The ham­mer

It could take six months to shake off auc­tion in­ac­tion, writes Nicole Lind­say

Herald Sun - Property - - Real Life -

IT COULD be at least six months be­fore Mel­bourne’s auc­tion mar­ket stops tak­ing a past­ing from pri­vate sales.

Auc­tion prices are go­ing down but pri­vate sales are go­ing up, a trend that in­di­cates a flight from the ham­mer.

Re­search by the Real Es­tate In­sti­tute of Vic­to­ria shows only 2551 houses made it to auc­tion in the Septem­ber quar­ter, a stag­ger­ing 43 per cent drop on the 4550 houses that went un­der the ham­mer in the same three months last year.

The num­ber of pri­vate sales, how­ever, has de­clined only marginally, from 6597 to 5651.

Part of that re­silience can be put down to the fact houses that pass in at auc­tion and sell later are counted as pri­vate sales.

The many passed-in prop­er­ties sell­ing at around their re­serve price are bump­ing up the me­dian price for pri­vate sales.

In the 12 months from Septem­ber last year, the price of houses sold pri­vately in­creased 12.8 per cent com­pared with a 2.8 per cent fall in auc­tioned houses.

And the dif­fer­ence was big­ger at the top end, where auc­tion prices fell 9.2 per cent, com­pared with a 13.1 per cent in­crease in the sell­ing price of pri­vate sales.

The me­dian price for auc­tioned houses is still higher, at $588,500, com­pared with $345,000 for a pri­vate sale.High-pro­file buyer’s ad­vo­cate David Mor­rell from Mor­rell and Koren be­lieves the ‘‘auc­tion sys­tem is dead and a waste of money’’.

‘‘Peo­ple spend all that money on ad­ver­tis­ing and their houses don’t sell,’’ he says.

But REIV pres­i­dent Adrian Jones says pri­vate sale cam­paigns mean ven­dors just have to ad­ver­tise longer.

‘‘The auc­tion sys­tem is re­spond­ing to the mar­ket place, which is cycli­cal,’’ Jones says. ‘‘I’ve been around long enough to re­mem­ber clear­ance rates about 30 per cent in the early 1990s and when it hit 50 per cent we thought it was ter­rific.

‘‘The long-term trend is 60-65 per cent and for 18 months we were above that. I had never seen sus­tained clear­ance rates of more than 80 per cent be­fore.’’

Woodards agent Cameron Way says auc­tions are hold­ing up in his area but agents are in­creas­ingly pass­ing in prop­er­ties on a ven­dor bid.

‘‘It’s a strate­gic move,’’ he says. ‘‘If you pass in a prop­erty to the high­est bid­der, then you must ne­go­ti­ate ex­clu­sively with that per­son. But if you come back and pass it in on a ven­dor’s bid, you can ne­go­ti­ate with all the in­ter­ested par­ties.’’

Mean­while, J.P. Dixon’s Nick John­stone says many more prop­er­ties are sell­ing off-mar­ket and never go­ing to auc­tion.

‘‘Every­one’s talk­ing about how bad Brighton is, but we had an amaz­ing week,’’ he says.

‘‘We did $20 mil­lion of off­mar­ket deals last week, in­clud­ing two prop­er­ties at more than $5 mil­lion.’’

Whit­ing and Co’s Dan­nie Corr says buy­ers were def­i­nitely show­ing more con­fi­dence last week.

‘‘There seems to be a bit of a lift in buy­ers will­ing to com­mit,’’ he says. ‘‘We sold five prop­er­ties in the last five days. It seems to veer from week to week but we’ve had a great run. It’s not all doom and gloom.’’

Al­liance Fi­nan­cial Group chief ex­ec­u­tive Craig Dres says the af­flu­ent end of the mar­ket has been hard­est hit.

‘‘What we’ve been see­ing in the past two months is a huge in­flux of pri­vate sales,’’ he says.

‘‘A lot might have started out as auc­tions but later sold at close to the re­serve— or less than— be­cause ven­dors just want to sell.

‘‘Then there are the true pri­vate sales that are done dis­creetly.

‘‘The days of putting up a board and hav­ing five buy­ers turn up on auc­tion day are long gone. Agents are fight­ing tooth and nail to se­cure a buyer.

‘‘This is when agents re­ally earn their keep. Five years ago, any­one could sell a prop­erty. Now they’re go­ing to have to work hard from start to fin­ish. And even then they might not sell it.

‘‘There are more buy­ers in the $300,000-$800,000 range be­cause you’re get­ting into first-home buyer ter­ri­tory.’’ RES be­lieves the mar­ket will im­prove mid-year, though it could take longer for the top end to re­cover.

‘‘The top end will strug­gle be­cause it re­lies on ex­ec­u­tive pay and bonuses to carry the large bor­row­ing costs,’’ he says. ‘‘It will be the last area to pick up.

‘‘The other ar­eas are al­ready show­ing signs of im­prove­ment.’’

The REIV’s Jones says once the lower end of the mar­ket picks up the rest will re­gain some health.

‘‘That will free up the sec­ond and third-home buy­ers and that will slowly fil­ter through to the rest of the mar­ket,’’ he says.

‘‘But I don’t ex­pect any­thing to hap­pen for a few months.

‘‘We need some good news. We need the share mar­ket to calm down and no more bad news, then the real es­tate mar­ket can start to op­er­ate again.’’

D

Off-mar­ket: J.P. Dixon’s Nick John­stone.

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