Victoria played host to a record number of real estate auctions over the six months up to the end of June.
Just over 13,000 homes were sold at auction from January to June. In the same period last year, 12,400 homes went to auction. That’s nearly 5% more.
Most of that growth came from the outer suburbs of Melbourne. That’s those large, still-kinda-affordable suburbs on the edge of the greater Melbourne area. Those suburbs saw a 20% increase in the number of auction sales.
More buyers are heading further out of the city to look for affordable homes. That’s boosted the numbers of people inspecting each property. When the number of people showing interest exceeds a certain number, it makes more sense for the owner to auction the property instead of selling it privately. This way, 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 going through the roof. And to the surprise of some, it’s not just because of interest from investors. Mr. Raimondo says there’s growing interest 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 point of view, 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 accepted, we walk away.’ She’s also not bothered with where the ‘hot’ suburbs are, preferring to invest in the areas she knows well. ‘We have usually bought close to where we live so as to keep an eye on them… We know the [local] market and prices well.’ Williams also mentioned that tax 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 live, driving up prices at auctions. And investors are looking for certain strategic priorities, driving up prices in private sales.
It’s interesting to see which suburbs have the largest number of auctions. Auction interest seems to be concentrated in the eastern suburbs. The REIV says that Mount Waverley, Wantirna South, Glen Waverley and Bayswater are amongst the top 10 suburbs with the fastest growing auction numbers. 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 inner city suburb.
According to the REIV, ‘the 2015 auction capital is Reservoir – for the second successive year.’ 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 up to March. Interestingly, the median price for all six suburbs surrounding Reservoir is just $569,900.
Source: REIV
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What’s so special about Reservoir? Well, if you believe the hype on suburb review site Homely, Reservoir is set to be the hottest new suburb amongst young families looking for space and affordability. One user said ‘We moved here 18 months ago after being priced out of 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 think this is a great area for families and we are very happy with our purchase.’
Pro-Reservoir locals love the parks, the 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 Reservoir 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 fatalities in a gang-style shooting at the strip shops one street away.’ Crime remains a concern, although 2013/14 stats from Victoria Police show that the rates of most major crimes are going down in the council area to which Reservoir belongs. Still, perhaps this reputation is why Reservoir hasn’t reached the lofty heights of neighbouring Preston ($744,000 median) or Coburg North ($682,000 median).
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Eva Mellors,
Contributor, Money Morning
*Real name withheld