People accuse me of being “Too optimistic about the property market”, but hear me out and see if you can fault my logic (My math yes, my logic no).
52 Ellice Street, Mount Vic Wellington sold this week for $3,080,000 (RV was $2,030,000). This represented a yield of 5.5% gross, which isn’t bad considering interest rates at the moment.
What surprised me, though, was that there were seven offers in total, so six people missed out.
Which made me think, if the average “Failed” Tender was $2,800,000, then that’s something like $16,800,000 of investable funds that are still looking to buy in central wellington. *
That’s a lot of money.
17 Palm Ave, in Lyall Bay, sold too. The R.V. was $1,130,000, and the asking price was BEO $1,195,000, but at tender, it achieved an excellent result of $1,711,000 some $516,000 over the expectation.
The truly remarkable thing in this sale is that they had 22 offers, meaning 21 people are this morning still looking for a home to buy.
If we assume those 21 failed tenders made offers averaging $1.4m, that’s another $29,400,000 still looking to buy in the market. *
72 Chaytor Street, Karori sold too. It had a BEO of $895,000 but achieved a sale of $1,207,000 or $312,000 over expectation.
This sale had 12 offers meaning 11 people missed out this time, and if we assumed an average failed tender of the million-dollar level, that’s another $11,000,000 still doing open homes this weekend. *
So from 3 property sales in one city, 41 offers achieved sales of very close to 6 million dollars.
But the stunning figure is close to 60 million dollars worth of offers that were not successful.
Sure some of these offers would have been cheeky, some may have been at brazenly low levels too, but then some of these people will be upset that they missed out also.
What will they do in their next attempt to purchase to make their offer more acceptable?
They might make a future offer “Cleaner” but most buyers will be encouraged by the previous sales levels, and they will offer more money next time.
The joke at the moment is if you want to win a tender, you need to “Make your best offer possible, then add 20%”.
Agents I’ve spoken to have commented on open homes of popular properties having 40 to 60 people going through them, and with COVID related restrictions in place for some, this meant up to 1 hour wait times to go through houses.
Causes of this level of interest could be international kiwis returning, people trading up or downgrading post lockdown, pent up demand after six weeks of lockdown or buyers taking advantage of low-interest rates, and higher possible LVR’s.
With rising unemployment and dropping GDP numbers, there will no doubt be a reaction from home buyers over the coming months, but it sure doesn’t look like it’s here just yet.
* Note: Keep in mind that the agencies involved never supply sales values and offer numbers, and my calculations are based on inside market knowledge, the information provided to me by buyers, and has not been confirmed by individual agencies.