Statisticians are talking about massive stocks of available properties in Melbourne. Many real estate agents are talking about a lack of stock. Media reporters usually take the high moral ground and talk about agents making comments that only benefit agents and that not all the information is forthcoming. We saw again the REIV clearance rates staying in the 50’s and agents/media communicators saying this is normal due to winter and school holidays.
So what is true and what isn’t. Actually all three statements are correct, but just not properly qualified. There is a glut of properties in New Estates, there is a shortage of stock in established suburbs and the clearance rate nearly always struggles in colder months and especially in school holidays
New Estate suburbs like Point Cook, Werribee, Caroline Springs, Craigieburn, Pakenham and Cranbourne all have huge stocks of properties on the market. And to make matters worse, developers are also trying to sell new properties in these same areas. With builders and developers having to sell properties to make money, they tend to drop their prices and this in turn devalues existing, established homes. If you are trying to sell in these areas you will find that you will most likely need to discount massively from “perceived market value” in order to get a sale.
On the other hand in the more established areas, where second and subsequent home buyers are looking, there is a dearth of good stock. In these areas, you need to purchase off someone who wants to sell. Many of the properties in more established areas such as Bayside, Glen Eira, Stonnington, Boroondara, Port Phillip, Moreland, Moonee Valley, Yarra and Manningham just to name a few, are being tightly held. If the existing owners can’t find properties to purchase then they don’t put their own property on the market. It is quite a vicious circle. I believe this is beginning to change now. I think we will see the 2nd and 3rd home buyers begin to loosen the purse strings and start to look to either upsize or downsize as their personal case may be.
Since April 2010 anyone who didn’t have to sell, basically sat on their hands. But two years later, whether or not the world economy is under control, people still need to get on with their lives. And this includes have children and upsizing homes, or seeing their children move out and downsizing their existing home. This circular effect of selling and then buying again usually offers up more “good” stock in the more established areas. I believe this has begun in ernest.
What this means to prospective buyers and sellers. With the advent of increased stock, there is usually a drop in price, unless there is a corresponding jump in demand. Obviously price movement will depend on whether demand will continue to outstrip supply as it does now.
In the newer estates, there are some bargains to be had if you purchase established homes of 2 – 5 years of age. This assumes you wish to live in the estate for lifestyle choices. It certainly doesn’t make sense for investment purposes, because whilst the yield may be OK, due to depreciation on a relatively new building, the capital growth will be dramatically limited, and may well be negative for a while yet.
If you are considering a purchase in the next few months, you would be wise to consider getting some assistance. You can easily lose tens of thousands of dollars or more by relying on a selling agent to assist you with research and negotiation. They are acting for the vendor and are contractually obligated not to assist you in lowering the price you pay.
JPP Buyer Advocates