Will there be more stock in spring?

Last week saw the final auction campaigns launch before the winter school holidays. The next six weeks will be quiet on the new listing front as Stonnington largely shuts down for winter, particularly for family homes. 

The second half of July is where listings will recommence for August auctions. Volume tends to build deeper into spring, with October and November typically being the busiest months of the year in our market. 

The current volume of listings is at a decade low. Listings began to tighten in Q2 2022, in line with the interest rate hiking cycle. 

The last 12 months have been among the quietest we’ve experienced in many years, with the exception of 2018/2019 during the banking royal commission. 

Auction volume is down between 20 and 50 percent compared to previous years, depending on which metrics you look at and which segments of the market. 

For example, family homes in Malvern have dried up far more than two bedroom units in South Yarra. 

So why have people stopped selling? And when can we expect a return to more normal volume?

Firstly, interest rates are now at their highest level since 2012, and just 13 months ago they were at their lowest level of all time. That’s quite the shift. 

Borrowing capacity (and therefore affordability) has taken a huge hit, meaning that many people who would otherwise have been ready to upgrade have put their plans on hold for a couple of years, myself included. 

Less people upgrading means less people selling.

And yet it doesn’t seem that interest rates have hit hard enough (yet) to force some people to sell, as many pundits have been predicting for a while now. 

Even if this “mortgage-stressed-selling” scenario were to pan out, it is highly improbable that more than just a tiny fraction of owners in Stonnington would be forced to sell. We certainly aren’t seeing it. 

Potential vendors have also been wary of selling in a softer market. We saw a short but sharp correction from late 2021 until the end of 2022, with prices falling across Australia. 

Stonnington was not immune from this. We saw, on average, around a 10 percent correction in prices. 

Well renovated A-grade homes barely dropped, if at all, while some unrenovated homes, land, apartments and townhouses seemed to come off by up to 20 percent, compared to what they were selling for in the 2021 peak. 

Many vendors decided to sit tight and ride out this correction, unless they had a strong motivation to sell. 

The market appears to have bottomed out in Q4 2022 or Q1 2023, with prices on the rise since. 

Competition – as measured by inspection numbers, bidders per auction and clearance rates – and fuelled by this severe shortage of listings, has resulted in solid price gains recently. 

Clearance rates above 80 percent and multiple bidders per auction have been consistent occurrences for the past few months across our entire business. 

This will hopefully flow on to more confidence from potential vendors to come to market. 

And so it should! 

Selling conditions are ideal right now, with far more buyers per listing than usual, and strong immigration further stoking demand. 

Our typical campaign at the moment is seeing almost twice the number of views online, and twice the numbers of inspections, compared to our long term average. 

Unfortunately, our market still appears to remain in a stalemate. 

Owners (potential vendors) who are looking to upgrade or downsize can’t find anything to buy, and therefore aren’t selling. So there are fewer listings. It’s self perpetuating. 

And this is why we aren’t overly confident that a return to normal volume is just around the corner. 

Having said that, volume always rises in spring. And so it will this year (albeit from a very low base). But if you’re holding out for a plethora of choice, you may be waiting a while. 

The only way to break this cycle is if potential vendors start to bite the bullet and sell first. 

In an ideal world you would sell first on a long settlement to take advantage of the current competition from buyers on limited stock, and then buy deeper in to spring when hopefully there is a bit more choice (and less competition). 

Fortune favours the brave.

Feature Property: 25 Fawkner Street, South Yarra