Winter Blues…. Spring is Just Around the Corner

On Saturday we attended an auction for two fabulous repeat clients. Their portfolio acquisition plan this time around was to identify a sub-$600K house which could respond to rejuvenation now, and could potentially be sub-dividable in future. No easy feat, but Northern middle-to-outer-ring Watsonia was identified as a possible locality to target.

The crowd gathered in the street as the bidding starts

House photo sourced from REA

Watsonia’s transport options (train and bus) combined with it’s ease of access via the Metropolitan Ring Road put it on our client’s targeted suburb list and they called us when 62 Princes Street came up for sale.

When I was asked what I thought it’s likely selling price could be, I had to overlay my appraised value with our strong market sentiment.

“We’re in a strong market and it’s winter.”

They were puzzled about my season comment. “But Cate, isn’t it better to buy in winter? There are less buyers out there.”

Interesting observation… but while there are less buyers, there are considerably less properties for sale out there. The same can be said for the Melbourne property market every winter. I recall as a listing agent that some of my best sales results were in July and August. And I certainly know as a buyers agent and investor who has been intently tracking the market for over fifteen years now, the pattern hasn’t changed. Whether our market be a buyers market, a seller’s market or a balanced market, there are always spike sales results when stock shortage strikes.

It’s a simple case of supply and demand.

Relative buyer numbers per house are at one of the strongest levels right now – and combined with fears that we are in a runaway market, buyers are panic-buying and we’ve witnessed some extremely strong results where emotional buying has been multiplied at one auction; and buyers have gone head to head with one another, stretching to purchase price levels even beyond some of the agents’ wildest dreams.

My advice to buyers who are starting to panic is the same advice as I am giving to my own clients who are missing out at auction or feeling impatient right now. I am telling them to remain calm, give it more time, and plan for an early spring change in the market. Listing activity will increase, vendors will get into the spring-spirit and that buyer/seller imbalance will shift back enough to make the market feel as though it’s eased a little bit. There is no doubt that our market is strong and confident, but I certainly doubt that winter is the best time to buy.

Now, more than ever, we are nagging the agents for off-markets and making swift and decisive moves when the right properties come up.

Stretching at auction to a level beyond comparable sales analysis is a dangerous business though.

Yesterday’s auction did land where I thought it may. Sadly it was beyond our client’s desired budget, but based on the market analysis we conducted, the result did exceed where we appraised the value at. Did they do the right thing? Absolutely. There will be other opportunities… and they are more likely to come around in spring. Until then we’ll keep exploring off-market opportunities.