Spring fever has hit the Victorian market. With clearance rates still in the 80% range and record numbers of properties available, buyers are getting a little nervous about missing out on property before Christmas. The market has been incredibly strong all year, with three, four or five people vying for every good property that has been on offer.
With the increased availability of stock throughout the Spring selling season, although properties are still selling well, the highly charged emotionally driven auctions with multiple people bidding in a frenzy are slowing down. Instead of four or five people bidding there are two or three and sometimes down to one. This does not affect the “clearance rate” percentage as anything that sells on the same day of the auction is usually put down as sold and therefore counted in this clearance rate figure that is so abundantly quoted in the press.
In the last three weeks I have had to negotiate three “pass ins” When competition at an auction does not force the biding to reach the reserve, the property is “passed in” to the highest bidder and that person has the first right of refusal at the vendors reserve. This is probably the most difficult time to negotiate for both vendor and purchaser alike.
The vendors are usually both angry at their agent for not getting a better offer, and also very scared that they will not be able to fulfil their next step in life. For the purchaser they are both frustrated that they are the highest bidder and therefore the purchaser “must” sell the property to them and also daunted by the fact they are now negotiating one on one with usually the most experienced agent in the company (the auctioneer). Many of these negotiations do not reach fruition.
If there are two professional negotiators, such as when we are acting for a vendor, then the negotiations usually go very smoothly. Both negotiators know what the property is really worth and what it should sell for and the quicker we get close to this figure the more likely a deal will be struck. Of the three properties that were passed into us we purchased two of them and walked away from the third as the vendors were asking for an unrealistic price.
When we call to have a chat to agents about an offer now we don’t get the standard response “the vendor has instructed us to go to auction” which is usually a load of rubbish. Vendors do not determine negotiation strategy, Agents do; Agents are now much more likely to “have a chat” regarding how we wish to negotiate.
This is not to say the market is faltering; far from it. Prices are still elevating at a reasonable pace. The Melbourne market has been steadily growing at a sustainable pace for many years now, and even though there has been close to 12% increase in Median over the last 12 months, the upper quartile change has been closer to 17% and the 95th percentile is the only true runaway area having a 27% increase. (All figures published by REIV)
There will be a much greater level of negotiations on properties for the rest of the season and it will depend on stock levels as to whether this continues through to next year. Purchasers should note there will be only another month of new properties publicly advertised before the Christmas hiatus.