The Wealth Effect (Another Crazy Auction Story)

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“And SOLD, to the young woman in green”.

“BANG” goes the gavel, as it comes crashing down… to the applause of the crowd.

Yep.

You guessed it.

It’s another bumper auction result from what is Sydney, nay Australia’s biggest past-time.

That is, having a sticky-beak at your neighbour’s property auction.

This time, the property in question was a street over from ours.

But First, To Set The Scene.

MrsFrugalSamurai and I had viewed this one at it’s first mid-week open about 3 weeks ago.

It was a standard 3 bed/2 bath/1 car on a sloping block, freshly landscaped and renovated throughout.

I was sipping a freshly brewed green tea (DIY), whilst MrsFrugalSamurai went for the bought latte option (decaf).

I wore my faux Ralph Lauren polo (navy). I don’t remember what MrsFrugalSamurai wore.

The weather I think, was overcast… but it could also have been sunny.

Apart from us, there was one other couple at the property, and a rather bored looking cat (American Shorthair or perhaps Egyptian Mau? Forgive me, it was late in the day).

The other couple was obviously the chatty kind for they spoke to the agent at length, in which case I gleamed some invaluable pieces of information:

• The property was just listed, with a short 3 week auction campaign.
• The price guide was $1.2-$1.3m.
• “Wasn’t this too quick a turnaround?” (husband)
• “No”.
• “Are you sure it will sell?” (wife this time, looking around and fixing her eyes firmly on US).
• “We are quietly confident”.
• The property was a tenanted investment property at $680 per week (under-market).
• Its owner is inter-state, and looking to sell to buy his PPOR.
• The weather for the next few days looks promising, so a good time to wash your laundry.

When they started discussing the recent turbulence in Indochina, I decided it was perhaps time to inspect with my eyes as opposed to listening with my ears.

My visual inspection at the time did not detect anything extraordinary:

• A sloping block, rear to front set on 543sqm (I learnt this from the brochure, not through my eyes).
• Definitely completely renovated and landscaped nicely.
• Small bedrooms.
• Limited natural light.
• Staged well.
• Very nice alfresco and open plan living area.
• Ticks many boxes. Young couples, Young families, Upsizers, Downsizers, Retirees.

Auction Day

Fast forward to this afternoon.

I had just come back from having lunch with my parents – a simple dish of rice, beans and fish fillets (Basa).

Needless to say, no sooner had I come home, I had to change, lock-up and head on back out because MrsFrugalSamurai was bombarding me with phone calls.

“Where are you? We are already here”, referring to herself and her Mother (they had also headed out for lunch, menu unknown).

“You better come quick, it’s unbelieveable”.

“Where are you? You won’t be able to nab a spot!”

“Hey, can you bring my jacket… I’m cold”.

When I arrived, I was gobsmacked.

At the sheer number of people who had come to attend.

There must have been at least a 70 or 80 strong crowd all crammed into the narrow street.

I was shaking.

Mainly because it was cold, but also because not less than 6 months ago – I had attended auctions in the same area, where you could count on two hands the number of people who showed up.

The Auction Begins

The auction began at the scheduled time of 4pm.

The sun was setting. The crowd was expectant. I needed to pee.

After the necessary introductions, the auctioneer asked for the first bid.

Which was kicked off at $1.2m.

Not bad I said to myself, scratching an ear lobe.

IMMEDIATELY following this was the second bid at $1.FIVEm.

Shitballs, I thought, here we go.

It was actually a very tactical yet ultimately fruitless er, tactic. To raise a strong bid to intimidate your rivals.

However the first bidder was having none of this, and raised their bidding incremently bid for bid with the second bidder until they reached $1.65m.

$1.65m! Strewth… wow… I wish they’d wrap it up though, gotta go peepot.

SUDDENLY, a third bidder entered the ring.

The third and first bidder traded blows, until the price reached $1.7m.

Just when the third bidder thought they’d nabbed it… a fourth bidder emerged.

Bidder four went hammer and TONGS with bidder three, and finally managed to secure the property for $1.755m.

Wowee… $1.755m on a price guide of $1.2m – $1.3m.

The Wealth Effect

Suffice to say, the onlookers were stunned.

And many were smiling.

Because if a neighbouring 3 bedroom property could sell for $1.755m – what would my 4 bedroom be worth?

Or my 5 bedroom?

Or my property with a flat block?

Those were the excited thoughts and conversations which ran through the crowd.

Certainly, no one was expecting such a result.

And do you know what happens when people start to feel the warm glow of enrichment?

They spend.

Because if you feel that your wealth has magically increased vis-à-vis a weekend auction, you suddenly feel more financially secure and confident in your outlook.

So you go out and spend.

Even if your income and fixed expenses remain the same.

And what happens when you spend?

Your dollars is injected back into the economy, where the government wants it to go.

What’s that?

The government wants you to spend?

Well of course – how else is the economy going to fire? Through dollars and cents circulating in its system.

So are you saying Mr Frugal Samurai sir, that our governments want house prices to increase?

“Nods head”.

P.S. I did manage to go to the bathroom in the end, it was a great relief.

*** I wrote this piece on Saturday, whilst it was still fresh in my mind***

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