There is something addictive about auctions. It was a hot morning and a largish crowd had gathered to see the fun. The house was in a nice area, close to the shops, had a garage, but was also (I thought) rather ordinary inside. Really a smallish suburban bungalow. You could extend or even rebuild, but this is a heritage area. The house in question is not heritage, but you will still have to comply with heritage rulings re compatibility.
The auction was slow to start with everybody watching each other. The bidding began about $A1.6 million with two couples bidding, two more on the phone waiting to bid. Bidding crawled up in $5,000 lots. The phone bidders dropped out without making a bid. Around $1.8 million, a new bidder entered with bidding still crawling up in $5,000 or even $1,000 lots. By now it was clear that the bidders were over their limits, but still staying in.
The wife of the original lead bidder put her hand on on her husband’s arm and whispered in his ear. Over the other side of the garden, the bidding couple turned to their friend. The wife was jiggling up and down, clearly keen but also cautious. In both cases, the women were in charge. I had noticed the couple from the other side, for from the back their friend was the spitting image of my brother. Surely David wasn’t in Sydney?
Now came an intervention, a clear crisp $1.9 million from a new bidder. He had been standing there passively with his wife, showing absolutely no emotion. Silence. The bidding crawled on for a little, and then the new bidder raised the price by a clear $50,000. That was it. “Sold to the man at the back for $2.095 million”. The agent’s staff rushed towards him with the paper work.
Was the house worth that price? It clearly was to the buyer. But as an investment, I doubt it.
A house across the road sold for a little more a few weeks back, but that was a much better house. In this case, by the time you renovate your embedded costs will push the recovery value of the asset to the point that it will take a number of years of capital growth for you just to get your capital back. Still, this is Sydney where monopoly money rules.