What is happening in the property market?

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After another weekend of hearing clearance rates are good, not so good and woeful by different media outlets, it is time to have a think about what is really happening. The REIV has said the clearance rate is 61% from 532 Auctions. 327 of these sold at or directly after auction or before the auction was held.

We now know the median price statistic is fatally flawed due to the dramatic drop in actual sales numbers. We also know that numbers of homes “on the market” is also not a reliable statistic, because there is absolutely no way of knowing what the change in numbers of people who are looking is. If you can only see one side of the “supply v demand” ratio then you do not have a viable statistic.

So what can we look at to give us a sense of what is happening? Simplistically, we can talk to agents and people who are looking at the negotiations in the market place on a daily basis. When I hear about all the gloom and doom, and hear that all the properties are sitting on the market forever or failing to sell at auction, and then I bid at an auction for a 3 bed 2 bath townhouse in Abbotsford against 6 bidders, I have to start thinking this must be an anomaly. My other auction is a double fronted residence in Kensington. 7 people bidding taking the property some $110,000 above the very top of the quoted range! 12 out of the last 14 auctions I have attended over the past three weeks have had multiple bidding well above the range that has been quoted. These auctions have been the best houses in their respective areas at the time.

It seems relatively obvious to me that if you have a very good property that is well presented by a professional selling agent it will sell and sell quite well if there is not direct competition at the time you are selling. From our enquiry statistics the market demographic is changing. The investors are still there, but they are being vastly outnumbered by owner occupiers. The owner occupiers that have had some discretionary time frames have been sitting on their hands for nearly 2 years. At some point in time everyone says “enough is enough” The owner occupiers are back in the market.

Owner occupiers are far more emotional than investors. It takes them longer to choose a property, but when they do, they will want to secure the property with more vigour than an investor. The owner occupier will tend to have a higher budget for any given property. This means that when a good property comes up more buyers will gravitate to it and potentially push the price up.

Because the market commentators use median price these spiked sales figures will not significantly impact the overall reports. This means the media will continue to tell us the market is falling in a hole. They will continue to quote professors who say the market is going to drop 40%. And to be fair they have no choice because that’s what the data says and that’s what some university professor has said. But in reality, the overall market is relatively flat and full of anomalies. There will be some bargain buys and there will be some great sales and this will continue for a little while to come.

The Australian property market is worth well in excess of $4 Trillion. It does not jump around by nearly half its value. Even the total capitalisation of the share market in Australian is only worth a little over $1 Trillion. The Australian property market and in particular the Melbourne market is a fairly safe place to have the majority of your money invested.

Ian James
Director JPP Buyer Advocates

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About the author

Ian has been operating his own businesses for more than 25 years. During this time the self taught lessons of building the business, dealing with staff, suppliers, clients and economic woes have been invaluable. Ian is a fully licensed Real estate Agent, a member of the REIV and registered with the Business Licensing Authority.

Buying property is not just sticking up your hand and outbidding your rival. It is an emotional, fiscal and psychological decision that needs to be planned and well executed. Ian is usually involved in over three hundred property negotiations per year; ranging from the $250,000 first unit purchase for a young couple to multiple million dollar residential developments. Ian's business background and endless numbers of negotiations make him one of the industry's leading negotiators.

Ian is married with two adult children, living in Patterson Lakes. He is a keen fisherman when weather and business allows the time.