Sellers feel wintry chill

Melbourne’s auction market has seemingly found a new level but it’s one that will cause some distress for vendors and industry players. The auction clearance rate was 56.3 per cent in May, about 5 percentage points below the average for the year to date.

This month’s performance was just shy of the worst recorded for this time of year in almost a decade.

Many in the industry claim this is due to rising auction stock levels – that demand is still strong, essentially – but the argument is not supported by the numbers at the metropolitan level, regardless of what is being seen in individual parts of the market.

In 2008, when supply levels were similar, the clearance rate was 63.4 per cent. In 2010, it was 75 per cent despite a quarter more auctions being held that May.

In the struggle to explain these conditions, the constant refrain at the coalface is it’s now a ”buyers’ market”, although it’s not a characterisation would-be buyers seem to be embracing.

The clearance rate has been steadily declining. Home loan approvals are still falling. The number of properties sold by auction in May was at its lowest level in five years.

If this is truly a buyers’ market, where is the rush of buyers?

There are signs, however, that recent price declines are starting to bring some relief.

Housing affordability improved slightly in Melbourne in the March quarter, up 1.6 per cent to an index rating of 50.7, according to the Housing Industry Association and the Commonwealth Bank.

But the affordability index is still notably lower than at the same time last year (54.1) thanks to rising interest rates.

The tag of ”buyers’ market” implies there is some overwhelming reason people should jump in now. But buyers seem either too nervous to move or are holding off in the hope that prices will drop even further.

Yesterday, the clearance rate was 59 per cent for the 775 auction results reported to the Real Estate Institute of Victoria. The results of another 114 scheduled sales are unknown. (Last week’s clearance rate has been downgraded to 56 per cent.)

In Prahran, a slow start didn’t ultimately impede the sale of 4 Chatsworth Road, with Hocking Stuart using vendor bids at $700,000 and $720,000 to prompt interest in the two-bedroom Victorian. Renowden Buyers Advocates said two bidders pushed the price to $780,000, where it was declared on the market, and then to a sale at $810,000. It was quoted at $700,000-$770,000.

Another strong result was recorded for 107 Royal Parade in Parkville, an unrenovated, double-storey Victorian.

About 100 people watched a three-way competition unfold, with the property declared on the market at $1.57 million and sold for $1,711,000, according to Advantage Property Consulting. Collins Simms quoted it at $1.15 million to $1.3 million.

Four bidders used about 30 bids to reach a result at 46 Elizabeth Street in Malvern, which opened on a genuine bid of $4.15 million and soared to a sale at $4.68 million. Marshall White declared the four-bedroom Victorian on the market at $4.5 million.

The unrenovated, three-bedroom period house at 2 Fairview Avenue in Camberwell opened and passed in on a vendor bid of $800,000. Richard Armstrong of The Makeover Group said Noel Jones quoted the property at $850,000 and the reserve was $900,000.

In Toorak, the sale of 37 Lansell Road shows how vendors’ expectations often have to change in the current conditions. In March, the five-bedroom 1930s house was passed in on a vendor bid of $2.8 million by Bennison Mackinnon and was then put up for private sale at $3.3 million. Yesterday, Marshall White sold the property for $2.86 million after declaring it on market at $2.82 million.

”Sometimes vendors have to give up their wish prices in this market,” said Catherine Cashmore of JPP Buyer Advocates.

There are 785 auctions scheduled next weekend.

cvedelago@theage.com.au 

Follow Chris Vedelago on Twitter @chrisvedelago

CORRECTION: In last week’s auction results, an incorrect picture was used for the auction of 46 Fehon Street, Yarraville. The Yarraville property was sold by Jas H. Stephens for $1,011,000.