Our market has bounced back, but when will the vendors catch on?

The property pundits have already put up their Saturday night reports, several with similar angles about the strength of our auction clearance rates, and more specifically, the fact that it hasn’t been this strong since 2017.

Surely for anyone who has paid the slightest bit of attention to the doom and gloom stories about our two major city property markets, this trend would suggest that we are now officially into a market recovery.

But the newsfeed isn’t necessarily suggesting this.

There are murmers of market recovery reports in the media, but by no means is it a consistent story, and there are two main reasons for this;

1. Opinions still vary. There are still subscribers to the ‘sky will fall in’ mantra. I even sat on the plane with a guy from Ireland who had a chat with me about the similarities he’d picked out between our markets.
2. Data lag: aside from our ‘on the ground‘ reports and weekly auction clearance rates/sale data, our broad property reports are collated quarterly and released the month after quarter-end.

That’s up to a four-month lag.

Our most recent quarterly data results were only picking up on a slowing decline. Any buyer out in the marketplace right now would scoff and ask, “What decline?” The tide has continued to move and we won’t evidence this in the data until the next round.

What this means for our market though is an action-lag from vendors.

Vendors who didn’t have to sell in the past year didn’t sell. Vendors who plan to sell are still waiting.

If Vendors are reading the quarterly reports and waiting for the right time to take their property to market, it is understandable that they are taking heed of the available information. What would serve them better though is to observe the auction clearance rates, numbers of properties selling each week, the numbers of matching dwelling types in their suburb and the auction participation from bidders at these auctions.

I had a prospect ask me yesterday if they’d made a mistake with the decision to sell their property recently (they sold a week ago). My firm answer was, “No, not at all. You timed things well.” As it turns out, they sold a property on a main road quickly and for a price they weren’t disappointed with.

The challenge for buyers right now is avoiding FOMO.

It is easy in tough buying conditions to adjust a mindset and feel as though the property market is running full steam ahead for the foreseeable future, only to continue getting harder for buyers as values continue to rise. Take these three similar land-size and era properties below for example;

Three properties, all in neighbouring streets just north of Broadway, all showing increased buyer demand and auction participation as each week passed.

This old gem above (80 Royal), had multiple buyers, (including two advocates) and I didn’t even get to put up my hand. The works required to restore it to it’s former glory and add a modern twist to the kitchen and bathroom were factored into our upper limit. It could have been strongly argued that there was far more than a forty thousand dollar value differential between Royal and Marchant, (the middle property that only sold a week prior).

But the four highest bidders who all fought above $800,000 had a different perspective. They knew all too well that Reservoir’s stock levels are currently unusually low for a suburb that typically reports record sale numbers based on its sheer geographic size.

Several elements have combined to create the increased buyer demand that this trio of sales demonstrate;

• Our Federal Election made an enormous difference to sentiment,
• A recent rate cut and some evidence of lender servicing rates easing has given many buyers more confidence and/or buying power,
• Vendors are still holding back on their decision to take their property to market while they wait for reports showing improved conditions,
• Winter has gripped. As silly as it seems, Melburnians in general don’t like taking their properties to market in winter despite the supply and demand ratio suggesting it’s an opportune time for them,
• School holidays are now in force and half of our city likes to jump on a Jetstar flight to Bali at this time of year.

The question that Buyers need to ask themselves is; “Will Spring bring some relief to the buying conditions?“

We think that the answer is yes.

We’re telling our buyers to continue their inspection and searching activity, but to be mindful that quality Winter bargains are fewer, and generally tougher to achieve under auction conditions. Spring is not that far away, and older, A-grade private sales that may have been priced too high initially are worth exploring. Off-market sales are still arising, and agents are just as keen to sell as buyers are to buy.

Now is the time to take stock of the conditions, remain patient and continue reminding the agents of your brief.