The Block auctions 2023 - 5 key lessons!

Bidding at auction requires nerves of steel at times, let alone when 2.4million eyeballs are watching you bid on national TV.

The Block auctions were aired on national TV Sunday 5th November 2023. The results were mixed – ranging from a whopping $5m for Steph and Gian’s house (house number 4), compared to Leah and Ash’s house which passed in at $2.9m (house number 5).

The reserves were thereabouts – ranging from $2.97m for house numbers 1, 2 and 3 - to $3.35m for house number 4 (the winning house).

So, the question begs, why is it that Steph and Gian’s house (house number 4) achieved a record $5m against a reserve of $3.35m, compared to having ‘no sale’ for Leah and Ash’s house (house number 2) with a reserve of $2.97m?

The houses are all comparable in terms of land size, what they had to offer, location and position. The differences were marginal hence the slight variation in the reserves.

There are five key lessons which I believe we can take-away from The Block auctions of 2023 which may help you with your next property purchase at auction.

5 key take-away lessons…

1. Depth in buyers is everything

If there is no depth in buyer numbers, the property will struggle to sell.

Knowing this will help you with your game plan at auction as you don’t want to jump in too soon, to later find out that your only competition was you against the vendor reserve!

As we witnessed on The Block auctions, Adrian Portelli and Danny Wallis were the main (motivated) buyers. Once Adrian bought house numbers 1, 4, and 5, the other remaining houses struggled with house number 3 selling just a tad over reserve and house number 2 passing in!

2. The buyer with the deepest pockets wins

No matter how skilful you believe you are at auctions, the person with the most money wins.

Adrian Portelli (self-proclaimed billionaire) paid way over the top for Steph and Gian’s house at $5m (house number 4). The reserve was $3.35m which I believe is about right and is where intrinsic value is. Paying $5m was crazy and motivated by other factors!

Adrian had an ulterior motive which is why he made a $1million counter bid that secured him the property.

Adrian runs a subscription-based rewards company where he gives away (large) prizes to his subscribers. His buying motivation at The Block auctions was purely a marketing initiative for him.

Bidding on national TV, watched by 2.4million people, created an excellent opportunity for him to expose his business (LMCT Plus) which will inevitably increase his subscriber numbers in a significant way. The journos have gone to town writing about Adrian Portelli, who he is, what his business entails, and so on.

Adrian has also since gone to town announcing that the three Block houses he bought will be prize money for LMCT Plus subscribers and will be given away!

For you it’s important that you set your absolute walk-away purchase price so that you don’t get caught up in the hype of an auction and you don’t let emotions take you down a path you’ll later regret.

3. Be prepared

At times we see other Buyer’s Advocates at auction bidding on behalf of their clients, and calling their buyer client during the auction to see if they're prepared to stretch some more!

When we bid at auction for clients, our golden rule it to be prepared. Super prepared!

We ascertain before the auction the client’s maximum budget, then we ask them to dig even deeper to give us their absolute walk-away price to the last single dollar! Being prepared IS everything when it comes to auctions!

By being prepared, we don’t give anything away to the other bidders or to the auctioneer. And we certainly don’t get caught up in the emotion on the day – which is what the auctioneer will cleverly try to get you to do.

If I was bidding against another professional and I see they kept having to call their buyer, it would be quite obvious that they’re at their maximum and spreading themselves very thin. This of course helps me with my bidding game plan to ensure I win on behalf of my client using strategies to fight off anyone on their last dollar.

4. The reserve is merely an opinion on value

The true value of something is the price point where buyer meets seller, and/or the other way around.

The vendor reserve is usually a guide, largely influenced by the selling agent.

Of course, the selling agent recommends a price range quoted throughout the listing campaign. This is usually based on comparable sales – being a common method used widely across the industry.

When it’s all said and done, the property will be bought based on a price point which the motivated buyer is prepared to pay up to in order to meet their individual needs and wants. This may vary widely to the quoting range, or to the reserve. Adrian Portelli paying $5m for house number 4, against the reserve of $3.35m, is a case in point!

If someone has the means to pay over the odds, they stretch themselves to the last dollar to give themselves the very best chance to win the property. This number is usually in excess of the vendor reserve as evident by the run-away prices we regularly see in the major capital cities like Melbourne, Sydney, and Brisbane.

5. The auctioneer will be tenacious to squeeze every dollar

Real estate agents work for vendors and will be tenacious – and at times ruthless – in their quest to secure them the highest price.

At auction, emotions run high and the pace is fast. Keen buyers are playing against sophisticated tactics to drive up the price.

As you may have seen on The Block auctions, the auctioneer kept stalling "dropping the hammer" until he was convinced that there wasn’t another dollar left in the crowd.

Even when Adrian Portelli made his crazy $1m counter bid to claim Steph and Gian’s house for $5m, being $1.65m over reserve, the agent kept prowling until he knew there was no more petrol in anyone’s tank.

My final words...

As you can appreciate, bidding at auction to buy your home – or investment property – comes with a heightened level of emotions; fear, excitement, adrenaline, confidence, disappointment, and so on.

If you plan to represent yourself at auction, I recommend you attend as many auctions as possible (prior) to familiarise yourself with the process and to be well prepared.

If you feel that auctions aren’t for you, our master auction bidding services are designed to help you secure your desired property at a favourable price and on favourable terms. This also ensures you're not tripped up by the auctioneer in paying too much for the property, as we know when to keep pushing and when to bow out.

Good luck with your next auction and if we can be part of your next property move, please reach out as we are ready and willing to assist.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Buying property requires a strategic approach

Buying a home or investment property is likely to be your biggest financial decision, yet so many people are blinded by emotion when making a purchasing decision, usually resulting in paying too much, or worse, buying the wrong property. Let me explain!

In my daily work, we get approached by buyers frustrated from continually missing out on their desired property, as well as buyers not knowing how much they should pay for a particular property. There are also buyers not sure if the property of choice is the right one for them - whether that's a place to call home or an investment property to help secure their financial future.

Below are the top 5 common issues I see amongst buyers, along with my thoughts on what you can do to help increase your chance of success with your next property purchase.

Top 5 issues and what you can do about it:

1. Financial constraints

Many buyers struggle to find a property that fits within their budget. This is the most common issue that we see as usually emotions take over.

Being realistic is the best strategy here to ensure you purchase a property within your affordability and within your borrowing capacity.

When working out your absolute maximum walk-away price, ensure you stress test the loan amount you plan to borrow by adding at least 2% on top of the interest rate quoted by your mortgage broker - this way you're allowing a buffer for possible rate rises over the term of your home loan.

2. The property sells way above the quoted price range

The true value of a property is the price point where the buyer meets the seller - anything else is merely an opinion on price, which is also the case with the selling agent quoting range.

The best strategy here is for you to work out what the property is worth based on comparable properties that have sold and settled over the last three to six months. Also work out what the property is worth to you - of course this number is unique only to you based on your lifestyle and budget preferences.

When working out your absolute (best) walk away price, ask yourself... would I have paid another $500 to secure this property? If the answer is a resounding NO, then you know you've reached your limit with certainty!

3. The selling agent is creating hype saying there is strong demand for the property

Real estate agents work for vendors and will be tenacious - and at times ruthless - in their quest to secure them the highest price. Take what they say with a grain of salt and do your own research - it's the only way!

Go to the open for inspection and say very little. It's important that you have your "poker face" on and show little emotion - even if you love the property. This also applies if it's an investment property knowing that it ticks all the right boxes.

Definitely let the agent know that you're interested, and be sure to register your interest, however you should advise the agent that you're also considering other options and to please keep you posted.

If asked to make an offer prior to auction, you're best to sit back and wait for auction day as transparency at an auction is usually best - this ensures you don't get fooled into buying a property with phantom competition.

Being transparent with the selling agent about your interest is a good idea to ensure that the property is not sold from under your nose, and if it is going to sell prior to auction, that you get the chance to throw your hat in the ring.

4. Market conditions

Low stock is a very common issue for buyers - like right now - where stock levels for quality family homes are very low as buyer demand is outweighing supply. At least this is the case in Melbourne and surrounds.

The best strategy here is to build a relationship with prominent agents in your desired location and that you keep in regular contact with these prominent agents to ensure they tip you into opportunities as they arise, as well as possibly provide you access to the hidden market (i.e. off-market properties).

5. Negotiation and Competition

Buying a home or investment property is likely to be your biggest financial commitment and as such emotions run high.

Unless you work in property, there's likely to going to be a significant knowledge gap.

Choosing the right property is one thing. Knowing what the property is worth and beating your competition is another!

Due diligence is mission critical here to ensure that the property of choice doesn't end up costing you a bomb down the track with significant repairs. It's also important you do your due diligence to ensure you pay what the property is worth - or what the property is worth to you at most!

We see this all the time where competition drives buyers hard, particularly at auctions where emotions run high and the pace is fast, with keen buyers playing against sophisticated tactics to drive up the price.

If you plan to bid at auction, be sure to attend to as many auctions as you can to familiarise yourself with the process and what is likely to happen when it's your turn.

In summary...

As you can see, buying a property is more than just a few clicks on realestate.com, turning up to an open house, and signing an offer. Buying property requires a strategic approach to ensure that you not only buy the right property, but to also but it at the right price.

If you want to buy your next property lead by strategy and with ultimate success, please get in touch with us today for a no obligation discovery call to find out why we're your secret weapon when it comes to your next property move.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Properties for sale aren't all created equal

In my line of work, I often come across buyers who spend considerable time trying to find their dream home, or astute investment property. The look of exhaustion is usually the most obvious when asked "how long have you been searching for?". This group of buyers usually don't realise that their competition is a lot bigger than what meets the eye! Let me explain...

Buying property is becoming more and more complex and demanding, especially in the current times where stock levels are at their lowest in a very long time! More and more property buyers are reaching out for professional help, as evident in the rise of demand for services afforded by buyer's advocates.

You see, not all properties are available for sale equally. There are three ways a property sale is transacted, and in most cases, buyer's advocates are the main ones with access to all three channels.

Here are the three ways properties are available for sale and transacted:

1. Off-Market Properties: An off-market property refers to a property that is not publicly advertised or listed on the open market. These properties are typically not actively marketed and are not widely known to potential buyers. Off-market properties are often sold privately through specialised real estate networks that connect buyers and sellers confidentially. Off-market properties may be sought after by investors or individuals looking for exclusive opportunities or unique properties that are not readily available to the general public.

2. Pre-market Properties: These properties are usually being prepared for the market and are not yet officially listed. In this context, a pre-listed property would be in the stage before it becomes an on-market property. It might involve activities such as preparing the property for sale, staging, photography, and gathering necessary documentation. There are many occasions where pre-market properties don't end up going to market and are sold privately. This mostly happens between a buyer's agent and a selling agent where the property matches the buyer's brief and there is consensus around price.

3. On-market Properties: These properties are officially listed for sale through established channels such as real estate agents, and online listing platforms. These properties are actively promoted and made accessible to potential buyers. When a property is listed, it is marketed to a wider audience, allowing interested parties to view the property's details, price, location, and other relevant information. Listed properties are typically subject to standard sales processes, including negotiations, inspections, and legal procedures.

Right now, there are postcodes around Melbourne (and surrounds) where off-market properties makeup as much as 30% of properties available for sale. This is particularly the case for the more affluent areas such as Bayside and surrounds, where more sellers prefer to be private when selling their homes.

Like anything, there is no "one-size-fits-all" when it comes to buying property. The right advice, and the right guidance, can make a significant difference to not only securing your dream home, but to also buying a property that accelerates your wealth in a more predicable way over the years.

I hope that my blog today helps you in some way. If we can help you buy your next property led by strategy and success, please contact us and find out why we're your secret weapon when it comes to your next property move.

The latest RBA pause and your property plans

Last week, Tuesday 4th April 2023, the RBA board decided it was time for a pause, but of course Dr Phillip Lowe, governor of the RBA, left the door wide open for further interest rate movement.

As shown in the following graph, the cash rate is now at 3.6%, marginally higher than this time 10 years ago.

Right now, forecasts and predictions are plentiful. Toss a coin and I’m pretty sure you’ll have the same chance of getting it right as those making predictions and forecasts.

Truth is no one knows. Even those who are paid the big bucks, like the RBA's governor million-dollar man Dr Phillip Lowe, seldom get it right!

If you are making financial moves based on short term noise, and/or based on forecasts and predictions, your chance of success will be slim.

The facts right now...

Inflation is slowly reducing, after a peak of 8.4% in December 2022, now sitting at 6.4%. The RBA board believes that the central bank's inflation target of 2-3% will not (likely) be achieved for another two years.

Interestingly, money markets are pricing in a very "slim" chance of further rate increases - as well as pricing in a strong probability of a 25 bps decrease before the year 2023 is out. Time will tell I guess!

The day after the pause announcement, Wednesday 5th April 2023, the RBA governor addressed the National Press Club in Sydney, saying that the RBA was “looking very carefully” at the flow of money into mortgage offset accounts.

“This is the way that people with a mortgage save; the money goes into the offset account. And we’ve noticed, in the recent few months, that the flow of money into these offset accounts is slowing. That suggests that people don’t have as many free cash resources as they previously did, that’s a really important source of information,” Dr Lowe said.

My read on this is that the RBA is well aware that home loan customers are draining their cash buffers right now to meet higher loan repayments, which will be further exacerbated once the anticipated fixed rate mortgage cliff starts to eventuate.

What does the latest RBA pause mean for your property plans?

The latest pause by the RBA is a positive step towards market sentiment - and sentiment is a key driver of property values - speaking from experience.

Given the rate hikes experienced within the last 12 months, and now a pause, you may be confused about your property plans and related timing.

Perhaps you are considering upgrading your family home, knowing that this is important for your growing family over the coming years, or changing suburbs to align with your desired lifestyle.

Or, perhaps you want to buy an investment property - or accumulate more property - as you know this is important as you work towards a more secure financial future.

You may even be contemplating getting a foothold on the property ladder as a first home buyer.

If any of the above resonate with you, you are probably confused about the timing of your next property move - if you are like most people. Perhaps timing the market is your strategy, thinking the market has further to fall.

Here's a strong tip from experience with over three decades of property investment success. Timing the market will cost you as no one rings the bell when the market has peaked, and no one rings the bell when the market has bottomed.

COVID is a case in point, where many property buyers sat on the sidelines thinking the market would fall further, to later discover that they priced themselves out of the market from exorbitant price increases. Or even from their inability to qualify for finance as the interest rate spikes had suppressed their borrowing power by up to 40%.

7 facts you should consider when contemplating the timing of your next property move!

When considering the timing of your next property move, it's important to consider the facts and to lead by strategy, as opposed to speculative guesses and wild forecasts.

Here are the facts which hold all the clues as to why right now could be the best time for you to make your next property move.

The cash rate is now at 3.6%, which is only marginally higher than this time 10 years ago. This highlights the fact that the historical low cash rate over the last few years was temporary - driven by the pandemic.
House prices are now at intrinsic value when compared to the runaway prices we saw post lockdown. For example, Melbourne's median house price now sits at ~$897k when compared to ~$1m this time 2 years ago (source: www.theurbandeveloper.com)
Many developers and builders have been squeezed out of the game from surging labour and material price increases - Porter Davis was sadly the latest statistic. This means more and more people are having to rent, increasing the demand for rental accommodation, which will ultimately increase the demand for more housing. As demand for housing increases, so do property values!
Stock levels have been running thin for quite some time, in particular for quality family homes. This is expected to continue especially given the expected surge in demand for quality homes - in light of point 3 above.
Melbourne auction clearance rates have remained healthy in the high 6's and even early 7's - even as interest rates spiked over the last 12 months.
Australia is about to welcome ~1.3million immigrants over the next 2 years, with ~300k this year alone (based on Treasury forecasts). This will put enormous strain on the rental market, as well as housing prices, as the demand for property is likely to surge. With supply already low and demand set to increase, property prices can only head in one direction - and this is up!
APRA has maintained a 3% mortgage buffer knowing that the emergency rate cuts, driven by COVID, would not last. It is likely that APRA will reduce this buffer back to a normal level knowing that interest rates have (likely) peaked in this cycle - or are very close to peak.

When contemplating your next property move, I recommend you beat to the march of your own drum and make your property and financial moves based on facts, ignoring sensationalised headlines which are there purely for click bait.

Your next property move should be based on your own lifestyle choices, your affordability, and of course your borrowing capacity.

Time in the market trumps timing the market, period! Play the long game and you can't go wrong. Speculating on interest rates and on property values will cloud your judgement when it comes to your next property move.

I hope that my blog today helps you in some way, and if we can help you buy your next property based on strategy and success, please contact us as we are ready and willing to assist.