The Stonnington property market cooled slightly this quarter after the unprecedented highs of the past two years. Whether it was the negative talk surrounding interest rates, the election, the Ukraine war, or the ability to now travel overseas diverting finances away from property, people visibly eased back.
Sellers entered the start of this season with overinflated hopes on the back of record end-of-year sales, quickly learning that the significant demand was no longer there. It presented an opportunity for good agents to rise to the top, as it became necessary to recalibrate vendors’ expectations in line with the market changes. Vendors who were able to adjust with realistic price ranges ticked over consistent sales, but those that persisted with overly optimistic price ranges, putting properties online and hoping for the best, resulted in pass-ins or extended selling campaigns.
Along with vendors, builders had to refocus and reassess their price point in these changing conditions. Building basic homes ready to add to was no longer the goal, as building and raw material costs reached record heights due to extended delays with the supply chain. Buyers lined up to purchase fully renovated homes rather than factor in the years it would take to undertake the work themselves in the current climate. People were time poor but money was still in abundance for buyers at the price level of A grade homes. Quality homes at the top end of the market performed well, particularly in off market deals, as they tend to do through all market fluctuations.
Apartments and townhouses, along with any properties secondary in nature due to position or architectural merit, struggled to move. Whereas these properties would have been swallowed up in the demand of last year, as buyers who kept missing out on the higher tier properties looked lower in an attempt to buy into the market in the FOMO conditions.
Sales reflected these changes. An apartment in Lewisham Road, Prahran, sold this time last year for $940,000, and a similar apartment in the same block sold for $840,000 this quarter, showing a 12% drop in price. A property in Davis Avenue, South Yarra, was purchased for a Sydney couple for their Melbourne base. The price guide was between $3.3m-$3.6m, and it ended up selling for $3m 3 weeks post auction. This could be viewed as a failure, though more likely a clear indication that the quote was too high for the current market conditions.
More in line with expectations was the sale of 15 Ruabon Rd in Toorak by Marshall White Real Estate. This property, backing straight onto a railway, was on the market 2 years ago and passed in after being unable to draw a single in the high $1m’s. Booked for auction late February, it received an offer of $2.1m, over $100k north of its price range, and came together 3 days later at a board room auction amongst 3 bidders for $2.399m. Likewise, 6 Kyeamba Grove in Toorak, also a Marshall White Real Estate sale, was initially purchased in 2020 for $2.05m. After investing $40k into renovations, this property was auctioned early March, quoted at $2.7m-$2.97m, well exceeding expectations as 4 bidders pushed the price to $3.32m.
An example of a property that exceeded expectations due to its exceptional renovation and position in a highly sought after street, 22 Barkly Ave, Armadale, was a major drawcard to interested buyers during inspection. With so few newly renovated homes on the market, this auction was brought forward due to overwhelming interest and attracted 4 registered bidders. Considering its relatively compact block at 385m2, and with a price expectation at mid $3m, the final result of $4.05m was a great result.
Conversely, 2 days later the property 85 Kooyong Road, Armadale, on a much larger block of 555m2 and located merely 500 metres from the above property, was auctioned. Though still considered a good position, it was on a main road and in an unrenovated condition requiring considerable work. It attracted a low number of people to inspections and was passed in at auction to only 1 bidder. With a price expectation between $2.7m-$2.9m, it ended up selling below for $2.61m.
In Toorak, $20m+ properties still attracted plenty of off market buyers, as individuals with net worth above $50m remained unaffected by market fluctuations, interest rates rises, elections, etc. The gap between the wealthy and the very wealthy seems to continue to widen as these highest income brackets have no need for borrowing money, instead converting assets to property. Their primary goal of securing a quality property at any cost means that these off market rare purchases will always have a demand and are only limited by imagination. A prime example was the recent sale of a pristine property in Orrong Road in Toorak, which sold to a 26 year old crypto investor for $38.5m off market.
As negative talk continues to pervade through both buyers and sellers, causing reluctance to enter the market and a fear that they need to wait it out, there will be a lot more work required to continue being productive in this market through the next 12 months. Both buyers and sellers will have to take a long-term position in property. Buying and selling in the same market nullifies many of the perceived issues, and as agents we will continue to look after sales advisories and buying requirements as clients often need to sell their house in order to buy.
Leading into the quietest period of the year, the market will naturally drop off until spring arrives. In this family home dominated market minimal activity and turnover will occur as residents travel overseas for the first time in years or head up the cost to escape the winter. Sellers will increasingly be pulling back to gauge which way the market will go, which will cause a severe lack of choice and wary buyers. Though growing families, overseas returns, and the like who do not want to throw their funds at rentals, will always create a need to buy. Combined with low stock levels, this will help maintain prices for the short term. The interest rates rise has begun at a very low base and may take 3-4 increases over the period of a year to see the true impact on the market. It will be the third quarter before we can tangibly measure any changes.