What’s really happening in the market?

Yesterday was busy in Melbourne, and likely in our regional cities too. The sad passing of the Queen initiated yet another public holiday in our already short week, bolstering up the need for vendors and agents to make the most of the weekend preceding the Grand Final.

Melbourne’s auction clearance rate (as at early Sunday morning) delivered 63%; a sure sign of a not-so-strong market, but not a dismal rate either. Considering the weekend was busy with a larger number of auctions than usual, this figure doesn’t spell a horrendous buyer’s market.

Admittedly, a large number of withdrawn auctions struck me. Vendors and agents are sensitive to the idea of a pass-in, and more than a few took the opportunity to convert to a private sale, (or withdraw the property completely) in an effort to avoid a disappointing auction.

However, the feeling at the coalface is interesting, and after chatting with quite a few agents throughout the week and yesterday, it’s evident that the media reports aren’t quite aligning with reality.

For whatever reason, the buyer sentiment feels a little bit different to past months.

Agents are reporting a subtle change in the air too. Could buyers be fighting the risk of further cuts to their borrowing capacity? Or could they be tiring of the media doom and gloom stories, and deciding that there is no time like the present? Or could buyers be sensing that the market has bottomed? Maybe the lure of Spring has caught their attention. It is hard to determine what it is that has triggered a slight change in sentiment at this early stage. As Warren Buffet famously said, “In the business world, the rearview mirror is always clearer than the windshield.“

My own website analytics form one piece of the puzzle, and typically I’ve been able to gauge a change in buyer sentiment from the number of visitors who look at my site. The current figures don’t show a significant uplift, but they do certainly demonstrate that the last rate increase didn’t alter the visitor numbers. The rate increase in May certainly bit hard though. (July’s uplift was unusual, but analytics take into account a lot of variables).

This chart from The Age shows an interesting correlation with the home value index, but it is essential for readers to note the scale. The price falls being projected are small increments by anyone’s measure. In addition, the chart is generalising all markets, which is not necessarily helpful to do.

Our two largest cities have certainly impacted the broader numbers, and the following table gives a better overview of what has happened over the last twelve months.

The latest monthly falls in Melbourne have taken part of last year’s gains away, and our rolling 12 month average has now slipped into negative territory. And while combined regional cities are showing negative price movements for the month (and quarter), the 12 month rolling average represents the enormous gains through COVID and the renaissance that so many regional cities experienced.

Almost every agent in today’s market will still suggest that quality properties are selling well, yet compromised properties will struggle. There are nuances across our markets, and finance-related jitters cannot be overlooked, but broadly speaking, I’ve personally noted this two speed market also.

My auction success rate has been sub-50% for the last two months; an indication of strong competition.

Yesterday’s auction win was exciting, however I had my work cut out for me. Three of us fought it out for this special property, and one determined biddder was hard to shake off.

Even in the rain and hail, bidders came out to bid.

Hardly a collapsing market if you ask me.

What buyers who are sitting on the sidelines, waiting for the market to bottom out should keep in mind is the signal that they are waiting for. The easing of interest rate hikes might just be the catalyst that brings strong buyer sentiment back.