What makes a Buyer’s Market become a Seller’s market?

Without doubt, the defining aspect of 2011 for us was the rapid swing of the Melbourne Seller’s market to a Buyer’s market. To explain this, cast your mind back to 2009 when, after the full impact of the GFC first hit Australia, our government and RBA instigated some immediate moves to aid buoyancy in our market.

We had one-off stimulus cheques sent out to many Australians, extensions of housing grants, boosts and regional bonuses for first home buyers, and most memorable, a rapid contraction of the RBA lending rate which banks mostly passed on to us.

These immediate benefits for buyers meant that buyer confidence increased, first home owners took advantage of the grants, and investors took advantage of the decreased cash-flow shortfall that investment properties offered as interest rates came down.

For us, Buyers Agents, at the coalface, it was a time where buyers were missing out constantly at auction, and a time when buyers were offering over and above the asking price on many private sales in a desperate effort to secure a property. Properties were in tight demand in so many markets and suburbs. Buyers were trawling the internet and nagging agents about new listings constantly – the oversupply of buyers was evident and owners sat back happily watching their house prices increase.

At the beginning of 2010 we were all starting to hear the statistics in on the median house price increase. Melbourne experienced one of the sharpest increases in her history at this time and there were cries in the media every day about the “Housing Affordability Crisis” in some way or another.

To be successful in a negotiation two years ago, we had to act decisively and swiftly and we often had to pay the full asking price. That was the perfect sign of a Seller’s market…. they could basically hold out for the best offer with a high degree of confidence that they would get a fabulous result. The tables turned last year and we found ourselves in a Buyer’s market again. Vendors had longer days on market, discounting off original asking price became normal, auction clearance rates hovered between 50-70% throughout the year, and there was a LOT of stock on the market.

Just prior to Christmas in Melbourne we had an extra 43.5% on the market. We were telling buyers last year to act counter to the market and to take advantage of the Buyer’s market conditions. For those who did, you can sit back and reflect on the buying power you held and the bargain you got. We certainly do.

We say this because we are now into 2012. We do have less stock on the market now because the listing activity is lower over the Summer, buyers in the market are motivated since our last two consecutive interest rate reductions and at the coal face, our Buyers Agent are finding  themselves having more competition when they are negotiating.

So what could tip the scales again and send our market back to that of a seller’s market? More market confidence, higher investor activity, first home buyers re-entering the market, growing household incomes, rental affordability issues… the list goes on.

Could 2012 be the year? We hold an optimistic view for Australian property in 2012 due to all of these factors listed above (and more)….but more importantly, we hold a very optimistic view for great handpicked properties in great sub-markets.