OVER the last 12 months, property analysts have had a lovely time explaining the inexplicable.
“Why,” we ask, “Is the property market booming at record rates in the face of a global pandemic?”
Ask Brad Teal, a real estate veteran and director of Brad Teal Woodards, and he will give you a surprising answer.
“The fact is, none of us in real estate think this makes sense,” he replies.
“Every single asset class has gone through the roof in the last 18-months, in defiance of lockdown, JobKeeper, JobSeeker, the loss of a generation of profit in businesses because of lockdown one to six. It defies logic – there’s some illogical things going on in the market place.”
Many (including this writer) have suggested that the money people have saved by not travelling internationally has been invested in property purchases.
Mr Teal rejects that suggestion.
“Because you didn’t go overseas this year, you may have saved $40,000 on a European vacation. But that doesn’t mean that you go and pay $300,000 more for a property.
“If you want to know what’s driving it – it’s emotion.”
This month, CoreLogic announced the national property market had experienced the highest annual pace of growth since June 1989. Housing values were up 20.3 percent over the past year and in Melbourne, values had soared 15 percent.
While few areas in Melbourne missed out on a lift, the rise in property values varied from 9.5 percent in Melbourne’s western suburbs to 30 percent on the Mornington Peninsula.
Reports of properties selling well beyond reserve have abounded in the past year, as have stories of prospective buyers willing to jump in to secure their dream home at almost any cost.
This, despite the golden rules espoused by property experts: Research the market; buy in a good location – the worst house in the best street and not the other way around; avoid making emotionally-charged decisions; and be prepared to walk away if the deal doesn’t stack up with our budget.
“Buyers have always had the mindset that the market is fractionally ahead of them the whole time,” explains Mr Teal. “And that’s what causes people to jump in. They may have been the losing bidder at four auctions – $1.2, $1.25, $1.3 million – next thing they’re telling you they jumped in at a higher rate because they thought they were going to miss out.”
Mr Teal says the emotion of Covid lockdowns, uncertainty about the future and people weighing up what’s important in life, has influenced consumer behaviour in the property market.
“They’re thinking, ‘Why wait three years to get into a bigger family home? Or `Let’s buy now and knock down and rebuild. We planned to do it in five years, but let’s do it now.
“There are plenty of properties that are not selling and have very low levels of enquiry and we suspect, it’s not about price.
“Buyers are going after one type of property. Everyone wants a family home in a good suburb, five to 15km from the CBD, with three to four bedrooms, plus a study, a new kitchen and perhaps a pool in the backyard.”
For owners of properties that fit this description, the current market presents a golden opportunity to optimise a sale price and capture the equity in their home so they can buy elsewhere, or downsize, and have some cash leftover, says Mr Teal.
For buyers, the rise in stock levels over Spring will deliver more choice and less urgency.
Last week Melbourne had its busiest auction week since late March. A total of 1478 properties went to auctions with a 79.4 percent clearance rate.
This month, CoreLogic’s Tim Lawless said while growth conditions remained positive, it was becoming increasingly clear the housing market had moved past its peak rate of growth.
“The slowing momentum can be attributed to higher barriers for non-home owners along with fewer government incentives to enter the market,” he explained.
Mr Teal welcomes signs that the property market is stabilising.
“A consistent market is good for everybody,” he says.
If you’re considering buying or selling, contact the Brad Teal Woodards team today.