There seems to be a disconnect between the current perception and the current reality of the real estate market.
Our perception is greatly influenced by the media and our own expectations or predications of what the future may hold.
And given the uncertainty and chaos of the modern world, and strong bias towards negativity and fear in our media landscape, it’s no wonder we perceive the world to be a scary place with an impending cataclysm around every corner.
Macro events like the Ukraine war, banking collapses, stock market volatility, cost of living crisis and every other bad news story constantly bombard our feeds.
This creates an uneasy feeling, a degree of pessimism, which spills into our little world of real estate.
This mortgage rate cliff has been threatening for a while now. I’m getting a bit sick of hearing about it.
Just wait until the middle of the year, they say, when everyone comes off their fixed rate mortgages all at once and it will be complete mayhem with forced sellers everywhere.
The predicted 20 – 30 percent market crash will materialize then.
Am I missing something? Why would all these two, three, four and five year fixed mortgages of people who bought from 2020 to 2022 all expire in the same three month period? Surely it will be more of a gradual effect?
Apparently only a third of home owners have a mortgage, and only a third of those with a mortgage are on fixed rates. So we are talking about a very small proportion of the market who bought recently.
Either way, we aren’t seeing any of it on the ground.
I’ve had one or two calls from investors who are concerned around the cost of servicing their debt, who might entertain flipping an apartment here or there, but not a single client has called needing to sell their family home in Stonnington.
Maybe this will change in the coming months, but I doubt it.
Most people in Stonnington, even those who are highly leveraged, can still afford to pay five to six percent interest rates, at least in the short to medium term.
So what other realities are we seeing that defy the negative perception?
A severe shortage of quality stock, with no end in sight.
We are hoping spring will bring more volume but early indications are that it will be slim pickings for the rest of the year.
Plenty of buyers.
We had an average of 22 groups across our five opens on Saturday. This is well above our five-year average of around 10-15 groups.
Buyers advocates have the longest lists of clients we have ever seen. I received an email from one buyer advocacy today with 22 separate buyer briefs. Usually they would have less than 10. They just can’t find anything to buy for their existing clients, and they keep signing on new clients (who can’t find anything themselves).
Multiple bidders at auction / multiple offers per sale
For the second half of last year it felt like most of our properties sold with just the one buyer.
This year is the reverse – most of our sales have occurred with competition.
Our last four house sales in Armadale sold with a combined 13 bidders.
Buyers are prepared to compete again and aren’t surprised when properties sell well above reserve.
Last year buyers were expecting to buy within the range, or possibly below. Not anymore.
Vendors are gaining confidence
More vendors are starting to get their “happy price” again. Last year this was rare.
Potential vendors are seeing some strong results and starting to sense that now is a good time sell and capitalize on a low stock environment.
Clearance rates have improved
We’ve been averaging close to 80 percent all year across 30 offices at Jellis Craig, even as auction volumes have increased. This is reflective of a strengthening market, not a declining one.
I understand that there’s a degree of bias here coming from a real estate agent.
None of us knows what is in store for the world or the property market. It’s not all rosy.
My point is that perception and reality are often at odds and this seems to be the case now.
The market is a lot better than most people would assume.
We see the improvement on the ground long before the media reports it.
Watch this space. I wouldn’t be surprised if the media get a whole lot more bullish on property in the coming months.
Feature Property: 20 Airlie Avenue, Prahran
2 thoughts on “ Disconnect ”
Awesome as always!!! Such valuable insight and always well written! Thx David