Our crazy ol’ market has indeed copped some changes in a short period of time. It’s hard to believe the sales that we were involved in from February to mid-May now that we’ve had two solid weekends of tough auction competition, fast-paced and competitive negotiations, and extraordinarily well-attended open for inspections.
What do people point at to explain the change?
The positive trifecta (encapsulating the Federal election result, RBA’s recommendation to reduce the lenders’ servicing buffers, and the recent interest rate drop).
The interesting thing is that nothing has actually changed yet.
The election result has put a safeguard around the dreaded negative gearing changes and abolition of CGT discounting, but the changes weren’t earmarked to take effect immediately anyway. The recommendation from APRA has not resulted in a rollout yet, and the interest rate cut is mostly passed on, but is too recent for buyers to have effectively flooded the market. This being the case, what is the cause of our palpable market change?
It is pure sentiment.
Buyers who wanted to take advantage of the bear market (and were in a financial position to do so) sat back, anxiously awaiting the call of the invisible bell when the market bottomed.
Upgraders who feared a miserable sales result resigned themselves to sitting tight and staying put despite the upgrade conditions being conducive to an attractive trade.
Those who believed the doomsayer headlines forecasting a 40% drop after Sixty Minutes aired that ridiculous program late last year held off any purchasing plans in the hope of buying a bargain when Armageddon was apparently going to strike.
Now that the opportunity to buy well has threatened this contingent’s plans, we are seeing an influx of activity, positivity, and (dare I say it)…. a touch of FOMO, (Fear Of Missing Out).
We can list the coalface differences easily;
- More attendees at open for inspections (I just had to queue at one beautiful house in Glen Iris),
- A diminishing number of available properties for sale online (the previously passed-in properties without fundamental flaws are now being snatched up),
- More auction bidders,
- Higher auction clearance rates,
- An exhaustive result well above the Vendor’s reserve for many auction properties,
- A higher number of challengers for pre-auction negotiations, and
- A generally bigger discrepancy between the quoted ranges and the resultant sale price for the auction campaigns we’ve canvased over the two weekends.
It’s amazing that sentiment alone can drive this visible set of changes in such a short time.
The question of whether to wait it out and chance it at auction, or to pounce prior with a compelling early offer is once again a conversation we are having with our clients. We’ve enjoyed the opportunities that the down-market presented for our clients who did manage to ignore the white noise and pounce with a firm plan in place, but now that these days seem to be fading we need to embrace the changing conditions accordingly.
In this last week we have proudly pounced on three suitable properties with pre-auction offers; two of which went our way and one zoomed beyond our grasp when some emotional offers overpowered ours.
This exciting purchase below in Aberfeldie was conducted prior to an auction scheduled to run next week. Carefully timing the offer to coincide with the auction conditions (ie. offering within the three business day period) enabled our offer to be taken very seriously, as it eliminated the Vendor’s risk of a cooling off applying.
Buyers do need to remind themselves of the changes to our market that are instigated by change, versus those that are initiated by sentiment alone. They also have to remain mindful of the seasonal conditions, stock levels during winter, competing sale properties (ie. micro gluts/micro droughts), and the market value (as opposed to the quoted range) of a property of interest.
Conditions are changing, and as the lender changes and recommendations roll out, buyers and vendors can anticipate that our market conditions will give way to our Melbourne asset prices increasing yet again.
Quality properties are few in number this June, and July/August conditions are not indicating that volumes will increase.
Vendors who are waiting for a good time to sell should seriously question whether it is now.