Melbourne Breaks Its Own Property Auction Record (and it’s Not Just Because of Investors)

Victoria played host to a record number of real estate auctions within the six months up to the end of 06.

Just over 13,000 houses were sold at public sale from January to June. In the same period this past year, 12,400 homes went to auction. That’s nearly 5% much more.

Most of that growth came from the actual outer suburbs of Melbourne. That’s those large, still-kinda-affordable and surrounding suburbs on the edge of the greater Melbourne area. Those suburbs noticed a 20% increase in the number of auctions.

More buyers are heading additional out of the city to look for affordable homes. That’s boosted the amount of people inspecting each property. When the number of people showing interest exceeds a certain number, it can make more sense for the owner to auction the property instead of selling it privately. By doing this, they can maximise the sale price.

Enzo Raimondo is the CEO of the Real Estate Institute of Victoria (REIV). He explained why auction numbers are dealing with the roof. And to the shock of some, it’s not just due to interest from investors. Mister. Raimondo says there’s growing curiosity from owner occupiers who want to get into the property market before it’s too late. He says they’re looking in areas which are still affordable, and within commuting distance of the CBD.

Property investor Carol Williams says that, from an investment strategy perspective, she prefers not to battle it out at auctions. ‘We don’t normally purchase at auctions as we prefer to offer our own price, and if it’s not recognized, we walk away.‘ She’s additionally not bothered with where the ‘hot’ suburbs are, preferring to invest in the areas she knows nicely. ‘We have usually bought close to where we live in order to keep an eye on them… We know the [local] market and prices well.A Williams also mentioned that taxes factors are one of the reasons she chooses certain properties over others.

It seems possible that owner-occupiers are being pickier about where they’ll reside, driving up prices at auctions. And investors are searching for certain strategic priorities, traveling up prices in private sales.

It’s interesting to see which suburbs have the largest number of online auctions. Auction interest seems to be focused in the eastern suburbs. The actual REIV says that Mount Waverley, Wantirna South, Glen Waverley as well as Bayswater are amongst the top 10 suburbs with the fastest growing auction figures. In fact, Wantirna South doubled its number of auctions compared to the same time last year. Richmond had the highest number of auctions of any internal city suburb.

According to the REIV, ‘the 2015 auction capital is Reservoir – for that second successive year.A High auction numbers and attendance levels have helped drive up average prices in Reservoir. The current median is $600,000 for a house. Prices grew 3.5% in the quarter as much as March. Interestingly, the average price for all six suburbs surrounding Reservoir is just $569,900.

Source: REIV
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What’s so special about Tank? Well, if you believe the hype on suburb review site Homely, Reservoir is set to be the hottest new suburb among young families looking for space as well as affordability. One user stated ‘We moved here 18 months ago after being priced from the inner North. Not surprisingly most of our neighbours are young families same as us.’ Another called it a ‘great up and coming family suburb‘, saying ‘I have recently purchased in Reservoir with my wife and 2 young kids… I believe this is a great area for families and we are very happy with our purchase.’

Pro-Reservoir local people love the parks, the actual proximity to Preston Market, the local public schools, and most of all the relative affordability compared to inner northern suburbs. But not everyone is a fan. IT professional Billy Bob Friday* disagrees. ‘I’m looking to buy, but Tank is a [expletive redacted]’ said Friday. ‘Had to call the police on my bogan neighbours when they started a bare-shirted fist-fight in the middle of the street at 3am… a week after I moved out of Lawley Street, there were deaths in a gang-style shooting at the strip shops one street away.A Crime remains a concern, even though 2013/14 stats from Victoria Police reveal that the rates of most main crimes are going down in the council area to which Tank belongs. Still, perhaps this particular reputation is why Reservoir has not reached the lofty heights of neighbouring Preston ($744,000 median) or Coburg North ($682,000 average).

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Eva Mellors,
Contributor, Money Morning

*Real title withheld