With Spring now behind us, the biggest surprise of what has been a consistently surprising year for the Victorian property market is that an ongoing shortage of available property for sale is STILL the most influential factor in the current conditions.
As I have mentioned several times this year, this shortage has meant that buyers are being forced to compete more strongly for the limited number of available properties, providing sellers with better than expected results in many cases. The remarkable thing is that, with the end of the year now almost upon us, there has been no sign of the anticipated late rush of properties for sale. So the question we really need to consider is, “Why are we experiencing this shortage?”
Much of the current market conditions has come about through a change in people’s perception of “risk”. If you were to look back just a few years, most people viewed the concept of buying before they had sold their existing home as risky. In contrast, most of today’s buyer / sellers are purchasing first, as they are more confident of finding a buyer for their own property than they are of being successful in purchasing their next.
Why is this so? Well, there are several factors impacting this state of affairs. Firstly, with interest rates at record lows and employment figures remaining relatively strong as well, most people are viewing their financial future with real confidence, including the economics of moving house. This sense of financial security is being reinforced by the increased equity that most people now have thanks to the strong growth in median property values. Indeed, this increased equity is also giving some property owners the option of not selling at all, and keeping the property as an investment to rent out.
On the flip side of this, there are also many home owners considering upsizing, but after watching property prices grow significantly over the last few years, there are many people fearing that we may be at the top of this price cycle. As a result of this more people are tentative about making that next financial jump and are instead taking a “wait and see” approach. Others are taking advantage of the availability of cheap money and choosing to extend or renovate their current home. All of these scenarios are adding to the lack of available stock.
Conversely when we look at the buying side of the market, there continues to be an ever growing pool of investors (both local and overseas), first home buyers and downsizers competing for property. Buyer demand has also been impacted by the growth in our population. Not only is Victoria growing faster than any other State, but we are living longer as well, which means that there are more people looking for places to live than we’ve ever had before.
The solution to this imbalance within the market could of course be very simple; every buyer out there could go and purchase an apartment, because there is a surplus of these! The only problem is that the majority of Australians don’t want to buy an apartment. Most of us want some space around us. Despite the push for higher density living in some areas of Melbourne, the demand for apartments is significantly weaker than that for housing. In fact, the gap between the apartment and housing market only seems to be getting bigger.
These unusual circumstances have favoured most sellers all year and we are expecting much of the same all the way up until Christmas. If you are planning to sell your home; or have just purchased a property and need to sell your own home in order to complete your move, then planning your campaign around the upcoming holiday period is essential to achieving the best result.
There are plenty of homes that will sell between now and Christmas and a case can still be made for a quick private sale over the next few weeks, but we are advising most of our clients to prepare their homes for a campaign commencing in late January. This will ensure they are not missing a good portion of the buyer pool that are likely to be away. The main exception to this would be our vendors on the Mornington or Bellarine peninsulas, as well as other holiday destinations where foot traffic increases over this time.
If you would like to discuss how to best prepare your home over this period, please contact our office and we’ll put you in touch with your best local advocate.