Last Saturday I called over 30 auctions at The Calile. The properties ranged from entry level to some of the best homes in town. Our October and November auctions have historically been our biggest events. They provide a great macro view of market performance and, more specifically, who’s confident right now. As I wrote last week, this market is a tale of two halves and last Saturday performed to the script. At one end there’s the luxury market, supported by soaring construction costs.
At the other, the investor and first home buyer market, struggling with uncertainty following federal government intervention. In the luxury market we took two properties to auction and both transacted for over $5 million. One under the hammer for $5.5 million and the other straight afterwards in the early to mid $5 million range. Both homes attracted wonderful interest and strong inspection numbers. Both had local buyers and interstate interest.
It’s this competition that’s continuing to hold the top end of the market in relatively solid condition. In polarising contrast, the studio and one bedroom unit market, previously stimulated by government incentives, saw groups of buyers watching the auctions like spectators on the sideline. With investors sitting on their hands amid uncertainty around government policy, first home buyers are being left to determine value based largely on their own opinions.
And this is proving difficult. It seems that when someone bids in this market, the other buyers see the interest, gain confidence and start bidding themselves. But when nobody bids, everybody watches and waits. Only to find themselves competing with those very same buyers after the auction! Since the event we’ve sold a number of properties and our clearance rate is now around 55%. But this week a number of media agencies have been reporting on a ‘tanking’ in Brisbane’s auction clearance rates.
Everything looks bad when you compare it to the best time in history. And that’s what last year was. Last year the federal government was so bullish on helping first home buyers into property that it even offered to take an equity stake in their homes. But this year’s Budget has changed the rules for investors and the subsequent uncertainty has had a very different effect on confidence. But here’s the part of the story that seems to be getting lost.
Most sellers in today’s Brisbane market are still making money. We’ve experienced significant capital growth over recent years and, for many owners, that growth has been substantial. So while the market is certainly a tale of two halves, perhaps the real story isn’t that Brisbane homeowners are losing money. It’s that they’re not making as much as they were last year.
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