Currently, the phrase ‘two speed market” is being bandied about a lot.
Fully renovated homes are flying, while completely unrenovated homes are often struggling.
Unique or oversized one-bedroom (Art Deco) apartments are getting record prices, while investment grade two-bedroom apartments are hard to move.
Small, two-bedroom single fronts are a bit lacklustre, while family homes on good blocks are highly competitive.
I believe there are two main factors driving this divide between what’s hot and what’s not.
Firstly, money. Specifically, access to money.
It’s surprising how many buyers in Stonnington are cash buyers – downsizers coming from larger homes, baby boomers or high net worth families giving their kids a leg up, returning ex pats who have sold overseas, and capital rich foreign buyers.
A property that attracts this demographic of “cashed up” buyers has the potential to sell well above the odds – such as fully renovated (downsizer) homes, family homes in good school zones, larger / blue chip single fronts, etc.
At the other end of the spectrum, first home buyers have been the hardest hit by interest rates, with borrowing capacity slashed by 30 percent or more in many instances.
In Stonnington, entry level single fronts around $1,000,000 – 1,300,000 are the most impacted by this, where the buyers are often borrowing 80 percent of the purchase price.
These buyers just don’t have the fire power they once did. Or they haven’t yet adjusted their expectations of what they can now afford, often still wanting a third bedroom or off-street parking.
The second factor is the cost and associated challenges of construction.
The cost of renovating has gone up 30 to 40 percent in the last couple of years, according to those in the business.
If you’re wanting a renowned architect, the timeline for completion has blown out to two to three years or longer, and that’s if you get through planning relatively unscathed.
There is a whole swathe of buyers who have thrown the towel in on renovating themselves and are now looking for something done.
Well renovated homes are scarce, getting scarcer. They are in demand. Prices now reflect this. And I believe they are still undervalued in many instances.
Our clearance rate on Saturday was a surprisingly buoyant 86 percent across Jellis Craig’s 33 office network (66 out of 77 auctions sold at or before auction).
It appears that the recent increase in volume – around 20 percent more auctions than the previous two weeks – hasn’t hampered the clearance rate… yet.
It will be very interesting to see if we can maintain a clearance rate above 80 percent once we hit 100+ auctions in the coming weekends.
Happy hunting!
Feature Property: 11 Airlie Avenue, Prahran
David Sciola 