Since the last newsletter, Victoria has yet again been plunged into lockdown. Now in our sixth, it’s safe to say the property industry has found a comfortable rhythm as we work around lockdowns and shifting market sentiment.
Homes are still selling – and selling fast. According to CoreLogic data, supply levels are not keeping up with sales volumes. Victoria's sales to new listings ratio is 1.3 – meaning there's more than one transaction taking place for every new home that gets listed in the state.
Strong buyer demand has been driven by low mortgage rates, lifted savings levels and first home buyers rushing to the market, thanks to government incentives.
Yet, broadly speaking, supply has not matched this demand. Extended lockdowns in Victoria have been an undeniable factor, as homeowners opted to hold off listing their properties amid a ban on physical home inspections.
While the data paints an interesting picture for buyers and sellers alike, it is a different story on the ground.
The talk around town is there is a significant number of properties in the pipeline, especially in the Bayside area, including suburbs like Brighton and Hampton. What is yet to be established, is this “significant” number is just result of a compounding of properties that can't be photographs and inspected or indeed if it is an increase in the number of listed properties for the same period previously.
It’s an unambiguous reminder that Victoria is not simply one property market, it’s made up of many property markets. Despite the overarching data, sub-markets can be vastly different in market conditions, sentiment and supply levels.
What does this mean for buyers? Time will tell this spring whether supply will actually keep up with the pent-up demand we have seen but one thing is certain, there is strong demand and if the exit from previous extended lockdowns is anything to go by then it augers well for Melbourne property.
The impact of lockdowns
Let’s take a closer look at prelisting activity and Victoria’s lockdowns. Prelisting activity in the state fell by 34% in the week to August 15, 2021, the latest CoreLogic stats show.
The current lockdown, the sixth one Melbourne has endured, began on August 5. But if we compare with 2020, prelisting activity was up by 35% on the same week last year.
There was also a noticeable lift of 37% when comparing prelisting activity between January and mid-August 2021 with the same period last year, we recall that Melbourne’s second lockdown began on July 8, 2020 and ended on October 27, 2020.
Seeing a pattern?
Clearly, there is a correlation between lockdowns and prelisting activity. It appears that lockdowns increase hesitancy for homeowners considering to list their property for sale.
While the lockdowns are causing market recalibrations at every turn, the market could rise slightly come September providing we are actually open for business. History has shown that market confidence evidently rebounds after lockdowns end, kickstarting further market activity.
Money is still cheap but people looking at the double move – sell and buy – could be facing more uncertainty, particularly around getting caught out with a lockdown. We have seen it happen. Having to move out in a pandemic with no house lined up can be stressful and is a common concern and one that is currently a leading reason underpinning the engagement of a buyer’s agent.
While uncertainty it is a noticeable theme among many buyers and sellers, that’s not to say interest has waned.
In fact, shorter sales campaigns are prevalent. It's a real case of "you snooze you lose" in the current market.
A recent example that comes to mind is a property we acted as vendor advocate for, at 3 Walnut St, Carnegie. The property had had no inspections. It sold over reserve at $2.1 million, with the guide at $1.7-1.8 million.
Never in my 30 years in the industry have I been involved with a property selling with not one single inspection. It’s a true testament of the major FOMO sentiment sweeping over the market. Buyers need to be fully prepared make a decision and act in this market. As buyers advocates, we are well versed in having our clients ready and poised to make the right decision at the right time. Never underestimate time as a negotiating tool.
Buying virtually - is this to be the new norm?
Lockdowns were initially predicted to be disruptive for the real estate industry. Many wondered how open homes, a critical piece of the sales process, would go ahead.
But technology has helped the industry find a workaround, 3D property walkthroughs, video or Zoom calls, virtual reality and online auctions have practically replaced physical inspections or auctions during the lockdown.
Virtual inspections have been around for a number of years, but it wasn’t until the onset of COVID-19 that it became widely used.
Online auctions have also taken off during recent lockdowns. Buyers and sellers have been unfazed by physical limitations, comfortably bidding millions of dollars at virtual auctions in droves. Admittedly these auctions have come off the back of properties that were inspected prior to lockdown however some of these properties only had 2 scheduled opens prior to lockdown – as is the case of 3 Collis st Brighton East auctioned last weekend on zoom and only 2 scheduled opens prior to lockdown, and by the way the eventual buyer paid well in excess of $4 million and had never set foot inside the house!
If anything, this has proven that even a global pandemic can’t stop the property market from ticking away.
Negotiating done right
When it comes to negotiations, there are many aspects involved that most people don't think about.
As a professional buyer’s advocate, understanding my client’s concerns and motivations are paramount. Are they prioritising the length of settlement period, do they have a magic number in mind, or is it the specific terms they care about?
Then there’s the sales agent front. The relationship we have with the agent, how we conduct ourselves with them, our track record with them,the level of trust they have for us – this all contributes to the result.
It's not just about the negotiation itself, it’s about the homework we do before negotiation. It’s what we do in the lead-up that really decides the outcome for our clients.
At Davidson Advocates, you can trust us with your property purchasing decisions. With more than 30 years of experience in the industry,our team is armed with the type of insider knowledge that will make an invaluable difference to your home hunting journey.
Armed with over 30 years of industry experience, we bring insight and experience to the table.
Here’s how we’ve helped our clients avoid major pitfalls (and a lot of pain down the track):
- On the eve of lockdown, we lined up to bid at auction for a client. We received the contract an hour prior. We pulled the pin then and there. Why? We discovered in the nick of time that the property had cladding and water issues, which were never mentioned.
- A client fell in love with a warehouse…next to a petrol station. Resale can be tricky, safety is an issue, as well as the noise and soil contamination – all of this undermines capital growth. We found our client something much better.
- A client saw a beautiful period property. Little did they know that it was opposite an injecting room.Our product knowledge of the area extended to intimate knowledge of council buildings and as such we advised them against the purchase. A recent discussion with a neighbour informed us that the eventual purchaser was unaware of this government infrastructure and are subsequently ”tearing their hair out”.
- We investigated a property that an interstate barrister client was interested in. We were told the property had no cladding but after some in-depth due diligence, found the opposite to be true.
- We work closely with valuers and recently we were under bidders on a property. The trap in this market is you can pay too much. Due diligence allowed us to fairly appraise and not overpay with hype and emotion. That said we bought next door with no competition.