The bubble has truly burst, but the prestige Melbourne market is two-faced: Mal James

The bubble has truly burst, but the prestige Melbourne market is two-faced: Mal James
The bubble has truly burst, but the prestige Melbourne market is two-faced: Mal James

This year has been a year some in the property market – chiefly sellers and some agents – would possibly rather forget. For buyers it’s been a little better, when there’s been a reasonable supply of good stock. But buyers’ enthusiasm has been constrained by nervousness about economic events unfolding beyond our shores. So while they’ve been out there looking, and while in many cases they’ve been keen to buy, they haven’t wanted to pay too much – certainly not as much as what many sellers are demanding. For many sellers it’s not been a happy result – and some of them will be still on the market with their now stale offerings in the new year.

Read on for our season-by-season account of how the year unfolded.

Late summer

After 2010 finished in a state we described as “balanced and healthy”, 2011 started with a bit of warmth, even moving into “hot” for the $1 million market. On the last weekend in February, clearance rates for the auctions we attended were up at 74% and Bidderman number of bidders per auction) was at two.

But a flush of new stock slated to come on to the market in March and April would be the test of whether the warmth we saw in the last weekend of summer represented an underlying hotting up or a temporary New Year afterglow.

The story was different with the $3 million-plus market, which was dead as a doornail with very few homes changing hands. Geographically too, the trend at the top end of the market reversed – with bayside performing a lot better than the inner east (in fact Brighton townhouses at the $3 million level were almost walking out the door).


The New Year’s afterglow had indeed faded by March, with buyers increasingly nervous about world events, the stock market, the government – the whole shebang. Coinciding with this buyer nervousness was a flood of new stock coming onto the market as would-be sellers also nervous about the future decided to try and sell quickly.

The surge in stock was not taken up by the market and consequently we saw declining auction clearance rates and bidder numbers, and a market groaning under the weight of stock numbers. Not only was new stock coming on that would previously have been gobbled up, but it was having to compete with an increasing backlog of pass-ins from previous weeks. This compounding rate of stock build meant price only had one way to go – and that was down. It wasn’t quite a price free fall, however, as most sellers, including those at the $3 million-plus level, had the resources to ride out what they thought was just a blip of negativity.

Red Zone - Bidders under 1.5 - Falling Prices



From around Easter the market had the first of two short periods of 2011 price spiking (September was the other). Those sellers who had the good luck or good management to be in the market at this time saw some good results – especially those with sensibly priced A-grade properties.

May 21st was probably the high point for sellers, with the clearance rate a whopping 84% on the 37 auctions we attended and Bidderman of over 2. It was the 2011 weekend to be selling.


However, the late autumn cheer turned out to be nothing more than a brief flare of optimism before we went into a grinding winter with little activity as the supply of good quality stock dried up, and buyers stayed home uninspired by what was on offer. It was not so much a negative as a boring market.

Prices flat-lined and even fell on lower-quality homes. The exception was the rare occasion when a quality home hit the market, but overall the market was off by as much as 10% from the last peak in April 2010.

The unluckiest sellers this year were those who went to auction on August 6, the day after the share market plunged by more than 4% on fears the global financial crisis was re-emerging. Just three of the 25 auctions we covered sold under the hammer – that’s 12% – though by the end of the day that figure had gone up to 55%.

After that weekend of panic, the rest of winter wasn’t quite the disaster that some had feared. It was more a “nothing” market, with little good stock on offer, and most auctions seemed a tug-of-war rather than a race – even when there was solid support from buyers. Vendors refused to budge on price, and buyers weren’t prepared to pay what they saw as inflated asking prices – and the result, more often than not, was a stalemate. 

Red Zone - Poor Price Matching - Falling Prices

Early spring

Vendors in early spring saw a reprieve from the doom and gloom of winter, with the second of the year’s upwards price spikes. The $3 million-plus market did particularly well. On August 27 we reported that 11 homes had sold for a total of $55 million in one week.  Clearance rates were back up over 60%. The heat stayed for most of the month of September for the $3 million-plus market.

Why did this happen? It was like April – it was about buyers looking into the future and seeing not a lot of good stock coming on. The supply and price equation showed that demand was there when conditions were right – and September proved it.

But by mid-September we were back in the ‘two speed market’. This division between over-priced lower grade properties and good quality well priced properties had been going on all year, but it became more entrenched as the year went on and buyers flocked to A-grade auctions and stayed away in droves from the rest.

At the lower end it was a vicious circle of low bidder demand resulting in poor results, making sellers reluctant to put their houses on the market. Which meant little in the way of good stock around, so buyers already feeling cautious about the economy anyway weren’t bothering to go out there and bid on the little that was on offer.

Meanwhile, at that upper level, where buyers weren’t so concerned about the economy, they were snapping up whatever good quality stock was coming on to the market. All you need is couple of bidders at this level to push the price up, and even at this point we were seeing auctions with three or more.

However the up spike was short-lived. By the end of September the heat had dissipated as opportunistic sellers flooded their properties onto the market. Within a fortnight most of the good news for sellers was over. And, as it turned out, that was it for sellers in terms of good news in 2011. For buyers though, the good news has rolled on for the rest of the year with a great combination of falling prices and increased choice.

Late spring

With the AFL season ending a week later than usual, the spotlight was on October 22 as the day of culmination for many auction campaigns and the biggest Super Saturday for 2011. In the $1 million-plus market in the inner east and bayside, 150 auctions were slated, three times as many as the previous week, and twice as many as we’d seen on any weekend since autumn.

But it was a day of pouring rain and frustrated hopes for many sellers, with a clearance rate of just 43% on the 46 auctions we attended. And many of the properties that passed in on that hopeful day sat on the market for weeks to come. Three weeks after Super Saturday our survey showed that a third of those properties still had not sold.

Even so, the market was not exactly on its knees. Yes, prices were continuing to fall and in some cases falling quite substantially. But when vendors were prepared to fall in with the market, there were bidders. In fact, if choice and falling prices are your definition of a good buyers’ market, this was an ideal buyers’ market.

2011 - Falling Prices 

What does this mean for 2012?

There is a lot talk going on about the market being overpriced and the bubble bursting. But the fact is the bubble has already well and truly burst. Prices right now appear to be tumbling as much as they did in the GFC. Even on some good homes they are down 5% to 10% and as much as 20% since our last highwater mark (April 2010) on the weaker homes.

But markets can turn quickly. To recap on recent history, we saw this kind of price discounting through the GFC in 2008 – although, please the GFC was heavier than 2011. But we also saw prices climbing back up the next year, with a mini-boom occurring up until Anzac Day 2010. During that period some prices on some homes rose by as much as 30%. Our graphic representation to the right shows how prices have moved in the past couple of years.

And while we have seen big price drops in 2011 (on all but the best of the best), there is not the panic we saw three years ago. The market appears to be accepting these ups and downs as a normal gyration and these gyrations may well become bigger and more regular in 2012 as we all become more “fully informed” through media saturation.

Our best bit of advice for 2012: The market is two-faced:

Look at the Bidderman stats over the last three weeks. Two weeks ago we reported 27 bidders on five homes and 14 bidders combined on the other 21 auctions. It was the same story last week, with 17 bidders on four homes but only 15 bidders on the other 21 homes we reported on. This week we saw 26 bidders on seven homes and 24 bidders combined on the other 27 homes we reported on. Which shows that properties that are hot are really hot. Those that aren’t need a good agent.

These facts should show you the importance of

  • Research
  • Multiple negotiation strategy – low and high
  • Price framing – may be $100,000s away from where you are.
  • Selection in buying now determines for your future in selling

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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