Last year was a seller’s market. A strong seller’s market. Arguably the strongest seller’s market in decades.
We watched in disbelief as prices for houses in Stonnington jumped 30 percent within 18 months – from Q2 2020 to Q3 2021.
I’m not saying all houses went up by 30 percent, but many did. Some went up even more than that.
As agents we would appraise a property based on the most recent comparable sales at $2,000,000 – 2,200,000, for example. The vendors of said house would have been very happy at the higher end of that range.
The house would hit the market, and promptly sell within 14 days for $300,000 above reserve, with several bidders.
Nearly every property sold significantly above expectation (ours and the vendors). Vendors were thrilled, we were thrilled, buyers were relieved to be out of the market. FOMO quenched.
How things change.
Now we find ourselves in more of a buyer’s market. It’s not a bad market for sellers, so let’s call it a ‘balanced’ or ‘normal’ market.
That is, clearance rates in the 60’s, less than two bidders per auction, and most properties selling via negotiation rather than under the hammer.
The occasional, A-grade property is being hotly contested, like 11 Hobson Street, South Yarra on Saturday with four bidders, but those are the outliers.
Now we appraise a property based on the most recent comparable sales at $2,000,000 – 2,200,000, for example. The vendors of said house would be very happy at the higher end of that range.
The house hits the market, passes in with one bidder at auction after 25 days and sells for $2,100,000.
The vendors are still happy to have sold, although they are not particularly thrilled with the price. They wonder if they could have achieved $2,400,000 last year.
Perhaps… But then they realise that they are now looking to buy and the houses of interest, which were selling for $3,400,000 last year, are now selling for $2,900,000. It’s a net win of $200,000 by upgrading in the current ‘normal’ market, rather than the imbalanced, seller’s market of 2021.
Not everyone is upgrading, of course. But unless you are cashing out of an investment property, most people are buying and selling in the same market so any perceived windfall or loss from the timing of their sale becomes relative.
For those entering the property market, like first home buyers, timing does matter. Buying well improves your equity position in the long run.
The difference between buying a single front in Prahran in May 2019 compared to November 2017 could be $200,000 in additional capital growth. That’s how much the market declined in those 18 months.
The problem is, unless you are lucky or special, or especially lucky, timing the market is nigh on impossible.
As a colleague recently said, ‘they don’t ring a bell at the bottom of the market.’
As of yesterday, my news feed is littered with articles predicting house price growth in Melbourne in 2023, based on some research by SQM.
And while I am quick to rubbish every single house price prediction article, I do believe we are closer to the bottom than the top, and that by this time next year house prices are far more likely to be on the rise than still falling.
Currently, a lot of buyers and sellers are sitting back and waiting. Waiting for the market to drop further. Waiting for the market to pick up. Waiting to see what happens with interest rates.
Both supply and demand are being supressed.
But you can’t hold off on a move indefinitely. Families grow, kids change schools and eventually fly the nest, people get divorced and relocate for work.
And all this pent-up activity eventually needs to be realised as real estate transactions.
We are social creatures who need social proof to feel comfortable making big decision. It’s hard to go against the grain.
For this reason, when the market turns, it turns quickly. FOMO will be back in a jiffy.
Don’t wait for the bell to ring.
Feature Property: 82 Brighton Street, Richmond