Early bird sellers gain more options and leverage

One of the clear trends seen in Melbourne’s real estate industry since 2014 is that more people are striving to maximise sale prices by auctioning their homes in late-winter and early-spring.

The “go early” strategy makes sound sense. By selling when there are relatively few property listings and then buying later in spring when many more houses and apartments are listed, so-called changeover buyers can take full advantage of their leverage in the market.

The spring market is dominated by changeover buyers seeking to downsize or upgrade their homes. Most sellers are also buyers, so it can be a smart move to sell early or buy first with a long settlement that gives you plenty of time to sell your existing property.

The market favours buyers towards the end of the year because plenty of quality homes are offered in October, November and December.

Domain Group chief economist Andrew Wilson says: “The closer you get to the end of the year, the more the energy can shift to the buyer, because the seller runs out of options.” The seller doesn’t have the luxury of saying, “I’ll wait until next year,” and properties get crammed up against the end of the year finish.

Nelson Alexander Sales Director Arch Staver says an increasing number of changeover buyers are electing to sell in August or the first half of September to gain an advantage over traditional buyers and sellers. “This approach is Real Estate 101,” he says. “You want to participate in a busy market that offers options and leverage to the buyer, and sell in a reverse market where there are fewer listings but a lot of people looking for properties.”

The buyers who do best in the home auction market aren’t always those with the most money. Well-researched buyers who recognise there’s always another house worth considering often get more bang for their buck. These players always consider market timing. They do their homework, don’t rule out buying next-best properties or in spillover suburbs and are prepared to wait.

A game-changer for this year’s spring market is the Reserve Bank’s decision in May to cut interest rates by 25 basis points to 1.75 per cent and then a further 25 basis points again in August to lower the cash rate to 1.50 per cent. These cuts have given property investors and well-heeled upgraders and downsizers renewed confidence. Many auctions now attract four or five bidders. Buyers also seem far more interested in the availability of cheap finance than in broader economic issues.

“Although we hear a lot about unemployment, it is probably not registering as highly with home owners in Victoria and NSW as the news about lower interest rates,” AMP Capital’s chief economist, Shane Oliver, says.

The Domain Group’s Dr Wilson couldn’t agree more. Dr Wilson says Melbourne’s northern and north-eastern suburbs have attracted some of the highest levels of price growth this year and the trend is likely to continue over spring. “These areas are attracting aspirational buyers that are taking advantage of the perception there is good-value buying in Melbourne in the middle to upper price ranges,” he says. Dr Wilson says low interest rates are encouraging middle-level buyers to borrow at their maximum capacity. “The difference for buyers with higher-level equity is that they don’t have to borrow to the max to trade up to the next housing level,” Dr Wilson adds.