Prospective home buyers have been urged to have their loan finance in order and to act promptly when a desirable property comes onto the market.
Buyer activity has picked up more quickly than usual in the first months of 2021. This is leading to sharp competition at key price points, particularly for properties priced around $1 million and for houses in the $1.2 million to $1.7 million bracket.
The record prices paid for A-grade properties across most of Australia’s capital cities in the last two months of 2020 have encouraged more vendors to come to the market earlier in the year. At the same time, historic low-interest rates are luring increasing numbers of buyers.
It’s much easier to qualify for a home loan than at any time since 2014 and 2015. The ready access to finance has contributed to a spike in the number of buyers who are able to compete for and purchase specific properties.
The Royal Commission into Banking in 2019, when loan finance remained difficult to access, encouraged the belief that vendors were more willing to negotiate.
Nelson Alexander Sales Director Arch Staver says back then some buyers adopted automatic adversarial positions against the vendor’s expectations, believing they faced little competition due to the difficulties in obtaining finance.
“That is no longer the case – buyers at present really have to negotiate according to the level of competition that exists in a particular price sector,” Mr Staver says.
“The property market is not a single market that behaves identically at all price sectors. The reality is that there is real vibrancy around certain price points.
“At present, for any property that is priced around $1 million, a buyer needs to be right on their game and ready to act because this is the most popular sector of the market.
“The same can probably be said for properties priced between $1 million and $1.5 million.”
It’s critically important to understand the particular sector of the market in which you are participating. A relatively high number of people are missing out on coveted properties because they haven’t done their research or sought expert guidance.
Melbourne has a very strong auction clearance rate at the moment (82 per cent), a clear indicator that many buyers are being forced to consider Option B, C and D when making a move to purchase.
In the second half of January, the Real Estate Institute of Victoria recorded more than 307 auctions. Of these, 184 properties were sold at auction, with 51 passed in. Some 44 properties sold before auction, and the clearance rate averaged 82 per cent.
Nelson Alexander’s clearance rate for the first week of February was 92.5 per cent, well ahead of the Melbourne average.
Against all predictions made in the first quarter of 2020, cheap finance and a high savings rate worked to reinforce housing values during the COVID-19 pandemic, with most cities showing strong house price growth.
CoreLogic’s latest index of dwelling values found home values rose to a record high in January, up 0.9 per cent.
These figures backed the Domain House Price Report. Domain’s data revealed the national median house prices increased 4.1 per cent to $852,940 in the December quarter, the steepest quarterly surge in four years.
House prices in most capital cities finished the 2020 year at record levels, with Sydney’s median at $1,211,488, Melbourne’s at $936,073, Canberra’s at $855,530 and Brisbane’s at $738,000.
Listing data from leading analyst group, SQM Research, strongly indicates that the pandemic-related lockdowns in Melbourne have created considerable pent-up demand.
SQM’s listing data confirms there has been an earlier start to the typical New Year selling period than normal.
SQM Managing Director Louis Christopher says comparisons of this year’s new listings compared to January 2020 showed there was a material rise in nearly all cities.
At the same time, there was an “observed early start to the auction market over January and February,” he adds.
Melbourne property stock listings numbered 37,617 in January this year, compared to 31,058 listings in the previous January.
Mr Christopher says normally buyers and sellers would see a pick-up in activity in the housing market after Australia Day, but this year that pick-up occurred well ahead of Australia Day.
“The month of January traditionally records falls in properties listed for sale as the market is still in a summer holiday mode,” he notes.
Mr Staver stresses that buyers need to pay attention to the competition levels in the market segment they wish to buy-in.
“Once you start to move into the upper end of the market, it is reasonable to say there are not as many buyers,” he says.
“But having fewer buyers in a specific price bracket does not mean that the transactions do not happen as quickly as they do at price points that have more obvious competition.
“An auction system is about competition, so buyers need to understand their competition.
“If a buyer is queueing up with as many as 20 or 30 other people at an open-for-inspection – which is not uncommon – they should be in the position where they can make a decision about buying almost immediately.”
One of the best things a potential buyer can do in the current combative market is to talk to a local real estate agent. They should raise such issues as their preferred location, secondary preferences, favoured property styles and their budget limits.
It’s also crucial for purchasers to provide details of an existing property they plan to sell to make their move.
This kind of transparent disclosure of information to a skilled agent often fast-tracks the process of securing a dream property.
If you would like more information on buying and selling in today’s market, please contact any Nelson Alexander office.