Saturday was our first auction weekend of spring, and the mood was positive with the pear trees in full blossom, the sun shining, and strong numbers at our opens and auctions.
Team Fetter/Sciola had three auctions scheduled. Two sold before at the top of the range, and one sold on Saturday under stiff competition with three bidders, comfortably above reserve.
The most talked about auction of the weekend was an unrenovated double fronted Victorian in South Yarra that sold with a competitor with six bidders for $1,000,000 (33%) above the range.
Was this a case of extreme competition or just an ultra-conservative quote? Likely both.
As observers of the market, or participants in the market, you are probably confused right now.
The media is saying prices are down in Stonnington by 10 percent, that this is the most rapid fall in Australian house prices in 40 years, that interest rates are going up at a record pace, and that there is more pain to come.
But then you attend an open inspection and it feels like a nightclub in 2019 with 40 groups of buyers crammed in. Or see yet another double fronted Victorian sell for half a million over reserve.
Conversely, if you’re a first home buyer then maybe the last five auctions you’ve attended have passed in without a bid.
It is confusing.
Let me shed some light… This is what you can expect this spring:
Sorry buyers, don’t expect to see a large influx of stock this spring. Volume will continue to be low compared to previous years.
How do we know? Because we track these things. Our team’s average number of auctions for October over the last six years is 12.
Last year, fresh out of lockdown, we sold 30 houses in what I am going to start calling “Outrageous October”.
This year, so far, we only have a handful of auctions scheduled for October and while this will increase, it will still be less than half of what we did last year.
Across the network, most offices are expecting this October to be below their five-year average in terms of listing numbers.
Hot properties will be hotly contested
Given the lack of quality stock, we will continue to see very strong competition and high prices for the scarce properties that everyone wants. We have seen this consistently over recent weeks.
Fully renovated homes that tick all the boxes are selling just as well, if not better, than last year.
Even unrenovated homes that would be classed as A+ for location and street appeal are bringing huge crowds and premium results.
Interest rate hikes will start to bite… for some
Only one in three Australians have a mortgage, but this varies greatly depending on demographics.
Nearly all first home buyers need a mortgage and often at 80% loan-to-value ratio.
Buyers at entry level price points are the most sensitive to interest rate hikes. And this is why we are seeing a drop off in demand for apartments and small houses.
Activity and inspection numbers are healthy, but the urgency is no longer there. These properties need to be priced attractively to get buyers excited enough to act.
Meanwhile, in Stonnington and more affluent areas, there are plenty of people who don’t require finance to buy.
For example, many downsizers buy outright, and there are plenty of wealthy families who can tap into resources and assist one another to buy or upgrade without relying on bank finance.
This is why the premium end of the market (call it $2m – 6m+) appears to be holing up so well, buoyed by very low stock levels.
Clearance rates will hold up
We expect clearance rates to hold up in the 60 – 65 percent range, which historically is still a ‘normal to good’ market.
But the thing that I am most certain about, is that there will continue to be plenty of uncertainty. There always is. It’s what makes life interesting.