Melbourne’s property market is moving into a more upbeat phase. Buyers and sellers are increasingly seeing eye-to-eye on price expectations and show a readiness to get deals concluded quickly.

The auction clearance rate has steadily climbed in the last eight weeks of 2022. Just as importantly more homes are being transacted quickly in off-market deals or sold prior to a scheduled auction – a clear indicator that 2022’s “cautious” market could be about to turn a new page in 2023. 

Over the past 12 months, the market has been strongly influenced by softening national house prices and rising interest rates. But more buyers and sellers now appear to be taking these market realities in their stride. They’re instead focusing on the value proposition offered by each listed property and the need to get a sale or purchasing result across the line.

“There is no doubt there has been an uplift in buyer activity in the past month right across the board of property types and areas in which we operate,” says Nelson Alexander Director Nicholas West.

“The family market is doing particularly well. There have been a number of sales – in Fitzroy North in McKean Street, Mark Street and Scotchmer St, and in Carlton North, in Bowen Crescent, Macpherson Street and similar streets – where family homes have really sold well and under competition.”

In other areas, such as North Melbourne, Strathmore, Pascoe Vale, Clifton Hill, Keilor, Hawthorn and Kew, families looking to upsize or downsize have also been far more active purchasers in recent weeks.

This forceful buying trend is borne out by the rising auction clearance across all capital cities.

The clearance rate for the combined capital cities hit a seven-month high in November, with the number of properties sold before auction also peaking as buyers and sellers aligned on price expectations.

Almost one-in-four properties – 22.1 per cent – in November changed owners before a scheduled auction, with negotiations successfully producing an acceptable result for both buyers and vendors.

The national metropolitan clearance rate for the month was 58.7 per cent, which is the highest since April and the third consecutive month above 55 per cent, according to Domain Group research. 

For the combined capitals, the volume of properties sold before auction day is also at its highest since April, Domain data shows.

However, the individual clearance rates across all capitals are weaker compared to November last year. This is unsurprising given the impact of successive interest rate rises.

Domain’s Chief of Economics and Research, Dr Nicola Powell, says clearance rates have “continued to steadily rise” during a busy period, as buyers and sellers unite on price, although it is a different market to the same time last year.

“This shows that cautious buyers and sellers are starting to see eye-to-eye amid falling house prices and rising interest rates,” Dr Powell says.

“While the monthly trend is showing stability, the capital city clearance rates are much lower compared to this time last year.

“The sold prior data is also at its highest point since April implying more vendors are opting to sell privately rather than going to auction in a lower demand market.

“Moving into early next year, we’ll continue to see sellers needing to be more realistic on price while buyers continue to return to the market with a clearer idea of their budgets.”

Mr West says the market has moved into a more dynamic phase in the final months of 2022.

“Melbourne’s property market is moving in ebbs and flows and it’s moving fairly quickly,” he says.

“There is an appetite to buy and sell, and if people see the value they’re ready to move. And sellers are now strongly aware that if they price properties appropriately, the buyers will engage and they will make an offer.”

The first eight or nine months of 2022 saw many prospective buyers adopt a “wait and see” approach to the market. Interest rate rises meant reduced borrowing capacity, which has weighed on buyer sentiment, placing a brake on housing demand and price.

But agents across the 16-office Nelson Alexander network are seeing the market shift gears.

“There is strength in the market,” Mr West says. “But what has helped, I think, is that vendors have started realigning their thinking around pricing.”

Numerous owners have decided that in order to get their property to move they need to offer prospective buyers a value proposition. Increasingly, the market is ready to engage with those vendors who provide a real value proposition.

Mr West stresses that setting the right price range for a listing is critical in the current climate.

He says asking prices need to be based on genuine comparable property sales that have ideally occurred within the past 60 days.  

“Twelve months ago, you would load a property online and you’d receive 20 emails from prospective buyers in 24 hours,” Mr West notes. “Buyers would tell agents, ‘I want it’, ‘Don’t sell it without me’, ‘Don’t exchange contracts, I’ll make an offer’, ‘It’s the perfect home for us.’

“There was a real element of FOMO (Fear of Missing Out), in the market as we came in and out of lockdowns.

“Now what has happened is that an agent will load a property online and he or she may not get one email enquiry, even if it is a good quality home.

“Buyer behaviour has changed significantly. An owner cannot just rely on the real estate portals to achieve a strong result. You have to have good connectivity with your buying audience.”

Vendors who rely solely on listing their property on portals such as realestate.com.au or Domain are limiting their selling options.

In an environment where off-market deals and pre-auction sales are on the up and up, buyers hunting for a new home or investment property are developing much stronger relationships with selling agents. Many are also showing a preparedness to purchase in a new area that wasn’t on their original search list if they find a particular property that meets their needs.

Often these “postcode jumps” are occurring because of leads given by a professional agent to a buyer. 

Mr West says Nelson Alexander agents are seeing buyers who may have started to look for a new home in Fitzroy North but end up buying in Kensington.

“Buyers will move east-west and they’ll certainly move from Melbourne’s north to the south and vice versa,” he says.

“Buyers across the board are showing greater readiness to move postcodes after a few weeks spent searching for a property compared to when they first started looking.

“Our agents have built up relationships with buyers who may have been looking in Carlton North for six months. They will then often advise clients that a property in North Melbourne will tick a lot of boxes for them.

“We have experienced a lot of that – a buyer ends up buying in North Melbourne when that suburb wasn’t originally on their radar.”

While Melbourne’s property market has experienced a flat patch for much of 2022, the long-term fundamentals are strong.

This creates opportunities to get into the property market before the market picks up again.

To date, Melbourne’s housing downturn has not gained momentum despite aggressive hikes in interest rates.

The supply of property stock is higher than last year, shifting the balance of power to buyers. But new listings have also started to track lower, indicating homeowners, who typically have substantial built-up equity in their property, are not rushing to sell.

And with the recent opening of international borders, Melbourne will be a big recipient of new residents putting extra pressure on our property markets, particularly the rental markets.

Mr West says there is a newfound acceptance that buyers and sellers are in a more balanced market.

Many buyers are asking how they can best take advantage of the more balanced conditions while making sure that interest rate rises do not put their targeted properties out of reach.

“Buyers are thinking they can now buy a home that would have cost them more a year ago,” Mr West explains.

“We are also seeing social pressure, with more people bidding at auctions. Buyers are well aware that others are in the market and are gaining confidence.”

If you would like to discuss your property needs in greater detail, please contact any Nelson Alexander office.