Melbourne top end market looks like it's flattening

With the break in traffic due to last week’s long weekend, how did we finish up this weekend after the shaky Second Super Saturday a fortnight ago?

At 6.00pm Saturday the James Clearance Rate for Melbourne’s $1 million plus property was 66% on the 35 auctions we covered; our bidders per auction measurement was at 1.7.

What does all this mean? For us it seems the market at this point in time is probably flattening overall – meaning that prices are leveling after a staircase rise that began in October 2012 and went all through last year and into 2014.

Hold on – what does overall mean?

If you look at the graphs of 2013 you will see significant overall price increases, but not in a consistently upward straight line.

It means that while this is a general trend, it’s not the case in every segment. For instance, homes in Boroondara that are drawing strong Chinese interest are still going gangbusters. But the overpriced B-graders and all the C-graders, i.e. the ones needing a big reno and where the price is not quite right, are not showing the same results as they did just a few months ago.

Hold on – what does ‘probably flattening’ mean, and what is a staircase rise?

If you look back over the articles and graphs of 2013 you will see an overall significant advancement in the market i.e. price increases. But this has not occurred in a consistently upward straight line.

What has happened typically is that one month the market seems a bit flat (the landing) and the next month it has another growth spurt (the stair rise), giving the price chart over the year the look of a staircase rise.

This year we started with a stair rise, and then the markets this weekend and the one before the long weekend (1 March) have both been flattish. It’s not terrible, not a shocker – just not as bullish as before (overall) – therefore a stair landing.

Let’s see how the next two weeks go before we start to speculate as to any significant market directional change.

Next weekend has a similar middling number of $1 million plus auctions to this weekend. And then the last week in March is looking like it will be another Super Saturday or very close to it, with around 150 $1 million plus auctions scheduled in the Inner East and Bayside. Some good homes are scheduled too, so we will have a good market to base our opinions on.

Our advice to clients right now is – don’t just assume it’s a runaway auction. Make sure you turn up with 1) a bidding strategy and 2) a pass-in strategy also.

At a pass-in you need to think about how you are going to work through your thoughts if, say, you are the “winner” on the street at $1.8 million but the auctioneer says you still need to give him another, say, $300,000 at the pass-in negotiations to buy it – especially if you were the only bidder.

On the flip side, if you went to many of the auctions this weekend hoping for no interest then you would have left without a home and very disappointed.

In a flattening market you begin to see fracturing results – i.e. a disparate number of bidders and prices paid. Some are hot and some are not, which is what we feel may be the market we are moving into. But a week is a long time in the Melbourne market – so stay tuned.