Before the dawn

We always see a peak in inspection numbers the first few weekends of the opening market in Stonnington. It’s predictable. 

The buyer pool is replete after the summer holidays, with not only the hangover of buyers from last year, but an entirely new crop of bushy-tailed buyers dipping their toes in the market for the first time. 

Some of the newbies turn into active buyers and starting bidding and offering in the proceeding weeks and months. Others retreat and wait until they are ready. 

Moreover, there are almost no new listings from the end of November until the end of January, and even then stock levels build slowly as the weeks progress into February and March, so there isn’t much to look at. 

The number of buyers per property is at the highest level of the year. 

This means it’s not unusual to see 20 or 30 groups through the first Saturday of new campaigns – roughly double the yearly average. 

But this year seems different, certainly compared to the last two years. 

20 or 30 groups has been less than the average. We had 40 and 50 groups through multiple opens on Saturday. 

Furthermore, it seems to be translating into genuine interest, with multiple buyers running on each of our current campaigns. 

We haven’t seen such strong inspection numbers since the previous peak market of 2016/2017, in the pre COVID days when all the neighbours and sticky beaks used to come out in force. 

So what’s going on?

Is this your typical ‘Feb Pep’, as Mal James calls it? 

Is it just a dead cat bounce, spurred on by an imminent rate cut, and we’ll soon go back to the 2024 grind I spoke about last week, with most campaigns concluding with just the one buyer?

Or will we finally see healthy competition returning to the market and some upward pressure on prices?

Clearly we don’t know. No one does. And it’s too early to tell. 

It will also hinge largely on stock levels. Will a rate cut encourage more potential vendors to sell? Demand has to outstrip supply if prices are to rise, and the opposite has been true in recent years. 

Most pundits are expecting more of the same this year, in spite of the possibility of two or three long-awaited rate cuts. 

REA are predicting -1% to 2% growth in the established home market in Melbourne in 2025. 

Most of the big banks are expecting similar, with prices to remain flat, and certainly no more than 3-4% growth. 

But do you know what? The pundits nearly always get it wrong. And they rarely, if ever, pick the bottom or the top. 

Many analysts and “property experts” predicted prices to drop 30% when Covid hit. 

Prices rose 30-40% in the subsequent 12-18 months, more in some coastal and regional areas.

Pundits predicted prices to drop 10-15% after the 2019 election, after prices had already been sliding for 18 months. 

The exact opposite happened. We saw prices in Stonnington jump 10-15% in the nine months from May 2019 to February 2020. 

Given how flat the Melbourne market has been for over three years now, (with the peak being November 2021), and just how ‘cheap’ we are looking compared to the other capital cities, it’s not unthinkable that we could see 10-15% growth in the next 12 months in parts of Melbourne. 

Why not? Perth and Brisbane have done better than that recently. They pay the same interest rates as us and now have a higher median price, so it’s not an uneven playing field (property taxes aside). 

And while this kind of growth may be unlikely, it has happened many times before. 

When the market turns, it doesn’t usually happen gradually, like a declining market does. 

It happens all of a sudden. 

And the sales price data lags by several months. We tend to see the change on the street months before the media catches on. 

We could feel the change in the air after the election of 2019. We went from no bidders at most auctions, to multiple bidders at most auctions, in a matter of weeks. 

In 2020, we went from no one wanting to buy a house in March and April, to everyone wanting to upgrade their house by September. 

As the saying goes, it is darkest just before the dawn. 

We’re just not sure if it’s 3am or 6am right now.

Feature property: 3 Durham Street, Richmond