It happens every time the market takes off.
When prices are increasing rapidly agents quotes always lag behind. When you’re using comparable sales from six months ago, these could be 10 – 15% below current values. And so everything starts selling 5 – 10% above the range.
This attracts potential sellers to market. Maybe I can achieve $200,000 over reserve as well?
But the market can’t keep up at this pace and eventually vendors expectations catch up with current values. And then they surpass them.
A vendor who would have been quite happy with $1.25m three months ago is now wanting $1.4m. If the property is only worth $1.3m it won’t sell.
We are already finding this with some of our campaigns. Ambitious vendors lead to full quotes, which lead to slow campaigns and pass ins.
It’s a tricky one because buyers are looking at the top end of the range and still adding 5 – 10%. While vendors always focus on the bottom end of the range as their ‘worst case’ scenario.
So for an accurate $1.4 – 1.5m quote where the vendor is a reluctant seller at $1.4m and a happy seller at $1.5m+, the buyers may be expecting it to sell for $1.65m and dismiss the property all together.
Due to this effect, and a bit more stock on the market, we are expecting clearance rates to come back a bit from the heady high 80s and low 90s to a more reasonable and sustainable (but still strong) level around 80%.
It’s still very competitive out there and the trajectory continues upwards, albeit not quite at the rocketing pace of earlier this year.
That’s my read anyway.
PS – Feature image is 48 Packington Street, Prahran