Buying into Melbourne's most tightly held suburbs: Robert Larocca's weekend auction preview

There are many different ways of looking at the market and making judgements about its performance.

You can look at sale prices, days on market or even turn up at auctions and count the number of active bidders.

These metrics will invariably tell you how the market is performing, whether is trending up, down, flat and by how much. They don’t and can’t tell you about the future performance. They also don’t tell you about the ease of buying.

The fact is that some suburbs are easier to buy into than others because owners are less inclined to sell. That can be for many reasons, sometimes it is cyclical, for instance in the first few years after property is purchased the owners are less likely to sell.

We measure the ease of purchasing by comparing the number of homes advertised for sale in a given period with the number of properties in the suburbs.

These suburbs are often described as ‘tightly held’.

In the year ending 30 November across Melbourne 5.3% of all houses had been advertised for sale. Those houses sold over the same time had been owned for an average of 11.8 years.

Drilling down to a suburb level the hardest place to buy a house was in Brunswick East.

In Brunswick East a mere 2.1% of houses had been advertised for sale in the past year. Those houses that did sell had been owned for well over the metropolitan average at 14.2 years and in a sign of the lengths buyers were willing to go, the median sale price rose 26.6% in a year.

With some exceptions there is a correlation between the period of ownership, the recent capital growth and likelihood to list for sale.

At a simple level that is demand and supply in action and it won’t surprise anyone active in the market. It also helps explain why real estate agents often letterbox suburbs or streets looking for an owner to sell!

An analysis of the top 10 most difficult places to buy a house shows a high representation of suburbs in the inner north.

Carlton is second on the list and it is followed by Fairfield, Carlton North and Fitzroy North. In each case the proportion of houses on the market is below 3%. With the exception of Carlton the increase in median sale price is above the metropolitan wide number for the same time.

The inner north of Melbourne has been in strong demand from buyers, but the owners have not been as willing to sell.

The inner northern suburbs are not the only place this occurs in Melbourne. The top 10 is rounded out by Clayton South, Mulgrave, Watsonia, Hughesdale and Carnegie. With the exception of Watsonia these are also all in a similar part of Melbourne.

But what happens if you want to buy into a suburb where the owners don’t want to sell?

These are called ‘off market’ transactions and they won’t be covered in this data because the homes are not listed for sale. A small number of those will be the homes sold direct by the owners but the majority are those transacted with the assistance of a buyers agent.

Astute buyers agents are able to build their own networks of sellers. This happens because sometimes an owner wants to sell without advertising or they find that because the buyers agent has a good network of buyers there is simply no need to buy the advertising to support the sale.

So if you want to buy into a tightly held suburb it pays to approach local real estate agents and let them know you are interested and consider hiring a buyers agent.

AUCTION PREVIEW

There are 1,149 auctions scheduled this week in Melbourne compared to 1,085 for the same time last year. Last week’s lower volume produced an outcome in line with trend with the overall auction market continuing to be better than last year.

The timing of Easter this year will ensure a very busy three weeks for sellers, buyers and real estate agents. The gap between Labour Day and Easter last year was five weeks and there were an average of 1280 auctions a week. This is a similar level of activity to Spring.

In respect of the private sale market in the past week, on a citywide basis, the time on market results for houses sold at private sale fell to 33 days, down from 43 days in the previous week. Overall vendor discounting was up stable at -5.4%.

Key data

• Preliminary clearance rate week ending 8 March: 73.7%
• Melbourne auctions expected week ending 15 March: 1149
• Melbourne private sales time on market week ending 8 March: 33 days (houses)
• Melbourne vendor discounting market week ending 8 March: -5.4% (houses)
• Listings being prepared for market are 3.3% higher in the month ending 8 March (seasonally adjusted)