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Surge in pre-market and off-market sales as buyers compete for stock

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Off-market sales of properties in Melbourne are on a sharp growth trajectory as some homeowners delay making the decision to sell amid the COVID-19 pandemic.

With fewer property listings on offer and fewer homes being marketed on the internet, would-be buyers have to be ready to move quickly.

More than ever, buyers need to have their loan finance approved, and their individual property requirements worked out if they are to cut deals in a stock-constrained market.

Developing strong relationships with real estate agents can allow buyers to get ahead of the pack, too.

When an agent knows you are a serious and committed buyer who is able to purchase, you’ll be given access to properties that are pre-market or off-market.

“In this COVID world, real estate agents are your best friends,” says Nelson Alexander Sales Director Arch Staver.

“Buyers will find that the vendors who are selling are genuine, and the agents are here to help facilitate a deal.

“In this market, it is not unusual for a number of buyers to be unaware of the properties that are on the market at the moment.

“There are a number of transactions that are taking place that are offline or off-market – there is simply no evidence that a particular property is available anywhere on the internet. So it is critical that buyers tick their boxes.”

Mr. Staver says the first box that buyers need to tick off is to have their finance confirmed. They also need to decide on the location that they want to buy in and to set a price range. “And it is imperative that buyers invest in building a rapport with an agent that can help them,” he adds.

New figures show that national listings dropped by 4.9 percent in April compared to a month earlier. Listings in April were 11.9 percent lower than a year ago when the housing market was in a downturn, according to SQM Research.

The most significant drop was in the resources-affected Perth market, where listings fell 8.4 percent in April, compared to March. Sydney followed it with a 7.2 percent decline.

Brisbane fell 5.6 percent, Melbourne dropped 4.7 percent, Hobart dipped 4.3 percent, and Canberra bucked the trend with a 0.4 percent rise.

SQM also tracked a surge in older listings, particularly for properties that have been on the market between 30 to 60 days.

When there are limited new properties available, buyers have the choice of buying old stock, waiting for more properties to come on the market, or competing for the fresh properties being listed.

Robust competition between buyers is keeping prices relatively stable, especially in Melbourne’s most sought-after areas.

Mr. Staver says people are still very active in the market. He stresses that there are more active buyers about – and more transactions occurring – compared to the activity levels seen during the slow periods that followed the Royal Commission into Banking and the Global Financial Crisis.

“The reality is that there are no open house inspections with the boards outside attracting the passer-by,” Mr. Staver says.

“It is only genuine buyers who are inspecting homes, and surprisingly there are quite a number of them.

In this period of virtual online auctions and behind-the-scenes dealing, pre-auction offers are on the up and up.

Transparency is crucial in this environment. Where there is interest from multiple parties in a home, Nelson Alexander is continuing to run the sale as a fully transparent virtual auction.

“The reason that listings became online auctions is because of Nelson Alexander’s processes of transparency,” Mr. Staver says. “Where there are multiple buyers who want to pay a similar price for a property, albeit, at a private sale, we then invite them all to participate in an online auction, so that they effectively see the whites of each other’s eyes and know that there is genuine other interest in the property as well.”

He adds that it’s extremely rare for sellers not to be fully committed to a sale in today’s market.

“A seller doesn’t come onto the market and spend the money to prepare a property if he or she isn’t committed to transacting,” he says.

“Sellers are motivated in this environment – there is no doubt about that in my mind – so it is the best situation to get a good deal.”

Mr. Staver cautions that now is not the time for a buyer to “park” their search.

“Now is probably a time to intensify your search, if we can learn anything from previous market hiccups,” he says.

“If you go back to the banking royal commission, many buyers withdrew, mainly because the lending environment was really tough.

“But the reality is that those who did buy at that time did so at highly competitive prices.”

Melbourne and Perth saw the most significant decline in home values among the capital cities over June, with both recording declines of 1.1 percent, according to the CoreLogic Home Value Index for June.

CoreLogic head of research Tim Lawless says the downwards pressure on home values has remained mild to date, with capital city dwelling values falling a cumulative 1.3 percent over the past two months.

“So far, the impact from COVID-19 on housing markets has been milder than initially anticipated,” Mr. Lawless notes.

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