Enthusiasm to buy at auction has lately fallen into the “too much a good thing” category for some. While the market remains patchy, we have seen several bidders pay well over reserve in pursuit of a coveted property. But if those successful bidders blow their budget in the process, they face a very good chance of being slapped with a slew of extra unwelcome costs.
Thankfully a good proportion of buyers as well as selling agents are now getting the message about the benefits of tapping into the impartiality afforded by the buyer’s agent. It's one of the reasons Rose Buyers Agents has been seeing more purchases transacted by buyers’ agents especially in the Eastern Suburbs where we primarily operate.
“The market is quite tricky right now,” says Rose Buyers Agents CEO Simon Rose. “Buyers are very choosy, and a good proportion are still sitting on the fence as we discussed last month.
“Our current experience in the market is that unrenovated listings are hit and miss. But turn-key properties - those properties that are ready to go – they’re the ones that are really being fought over and the ones that are giving our buying agents a run for their money.”

Eager beavers

Proving most desirable among buyers at present – and pulling the big bucks at auctions - are small gems in good locations. Take the one-bedroom 1800s cottage 8 McElhone Place Surry Hills which went to auction on the first weekend of this month: this property attracted 15 registered bidders of which 9 were so eager to call it their own that they pushed the eventual sale price $191,000 over its $1.1 million reserve. Last weekend a truly dated freestanding home on 544sqm in the southern Sydney suburb of Carlton sold under the hammer for $1.875 million, which was $225,000 above reserve.
So, back to my earlier point about eager bidders potentially blowing their budgets. Research by RateCity recently showed that an extra bid of $10,000 on the average priced residence could lead to a buyer forking out five times that in costs over time. How? For a start, paying an extra $10,000 on top of what they could afford means they would need to take out a larger loan. Then, in addition to paying more interest to the bank and more money to the government in the way of stamp duty it could also tip that hypothetical buyer into mortgage insurance territory. Even going a mere 1% over the 80 per cent loan-to-value ratio (the level set by many banks for waiving mortgage insurance completely) can instead cost a purchaser about $6300 they didn’t expect. Explaining this scenario to a client is yet another one of the good ways to emphasise the pluses of engaging a buyer’s agent as well as a selling agent to our clients.

Flush with cash

In other news, it’s heartening to see the latest Australian Bureau Statistics figures which show buyers are more cashed up than ever. Amazingly, the average new owner-occupier loan now sits at $626,500 - the highest level since government records began and despite the cash rate hitting its highest level since November 2011. Even the experts are surprised, the director of research at RateCity remarking that it is “astounding to think owner-occupiers are, on average, taking out larger loans than ever before despite the fact the cash rate is sitting at a 12-year high”. For this reason alone, those in our industries can be confident as we sally forth into the second half of the year. See you next month!