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Buyers recognise “extra competition” in the market

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With public auctions back in play for property buyers and sellers, Melbourne’s real estate market is on track to see intensified competition for limited stock in the run-up to Christmas.

Victorian Premier Daniel Andrews has announced that a maximum of 10 people can attend public auctions in Melbourne from Monday, October 19, under new rules aimed at helping the city achieve a COVID 19-safe summer.

State restrictions banned private inspections and public auctions for seven weeks from early August. The ban on private in-person inspections was eased on September 28.

So how will a post-lockdown market perform?

Nelson Alexander agents say there is a clear trend to “extra competition” for many properties. The raised stakes in the current sales environment are being driven by pent-up demand, record-low interest rates and well-researched and prepared buyers. Also assisting transaction activity are hundreds of motivated vendors who are keen to make a move and are setting realistic asking prices.

Nelson Alexander Sales Director Arch Staver says bookings for online auctions increased sharply after one-on-one private inspections with an agent were allowed in late September. The company is now consulting with vendors about converting some scheduled online auctions into “on-the-street” auctions.

At physical auctions over the next few weeks, Nelson Alexander agents will be using witches hats to cordon off an area in front of the sale property. Only prospective bidders who have registered for an auction and agency staff will be allowed within the fenced-off area.

“Where we have more than 10 registered bidders we may persist with an online auction,” Mr Staver says. “The last thing we want to do is breach any of the rules. Agents using their mobile phones will also be able to bid on behalf of a buyer who may not have been able to register for an auction.

“We are particularly enthusiastic that we can now conduct auctions onsite. It is delightful that we can now see people other than on a computer screen.”

Mr Staver says agents here have been encouraged by the strong performance of the auction market in Sydney, which has been subject to far fewer restrictions than Melbourne’s market.

In Sydney, the spring rush for properties has been reflected in strong open for inspection attendance and bidder numbers at auctions. Sydney agents say most auctions are obtaining early bids from buyers. A big proportion of these buyers are upsizing or downsizing, and they understand that there is competition in the market and are prepared to go above and beyond to secure the right property.

Mr Staver says buyers are making reasonable offers for listed homes, while most sellers are motivated and keen to get transactions across the line.

“There is a shift in the way the market is working,” he says.

“Buyers 10 weeks out from Christmas are very quickly realising that a tsunami of stock coming onto the market is not going to happen. They realise that there are limited opportunities to buy, which will result in some extra competitive friction.

“If the Reserve Bank announces another drop in interest rates, I think it may fuel some activity.

“We are closely watching the Sydney property market, which has bounced back very strongly. The appetite for buying property remains.”

While Australia has been put to the test by the coronavirus pandemic, consumer confidence is on the rise, due in part to the low-interest-rate environment and recent tax cuts announced in the Federal Budget. Major lenders have also acknowledged that the housing market and capital-city dwelling prices have weathered the COVID storm far better than the banks initially expected in March.

New figures show that consumer confidence is on a high. The Westpac-Melbourne Institute Index of Consumer Confidence rose by 11.9 per cent in October, lifting from 93.8 in September to a 27-month high of 105 points.

A reading above 100 points denotes optimism. The index, based on interviews with 1200 Australians, is up 38.9 per cent after hitting 29-year lows of 75.6 points in April.

Sentiment is currently at the highest level since July 2018. In further good news, confidence in Melbourne (up 13.3 per cent to 102 points) is back at levels last seen in August 2019.

The Westpac survey saw house prices expectations and the “time to buy a dwelling” index bounce back in the past month, despite the pandemic-induced recession.

The national “house price expectations” index grew by a very high 31.5 per cent to 117.3 with all states registering “impressive recoveries”.

The national “time to buy a dwelling” index increased 10.6 per cent in the past month to 122.2, growing to its highest level since September 2019.

Westpac chief economist Bill Evans says the latest survey findings are an extraordinary result.

“Such a development must be attributable to the response to the October Federal Budget; ongoing success across the nation in containing the COVID-19 outbreak; and the expectation that the Reserve Bank board is likely to further cut interest rates at its next meeting on November 3,” he says.

The survey is the latest in a growing body of evidence that shows the property market has defied expectations during the pandemic.

Mr Staver says the post-lockdown environment in Melbourne is supporting a trend to quickly-realised property transactions.

“Many people want to move,” he notes. “They’ve been locked down, they’ve discovered the inefficiencies in their existing homes, and they might want to make lifestyle changes. Now they are free to implement that.”

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