What is Happening in the Melbourne Property Market this Winter?

I recall my reporting mid to late last year – around September/October, our difficult Melbourne market felt as though it had started to turn a corner for the better. I was too cautious to call it until November, when the race to finishing line for the year’s auctions became quite apparent that it wasn’t the only driver nudging buyer demand up in the tightly held inner and middle ring areas.

We experienced what some agents referred to as a ‘static’ market for nearly two years and there is no doubt that it was a challenging time for vendors, agents and investors alike. While some areas were somewhat immune to the market downturn, others really suffered. Auction numbers were down, clearance rates were low, lending was reported to be slower and market confidence was pretty grim. Keeping firmly in mind the importance of understanding values and exercising prudence, this two year period that our ‘static’ market offered was indeed one of the best buying opportunities a buyer’s advocate could possibly take advantage of. I researched, selected and negotiated for properties in the very areas which are exhibiting strong demand now and I am proud to read sale data now and be a part of the strong-buyer demand in the very streets and suburbs where I bought for clients during the downturn.

Ironically, I’ve missed out at the last three auctions I have bid at and it’s fair to say that it’s been frustrating for me – but it’s also been a welcome reminder that we are in an improved seller’s market. It means that my client’s assets are performing and it also means that my own assets are performing, so it’s not all bad by any means.

So why have I been missing out and what does it all mean?..

First of all, we have to understand the ‘winter’ market. For whatever reasons, vendors assume that the best time to sell is Spring. I completely disagree and I have done so since I was a listing agent. Maybe they assume that buyers aren’t out and about in the cold, wet weather (which is an incorrect assumption), or maybe they know that their property will look prettier in spring (everything looks prettier in spring, true), or maybe they like to follow the herd and list their property for sale with every other vendor in their area who is selling in spring, (and this is the worst reason to sell in spring). When a unique house hits the market and has no real competition, vendors can expect strong buyer interest. In the case of each of the three auctions I have missed these past couple of weeks, this has been the case. In fact, as a listing agent, I had my best months every June, July and August. My listings all sold – and sold well.

Secondly – with interest rates as low as they are now (let’s face it – variable rates which start with a 4 are as low as some of us have ever seen), we have increased borrowing capacities, investors who can buy much closer to cashflow neutral in some cases, and other investment class investors opting for property over shares, bonds and cash. In the case of all of my auction losses this month, I have come up against buyers who have had high emotional attachment to the property and have exercised their increased borrowing capacity to record price levels for that property and street. Just in the case of a property I bid at this Saturday in Spotswood, the property sale price was the highest in the street and I would argue that the property was indeed not the best property in the street. I was told earlier that the winning bidders had lost at auction three times running themselves and were determined to make this property their home. I knew I had tough competition.

Which leads me to the third reason – I missed out on all three because my clients and I had strategised and set a top-end figure. Depending on whether each property was an investment or a home, we weighed up their preparedness to stretch beyond the value-range I determined, and we set a sensible figure with careful deliberation. In each case though, we missed out because price exceeded where I saw even a stretched value. It’s an important balance when working out what price becomes TOO MUCH to pay. My rationale when considering this decision is as follows; when the price you are considering takes you into the next class of property; above and beyond the property you are fighting an emotional buyer for, it’s time to move on and find an alternative. This was the case for all three auctions I missed out on this month.

Optimistically, I am confident that the new and emerging spring-market properties will offer some welcome buying opportunities where I will have a greater chance at securing property prior to auction and with less competition (but I have to be swift and decisive!), and I will continue tapping into my relationships with the agents to get off-market sale opportunities for my clients. In a seller’s market, a good buyers advocate has to be fast, decisive, organised with the due diligence process, unemotional, well-connected to the agents, and cautious about paying the right price, not an inflated, emotional price.