The latest happenings in the Melbourne property market. For our Essays and The Secret Agent Report, see our Research page.

Category Archives For: Auctions

The Secret Agent Report – Temperature

We have just released our latest Secret Agent report! To welcome the first month of Spring, we are investigating if daily and monthly temperatures have any effect on auction results.

Start reading this report by clicking on the link below:

Register to receive our report monthly and access the Temperature report now!

Temperature Report

Auctions VS Rain

The start of this month marked the commencement of winter auctions for 2013. A running joke in the industry, is that if you’re a buyer intending to bid on a weekend auction – pray that it rains!

Auctions VS Rain


We at Secret Agent wanted to ask ourselves a very simple question. Could rain affect auction prices? Would it have a detrimental affect to property pricing?

Our initial thoughts were that it wouldn’t impact results. If a buyer was set to bid on a property, the weather wouldn’t impact the way a serious purchaser would pursue it.

However we started following some interesting research on the correlation of stock market performance and the weather, this started our quest to establish if in fact the Melbourne property market was influenced by the weather. The research mentioned was prepared by the University of Berkeley, and compared the Dow Jones Industrials and weather patterns from 1948 – 2010. The market recorded an average reduction of -2.8% on cloudy days over that time period (62 years of data).

We looked at the winter months when an auction occurred on a wet day (i.e. more than 4mm of rain) there was an average price difference of -5% as opposed to auctions that took place on a dry day with less than 4mm of rain.

This finding was compiled with 2012 sales results that occurred on a Saturday (i.e. at Auction) between June and August 2012.

Average auction result with less than 4mm of rain: $1,003,300

Average auction result with 4mm or more of rain: $956,800

-5% difference could be expected for property owners auctioning on a rainy day!

The one saving grace to this situation is that some correlations over the past decade show that prices on a whole are stronger in winter than those at other points in the year. The reason for this is the scarcity of stock in Winter. A vendor could be wise to sell in winter, but only on a dry day!

Which auction are you bidding at?

We get the odd frustration from having an auction operate under a different formula from the standard Schedule 1 auction (explained below).

A few weeks ago, we were bidding on behalf of a client for the property 74 Falconer Street North Fitzroy (above).  Half an hour before the auction,  we were made aware that one of the owners of the property were intending to bid at their own auction. The sale situation was a deceased estate.

A number of siblings were the beneficiaries, and one sibling wanted to buy the property from the other siblings.  They used an open market strategy – and we ended up being out bid by that sibling at the auction.

It was a disappointing situation. We felt that the entire campaign should have mentioned this in the marketing material, rather than buyers being made aware just 30 mins prior to the auction.

As a guide to these confusing situations, we’ve included below the different types of auctions, so buyers can be best informed about these and what they mean.

By law, the estate agent must display the auction rules 30 mins prior to auction. The auction can either be Schedule 1, 2, 3, 4 or a schedule 1 with an alternative.

Here is the breakdown:

Schedule 1:

The most common auction in Victoria. A schedule 1 auction allows the agent to place a bid on behalf of the vendor however no co-owner bidding to take place.
The alternative to schedule 1 is exactly the same listed above with no vendor bidding at all.  This is the purest auction possible.  However,  most auctions will not use this.

Schedule 2: 

Where 2 co-owners own the property,  one co-owner may bid for the property plus the auctioneer may also take a vendor bid on behalf of the owners.

Schedule 3: 

The property has 2 owners or more,  and some (but not all) co-owners may bid for the property.  The auctioneer may also take vendor bids.

Schedule 4: 

2 or more co-owners own the property. All co-owners may bid on the property however vendor bids cannot be taken by the auctioneer.
This can be a marriage situation were both husband and wife and bidding for their own property together with the open market!

A good tip for property buyers is to always look at the rules of the auction before they intend to bid.  Even take a photo with your smartphone to ensure that the auction you are bidding on is a pure auction. Owners bidding on their own property can distort the price paid to unrealistic levels and you don’t want to be left buying a property, at a figure that isn’t market driven.

The Tale (and Sale) of Two Titans.

The market is not consistent. We all know that by now. To highlight the inconsistency, we turn to two sales:

Both were side by side and had identical block sizes of approx 740sqm of land.

39 Alfred Crescent sold in May this year with competition from two bidders going toe to toe at $4,200,000. It was a landmark price and set the benchmark for the area.

All eyes were on the sale of 41 Alfred Crescent a number of weeks ago. Many thought it might make up to $4 Million and beyond, yet it faltered and sold for just $30,000 past its reserve price of $3.5 Million.


The houses were different. One was a double fronted home that was mostly single story, while the other was a two story terrace with side land. The two story terrace was the lower price of $3,530,000 (41 Alfred Crescent) yet in my opinion, it was almost the preferred option. It managed to obtain great natural light through the side land, allowing those Northern windows to work hard for the property.

So the difference was a whopping 20% difference in price.

What can we attribute this difference to?

1. When a landmark property comes onto the market, it captivates the attention of the suburb. When a second landmark property comes onto the market within a few months of a similar sale, it loses some prestige as a result. In this case, It’s almost like the market shifted from thinking how rare and special the property was, to “another one has come on the market in Alfred Crescent”…

2. The dangers of two buyers slugging it out. 39 Alfred Crescent North Fitzroy had two buyers “slug it out” at auction, pushing past the $3.5 Million reserve and beyond $4 Million. So as soon as you take one of those buyers out of that situation, the system breaks down. 41 Alfred Crescent was a much more market based result. Three separate bidders all took a $10,000 bid over $3.5 Million with the end selling price of $3,530,000 going to a buyer who only bid once – the final one.

3. The inconsistency in the market. The market is proving to be very inconsistent at the moment. These sales help to establish this fact.

If I had the choice between being the owner of 39 or 41 Alfred Crescent – I’d like to be in the position of 41. I’d feel more comfortable that I’d purchased on value. If I owned 39 Alfred, I think I’d be a little worried if I needed to sell in the next few years for any reason, as it might mean absorbing a heavy loss.


Pareto Principle – The 80/20 Rule

Vilfredo Pareto famously observed in Italy that 80% of all of the land was owned by 20% of the population. He then compared this to pea pods in his garden which produced exactly the same result: 20% of the pea pods growing in his garden produced 80% of the peas.
The same rule applies to property, particularly in the present market which has lost plenty of steam over the past 18 months.
This law of the few, means that certain houses are moving undisturbed in present conditions.
We are noticing that the select homes in the market still have strong bidder depth. 5 – 8 parties can still be at an auction for quality. However the property must almost have no negatives -otherwise this changes the entire situation.
Attending auction after auction – we are constantly confronted with either no bids, or many bidders.
Expect this trend to intensify over the next 12 months.

This Weekend

With 490 auctions due to take place –  get ready for decent conditions once again for buyers.

The financial turbulence of the past few weeks will yet again be a good test for the Melbourne market.  As discussed yesterday,  many locations close to the city are seeing less and less auctions taking place.

According to the REIV,  this weekend over the past few years has yielded the following results:

2009:  85% clearance rate for this coming weekend

2010: 67%

2011: ?

Last weekend had a total clearance rate of 54%.  The expectation will be around this figure.

A Weekend of Better Clearances

A rise in the number of sold property over the weekend with the clearance rate lifting to 59%.

After the initial adjustment phase of owners ‘meeting the market’ there were also strong examples of competition for good property.

The market wrap can be viewed here for the week.