Confidence behind bayside resurgence: Chelsea state of the market

Last weekend the Melbourne property market saw the biggest auction day ever held with a record 1,450 homes going under the hammer. Hitting a clearance high in the high 70s, this latest result has added to the media hype around spring 2013 being a ‘boom’ selling season.

In Melbourne’s southern bayside suburbs, spring is typically our peak selling period and this year has followed that trend. We kicked off with auctions in September and have seen a steady flow of interest since. Buyers are out and listings are up.

In our market we’ve observed one critical change this season– confidence – particularly among buyers. The conservatism that’s clouded the market ever since the GFC appears to have lifted.

Photo: Chelsea beach huts, courtesy David Stephenson/flickr

It’s a little early to judge what impact the election has had on the market, but low interest rates have definitely given buyers the additional security they needed. While our stock levels have increased by around 10%, our days on market have dropped significantly from around 70 last spring to about 40 through September and October this year - a sure sign of strong competition and confidence among buyers.

Besides days on market, there are two common rules of thumb used in real estate to measure confidence – the popularity of auctions and activity in the million dollar market. This year we’ve seen movement across both.

In our suburbs of Chelsea, Bonbeach, Carrum and Edithvale there has been a resistance in past years to put properties up for auction.  Vendors have opted to ‘test the waters’ rather than going all in. But with so much media attention around auction successes, they are now more willing to have a go. Our standard percentage split of 55/45 for private sale versus auction has switched this year to around 45/55.

Although the majority of properties in our area are mid-sized family homes, we’re a coastal market so a smaller portion of our stock is beachfront property priced in the million-plus bracket. It’s often said the top end of the market is the first to fall and the first to rise during economic peaks and troughs. We’ve had a few great sales already this spring which reflect the overall upward trend across Melbourne. A beachside townhouse on Roseberry Avenue, Chelsea (pictured below) recently sold for $1.2 million - a record for a non-beachfront property. 40B Bowman Street, Aspendale also sold for huge $3 million.

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Other local trends we’ve observed recently include a return of investors and strong interest from families. There is great potential throughout the entire coastal corridor from Mordialloc down to Seaford where all properties are within close proximity to rail and the beach. These suburbs have experienced steady capital growth. Six weeks ago we sold a property on Railway Parade, Seaford (pictured below) which had been bought in the late 2010 peak for $595,000. The owners wanted to move to another school zone but were worried they wouldn’t get their money back. We sold it at auction for $650,000.

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Another listing at Newton St, Seaford (pictured below) which was quoted in the low to mid $600s recently sold for $715,000.

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The sub-$500,000 market is especially active among families and first time buyers in our area right now, which all comes back to affordability. In the last year we've noticed many young families opting to move further down the coast to get into a four-bedroom, two-living area family home. Our average number of viewings is around 30 groups per campaign, but recently we had 70 groups through the first open of a property at Ilma Grove, Bonbeach (pictured below) with a quote range of $390,000 to $440,000. This property sold at auction last weekend for $486,000.

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With spring wrapping up, I’d need a crystal ball to predict what the market will do from here - that’s the nature of real estate.

My feeling is that growth will remain quite steady. Given the high demand for sub-$500k properties I expect activity in this price bracket will be strong. In a popular city like Melbourne, an affordable freestanding home in an attractive coastal suburb is rare and will continue to be sought after. I believe there’s a small chance interest rates might come down a little in future which will further stimulate investment and the borrowing capacity of buyers, but whether that will happen is anyone’s guess.