Improved auction clearance rates the latest fashion, but no price boom and few fat profits
The six-bedroom Potts Point terrace of Fat Prophets boss Angus Geddes fetched $2.18 million at its recent auction, selling $180,000 above the quoted price.
But the triumphant result was actually emblematic of the growing misconception that is emerging from the 70% clearance rates of recent weekends.
As the stockbroker Angus Geddes, founder and chief executive of Fat Prophets, and his wife, Maryam, had paid $2 million for their grand Victorian terrace residence (pictured below) in 2008.
That represents 1.8% annualised growth over the past five years.
The Geddes had formed the view – no doubt with the guiding assistance of the listing agent who became the selling agent – that the price achieved was "at the top end of our range at auction."
But while Angus Geddes comes from an industry with no stamp duty and low commission fees, the $180,000 windfall was severely reduced by the $96,000 NSW stamp duty, and then several other selling costs and holding charges.
Hardly fat profits for the well-heeled professional classes.
And OK, so a bit over reserve but certainly nowhere near the requisites to warrant the recent headlines saying it's back to boom times. Ditto the weekend's top sale which was $2.9 million in Randwick. The Govett Street house had last traded at $2,705,000 in 2006, thereby reflecting 1.1% annualised growth.
In Melbourne, mimicking the same trend, fashion designer Alannah Hill’s South Yarra terrace recently sold for $4.365 million - $150,000 above the reserve price - but having traded at $4.31 million in 2010.
There's actually an acute price sensitivity that belies any boomtime enthusiasm traits.
Those recent headlines have been nothing short of reckless – arising from the one obvious characteristic of auction clearances in Melbourne and Sydney being around 15 percentage points higher than a year ago.
What has happened is that for the first time in years both vendors and buyers are on the same page pricewise, so auction successes have become the norm. Estate agents have needed to be patient and pursuasive to get the market to this juncture which began to emerge in spring last year when clearance rates didn't tail off as per normal.
What's interesting is that Sydney's 2013 APM auction volumes have, after a slow start, kicked along well up on the volumes of last year – possibly due to the late 2012 bouyancy along with the early Easter scheduling – but tellingly overall SQM listings are markedly down. Melbourne just has more and more listings.
True vendors must have a dose of reality that their desired prices are not at boomtime levels, and in some cases not even at pre-Global Financial Crisis levels. Buyers have to pay a little more than their initial hopes.
Thankfully, the senior property commentators at RP Data and Australian Property Monitors were out over the weekend to dampen things down.
“It is a run, not a boom,” Andrew Wilson, the Australian Property Monitors senior economist, told The Australian Financial Review.
“The best term is recovering,” says Tim Lawless, research director of property information provider RP Data.
Lawless predicts that, with the current modest gains in prices, values will regain the 2010 peak only by the end of the year.
And I'd suggest let's all see how the inevitably-hyped March 23 super Saturday results fare, with APM advising Property Observer to expect 670 auctions in Sydney and 1100 in Melbourne in the pre-Easter crescendo.
