never before, investors should focus on Owner-Occupier appeal and should seek sound advice from an investment-centric mortgage professional.