Burbs Property Auction Update: 21st May

149 Graceville Avenue

This is a new house, obviously built by a developer. It was likely flood affected (during the building process) albeit to a limited degree. As with so much of this type of property it is on a small subdivided block with a near identical house next door (No. 147), which will undoubtedly be on the market the moment 149 is sold.

I was unable to attend this auction but it did not sell as today it is listed as Price on Application according to the realestate.com.au website. Prior to the auction announcement it was indicated at $875k. The developer cannot accept a knock-down price for 149 as it will simply set a benchmark for 147 and likely wipe out a large portion of the budgeted return. That said, given the abysmal state of the market right now, this really needed to sell on Saturday -- there is most likely a large and expensive loan outstanding on the project. The risk is that this home sits on the market for endless weeks/months as the market deteriorates further and the financing cost eats into the potential return or indeed simply enhances the inevitable loss.

For now though, the valuable 'optionality' for the developer in waiting will mean he won't be prepared to pull the pin just yet.