Melbourne’s top-end market in 2011 - Eleven top agents weigh in on the year: Mal James

Melbourne’s top-end market in 2011 - Eleven top agents weigh in on the year: Mal James
Melbourne’s top-end market in 2011 - Eleven top agents weigh in on the year: Mal James

To help us get a sense of what happened this year in Melbourne’s top-end property market, on both sides of the fence, we asked some of the greats of Melbourne real estate – our legends – to give us their perspectives. We also asked them to take a longer historical view on how this year compared with the recent past and on how it might impact on the market when it opens again next year.

 

Peter Batrouney – Jellis Craig 

What happened this year in your area of expertise?
Demand was not quite as strong as 2010. However for a prime property such as 47 Kinkora Road, Hawthorn, it is a very strong market still.

Supply is holding, and our own stats support that. Prices are down by 10% to 15%

Where are we on the price cycle compared with 2007 peak, 2008 GFC or say 2010. And what do you think will happen to price early next year?
Next year I expect the market to open up briskly as it has always done in my 43 years of tracking it. February is statistically the most successful month in which to sell.

The main reason is the lack of supply. And the fact that buyers left over from the spring quarter react to new stock very positively. Clearly the state of the overseas financial situation will have a continued bearing on how we see things here!
 
In general terms I expect things to be steady as she goes in 2012.

John Holdsworth – Hocking Holdsworth

What happened this year in your area of expertise?
This has been a year of two markets. The year stated strongly with supply and demand well balanced after a slow end to 2010. Most surplus stock from 2010 was mopped up early in the new year and prices were comparatively strong.

About mid-year however, the news of Europe started to dominate, which initially lowered supply. But at the same time we saw sliding prices (meaning demand dropped even more).

One thing that has become apparent is the flight to quality. Main roads and other distractions have almost become unsalable in Port Philip, particularly in the $2 million-plus range.

Where are we on the price cycle and what do you think will happen to price early next year?
In one sense, having a breather after the price spikes of '07 and '09 is not such a bad thing, as 20% growth per annum is unsustainable. The question is, is this a breather or a five year flat market?

I believe we would need some hefty rate cuts to get things moving substantially so as we can get rid of the fear factor.
Having said that, the market will become the market as we know it and we will deal with it accordingly.

Greg Hocking

What happened this year in your area of expertise?
Demand was steady for the first half of the year across all price ranges. In the second half there was a noticeable drop off in demand above $2 million. Up to and around $1 million has remained steady. Supply contracted sharply mid-year and rebounded strongly over October and November, noticeably easing prices. Overall the market faded toward the finish line, with many properties failing to attract buyers at any price. Subsequently a significant number have been withdrawn from sale altogether. In closing, it is fair to say that prices across the board have dropped by 10 to 15% this year.

Where are we on the price cycle and what do you think will happen to price early next year?
The current price cycle mirrors the worst of 2008 and much like the early '90s buyers are remaining cautious and largely unresponsive to the downward movement in pricing that has occurred throughout 2011. The ongoing negative media coverage of the market has no doubt influenced many would be buyers to ‘sit on the fence’.

Buyers currently brave enough to be in the market are almost paralysed by the fear of making an offer that might be accepted – which they fear must mean they must be paying too much!
 
The easing of interest rates offers a glimmer of hope for a more balanced market as we move into 2012. No other factor will have more of an influence on the 2012 market than interest rate movements. However a full 1% drop over a relatively short time frame would be required before prices begin to rise again.

James Connell – Marshall White

What happened this year in your area of expertise?
In 2011 we have seen a reserved correction in terms of pricing as a result of general uncertainty and fear as a result of world economies and media commentary across the many markets in which we operate.

Where are we on the price cycle and what do you think will happen to price early next year?
2012 in my opinion will represent great buying opportunities to those looking to enter the market or upgrade an existing property.

Alastair Craig – Jellis Craig

What happened this year in your area of expertise?
Demand has been strong for the good quality period/modern homes in the A-grade streets. Supply is down approximately 10%.


Pricing West of Burke Road is very stable. East of Burke Road prices are down 10% to15%.

When the market gets a little tougher, buyers tend to stick close to Glenferrie/Cotham Road (the school belt). Pricing is approximately 10% down overall from the peak of the market – Easter 2010.

Where are we on the price cycle and what do you think will happen to price early next year?
2012- Hawthorn/Kew to remain steady. East of Burke Road has already fallen 15% and may thus remain stable.

Rob Vickers-Willis – Abercromby’s

What happened this year in your area of expertise?
With the economic uncertainty from Europe and the continual fluctuations of the share market in the USA we have seen confidence drop in the Australian economy and share market.

This, along with the negative media over a period of time, has caused the market to drop between 5% and 10% this year. Many vendors with A-plus-rated properties have not placed them on the market, which has compromised the quality of stock. B-grade real estate is bringing average prices so the quality of property is not on offer and therefore prices have fallen. This is a trend that will most likely continue through the first half of 2012.

Where are we on the price cycle and what do you think will happen to price early next year?
We are probably halfway through the cycle and, depending on what happens to the European markets and the RBA (if they have the balls to drop rates by another 75 basis points by April 2012), we will then see the cycle slow or jump ahead. I expect property prices to vary 1% to 5% up or down or stay constant for the next 12 months.

Andrew Stuart – Hocking Stuart

What happened this year in your area of expertise?
2011 has been a tough year! And yet along with that it has brought opportunities.

Opportunities to "skill up" your staff, particularly in the area of selling in tough conditions, keeping track of that elusive buyer, and still endeavouring to achieve respectable outcomes for your clients.

Clearance rates in Bayside have remained fairly steady throughout the year at around 50-60%.

In previous years approximately 30% of the properties we sold were to investors. This year probably that figure is closer to 10%.

Given that, coupled with more people looking to rent rather than to buy, you can understand why rental properties are very hard to find and why weekly rent is going through the roof. Demand has slipped. Supply of saleable properties has declined, with many vendors still clinging to prices of two years ago. Therefore fewer properties have been selling for cheaper prices.

Where are we on the price cycle and what do you think will happen to price early next year?
However, the good news is that I reckon we are at 6 o’clock. Things will improve from here. The question is: When?

John Bongiorno – Marshall White

What happened this year in your area of expertise?
It has been a challenging year, however properties well priced have continued to sell successfully in this market.

Where are we on the price cycle and what do you think will happen to price early next year?
In regard to prices compared to previous years, there are so many different market places within our markets – it is difficult to pinpoint movement, in some instances prices have held firm, in others there have been price adjustments compared to previous years.

I am optimistic about 2012 and I believe the adjustment to prices will see astute buyers take advantage of the market place that exists currently and create more activity than 2011.

Iain Carmichael – Bennison Mackinnon

What happened this year in your area of expertise?
It has become evident that buyer demand for most sectors of the residential market across Melbourne’s inner suburbs has receded from the highs of late 2010. Buyers have become more studied in their approach and are less inclined to negotiate on properties that are overpriced.

Accordingly, people are taking longer to make buying decisions and family buyers are quite prepared to walk away from properties that do not meet their needs. On the plus side, buyers are still prepared to pay fully for well-located properties offering the right accommodation.

When prices fall in inner Melbourne, supply follows.  This time around is no exception to that rule and its not surprising that fewer people are choosing to sell right now. This very fact actually maintains buoyancy in the market.

A clear reduction in the level of "irrational exuberance" in the marketplace has occurred for all sorts of reasons: uncertainty, uneasiness and apprehension to name three.

Where are we on the price cycle and what do you think will happen to price early next year?
Who knows where we are on the price cycle? On the "economic clock" we are probably at about ‘20 past’. Prices will be flat at best in 2012. All the more reason to select the right agent who really understands how to maximise selling prices on behalf of vendors, rather than just making another a sale! On the other hand, real estate prices could well rebound if the European economy falters and private investors move funds from equities. The money has to go somewhere!

Bert Stewart – Buxton

What happened this year in your area of expertise?
Demand has been reasonably strong overall, especially at the bottom end of the market below the $1.5 million range.

Supply is certainly down on the previous year because of the vendors' uncertainty of what’s happening with the global financial situation, people tend to be conservative in times like these.

Prices have come off 10% to 20% in the top end of the market but have held better in the bottom end.

Where are we on the price cycle and what do you think will happen to price early next year?
Compared to the price cycle of the last three years I believe prices are below, but having said that for prestige properties with a wow factor in excellent locations and priced well, they are selling well.

Prediction of the market next year would be steady as she goes with the first batch of auctions in February and March a strong barometer of what will happen going forward.

Michael Gibson – Kay and Burton

What happened this year in your area of expertise?
2011 has been the year of continual market fluctuations, which has made giving accurate advice extremely difficult. Since the start of May supply and demand have been lower however the properties that tick all the boxes have continued to sell well.

Prices have come off in varying degrees; 5% to 15% depending on the quality of the offering, with market conditions perhaps similar to that of 2008.  The auction clearance rates do not reflect the current underlying strength in the market.

Where are we on the price cycle and what do you think will happen to price early next year?
2012 will be determined by local interest rates and confidence levels of the world around us, and to that end let’s hope rates come down and confidence goes up!

Mal James is principal of James Buyer Advocates, which advocates on behalf of buyers of property over $1 million. Mal writes weekly auction reports, advice and in-depth market analysis on James' website.

Mal James

Mal James

Mal James is principal of James Buyer Advocates, which advocates on behalf of buyers of property over $1 million.

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