Only four weeks ago the State Government Stamp Duty Concession changes applied for First Home Buyers in Victoria. Increasing the 50% concession to 100% for all purchases sub $600,000 and applying a concession on purchases up to $750,000 was bold and we predicted that sales results in this price bracket would be skewed.
A month on, and the change to the market is obvious.
Combined with our Southern State’s typical winter stock shortage, July has proven to be a month of tough buying conditions for First Home Buyers.
The challenges are palpable; from heated auction bidding to runaway results, shorter days on market and a sense of urgency for those buyers who are preapproved, clutching their stamp duty waivers and wanting to battle the other eligible buyers.
Talk of investors and foreign buyers steering the market has dulled and our battleground in the market now sits firmly in the regions where circa $400,000-700,000 offers opportunity for First Home Buyers.
Established, older apartments in the inner to middle ring south-eastern and eastern suburbs are the evergreen, popular footholds for FHB’s, particularly those who value urban amenity and proximity to cafes and high streets. But it’s the house and townhouse markets which have really felt the brunt of this strong contingent. The outer east towards the foothills of the Dandenongs, Frankston, Langwarrin and surrounds where older style three bedroom homes are still available sub-$600,000 and suburbs offering townhouses within walking distance of train stations (including but not limited to Greensborough and Watsonia) are experiencing high demand and reflecting the demand in the sale prices and days on market. Not to be forgotten are the middle-ring north and west. These 12km-15km radius locations, (particularly those on train lines) have shown excessive demand in the house and townhouse markets and it’s fair to say that the affordability and proximity to CBD holds them in huge favour right now.
And in the regions, buyer demand is obvious. Geelong has experienced some spectacular results, and not just in the period housing markets. Offers prior to auction, shorter days on market, and strong auction results are hallmarks of the Geelong house market also.
Ballarat and Bendigo are not typically strong auction centres (although they have their fair share of auctions), and we have found that the shortened days on market; particularly the limited time frames that buyers have to make decisions with in, have been really challenging.
Last weekend we assisted a client with a bidding assignment in Braybrook; just 10km from the CBD. This townhouse they had selected to buy had a handful of direct comparable sales which we could draw from to guide them on likely price. Four units with very similar floor plans had sold within the last year in the same development and prices ranged from $441,700 to $502,000. Logic suggested that in a stable market, this property could likely sell for $520,000-530,000 when capital growth projections were overlaid. But with another advocate, seven qualified buyers and multiple building inspections, we knew that it could be a tough fight. The property was knocked down for $560,000.
The following auction we attended was this neat 1990’s style townhouse in a block of 4 in Glenroy. Quoted at $360,000-390,000 and appraised by us around $420,000, we felt our client had a decent chance at buying it with her stretch budget. Upon arrival, the sheer number of buyers gathered in the street and driveway suggested our chances were slim. The lack of available places to park on the street should have hinted upon arrival that it was to be a popular auction. Multiple buyers fought it out and after throwing out the first bid, we realized it would be our last. Two advocates, several buyers and a sea of excitement fueled the auction along until the final winning bidder secured the property against another first home buyer for $492,000. The Advocates had dropped out of the race from early to mid-fours each; a usual sign that the bidding had become emotional.
Was there sales evidence to support this price? Not that we could find. However there likely will be as the weeks press on through winter and FHB’s fight to secure their homes.
The toughest question relates to timing and pent-up energy.
Are buying conditions for FHB’s likely to ease when Spring listings bolster stock levels and supply and demand eases?
Is the FHB’s rush now just short term? Is it possible that the majority of eligible (and purchase-ready) buyers are buying now and not in later months? Could this ease in coming months as they all purchase early?
The answers are interesting and chatting to mortgage brokers gives us some clues.
We believe that reduced lending capacity for investors coupled with an increase in listings in September/October will give way to some easier buying conditions for all buyers in this price point, and being prepared to make a strong, yet reasonable offer which is supported by comparable sales prior to auction is often a great move if the property meets all the criteria and the agent and vendor are happy to genuinely consider prior offers.