A snap shot of what is happening on the ground in Melbourne

It appears auctions have been more favourable on the Mornington Peninsula this year at least. 'Mornington Peninsula listings dominate realestate.com.au’s auction pages this week'. You are right, the premium and blue chip end of the market is really moving with lots of growth. The Mornington Peninsula's strong growth is centralised mainly on the port phillip bay side of the region. The western port side for example has not performed as strongly. However, $100,000 growth in the last 12 months on the western port side is not negative whatsoever. This is especially so in a declining Melbourne market. It is clear that the more premium suburbs (usually on the port phillip bay side) are the best performers with anything from $300,000 - $815,000 growth in the last 12 months. The top suburbs for growth are also the 7 most expensive suburbs in the market.

 

OK guys, now it is time to get real... you can spin it all you like, but when market sentiment changes, means the markets are going south. I prefer to keep it real, cos if I have money in the game a paper loss wont cut it

…… As for developers..... albeit you got big bucks to play with, so what,???? get the timing wrong and you are losing $

Here is an example of this buyer from Steve McKnight....no secret like this guru ...ahead of the crowd.


What Does Losing $1m Sound Like?
A case in point is a property a friend and I have been watching in Melbourne’s leafy eastern suburbs. It is a development site of nearly 1,000m2. It was bought by a “wealthy Asian buyer” in May 2015 for $2.53m as a vacant block, and he went on to have plans and permits approved for two high-class houses to be built on the site.

Fast forward to February 2018, and, allowing for closing costs, a couple of year’s interest, and for getting plans and permits for two luxury dwellings scoped and approved, the site would now easily owe him $3m.

However, sensing the market was getting the wobbles, or more likely, given the exodus of even wealthier Asian buyers who might have wanted to pay $2.5m+ for a trophy home, the vendor put the block with plans and permits up for sale via a ‘Boardroom Auction’ (instead of auctioning it on site, the auction is done at the agent’s office with only qualified buyers allowed) with the agent canvassing a sales range of $2.6m to 2.8m+. It didn’t sell.

Just for the record, at that time I emailed my friend and recommended we submit an offer at $2m. We did, and were laughed away and told: “you’re dreaming”.

In the six months that followed, the asking price range has gradually slipped lower and lower. First to $2.4m – $2.6m, then $2.2m – $2.4m, and now $2m – $2.2m. In other words, the vendor is realistically now $1m+ in the hole. One. Million. Dollars. Gone!

So much for not being able to lose money on real estate. If you’re interested, my offer for that property now would be in the vicinity of $1.6m. Who’s laughing now?

 

Yep happening on Sydney also.....but I can't see the lower priced homes in Melbooorne takin' a hit....they have levelled out...but stuff under 650k near stations is pretty solid ..even in the outer suburbs.

But the stuff like what ya posted is taking a hammering.

For example in the lower North Shore...houses which were sellin' for $2.7m are struggling to get $2.3m.....dems the breaks.

Went out to Western Sydney....houses for over $1m in places like Wentworhville, Pendle Hill, Toongabbie, etc are going to be well below $1m soon.....

 

For north shore houses they are mostly bought by upgraders, or are on old money, or Crazy Rich Asians who don't have a mortgage so that is OK.

For Western Sydney like Wentworthville, Pendle Hill etc I think it will be big hit as a lot of buyers would be borrowing most of their money and will struggle to pay if they borrowed on IO rates and then reset to P&I later.

 

Don't kid yourself about the North Shore and Eastern suburbs...lots of people have huge mortages..and livin' the lifestyle.

For example.....some who borrowed $1.75m to get into a 2.25m house.....sure they bring in 450k plus combined but that much really?

Another couple....spend $3m and borrowed $2m.....again income about 500k combined...

People like this will get smashed when the day of reckoning come....

Western Sydney has lot if indebted people...but so do the rich suburbs.

 

Yes sure there are people who borrowed millions to buy LNS and/or Eastern suburbs borrow a lot but I think it is a minority compare to most buyers. I actually think a lot of people who buy houses at LNS and/or Eastern Suburbs, would have strong financial support from their mums and dads, or they receive an inheritance from them and then just buy whatever they want.

Now it doesn't mean that the price at LNS and/or Eastern suburbs won't drop much (in fact it drop a lot in monetary terms as you mentioned), as everyone is just waiting for the market to bottom out and then buy again ..... with either inheritance money, or from mums and dads, or from Crazy Rich Asia etc.

 

I am on the ground in North Bondi, Bondi Beach, and surrounds. I can tell you that the units market has come off a little bit (usually for second rate locations) but absolutely no crash. At least not yet. Who knows the future but I do know right now its holding well. Properties over 2.5m are showing some opportunities if you know where and what specifically to look for. But no major correction or crash at this point in time. I agree with you, there are a lot of folks in these areas with huge incomes, huge family incomes, very close communities and a lot of trust fund folks too. I do not anticipate markets in these areas to crash. I do expect to see some opportunities in niche markets over here but the buy in will still be high and not too far from peak prices, but still showing some value as they come off. Anything can happen but I believe its unlikely to see widespread crashes in the East.

 

@Leo2413,
The broad term of crash and correction means different to different people,
Just curious, How much in terms of percentage has it come off as you see it?

 

I take it from the midway point of the boom. Those who bought pre boom are still laughing and will be laughing all the way to the next boom. Those who bought mid way (roughly speaking) are still very happy (at this point in time). No crystal ball of course. Can only re-evaluate as time progresses. Still no major crash of the entire East, as some would like to pray for. I can understand that sentiment too. Tbh I'd be happy for a further 20% drop. I'd go nuts buying. Because I know in time I will be holding even more assets bought at dam good prices which will sky rocket again.

I think units markets, especially second rate units, eg bad location, small interior, very old, etc have in some instances come off up to 10%. But at the same time you see good 2 bedders still getting very strong prices. So its a mixed bag for units. The best value I see is in houses and Semis. And within them, a niche stock type I wont get into atm. Still no killer amazing value (yet), but I see it coming

I view suburbs as 'businesses'. Good businesses may lose 30% over night or over a short period of time but the business is very unlikely to have gotten 30% worse. Market sentiment is all. Buy good businesses at cheap or fair prices and hold. If you can add value then even better. Way better.

Sound familiar?

 

Twitter
Curious to hear if OPs thoughts have changed since initial post?

 

Melbourne
Number Listed Auctions: 984
Number Reported Auctions: 746
Sold: 375
Withdrawn: 26
% Cleared: 49 %
Total Sales: $249,284,938
Median: $767,500

 

I suggested we could be in the 30’s soon in September and people didn’t think it was real when I said it.

This week could hit sub 40 when all is counted. Also real estate has 700 of 1100 reported.

 

Ouch.


Sydney numbers are even worse and will most certainly settle in the 30’s.

This is starting to feel like a crash.

 

Yes, this would now be concerning for the policy makers and RBA, my guess is that they will try and implement some sort of measure to inject some life back into the market. I just don't know what..

 

Crash will only happen if unemployment changes noticeably.. For everyone's sake, I hope that doesn't happen.

 

Home loan interest rate increases, increase in inflation (driven by food and oil), another GFC equivalent, a few things to watch and hopefully not all at the same time

 

Unemployment was the consequence not the reason of crashes in many cities in US and Ireland, Reason was Credit event.

 

Actually I put mine on the market in the outer suburbs and the agent said it was turning into a buyer's market with buyers offering $40k under asking. I think I just got out in time and being walking distance to the train saved me from taking a hit.

 

If it is Hoppers Crossing...it has stopped rising.

New house and land in Tarneit is an issue...but people are still buying. The issue is a lot of people paid 300k for 350sqm lots. They were only 150k a couple of years ago.

The agents I am dealing with see no major drop...just stabilization....lot of immigrants have figured out that Hoppers/Werribee is only 23-25 klms out...the same distance on the other side would cost your 700k plus...where in Werribee it starts at 480k plus.

Here is an article that backs this up..

First-home buyers dominate city outskirt markets as investors retreat

 

The question is what will the market look like over the next 30 years without FOMO. I think FOMO occurring in areas like Werribee and Ballarat is a once in a lifetime situation that won’t happen again for a long time. It is crazy that FHBs and even investors are desperate to get into these suburbs.