Market Confusion 7th April 2014

The market patchiness recorded over recent weeks levelled last week, with the overall national clearance rate remaining steady at 56%. While above market results were recorded in some areas and price segments, particularly in the inner ring of Brisbane, Sydney and Melbourne, agents are increasingly reporting signs of a softening in the market.

It’s a confusing scenario for many vendors. Newspaper headlines last week were spruiking price growth in all major capital cities over March and average price growth across Australia of 2.3%. But on the ground, rising stock levels and high vendor price expectations are two of the factors blocking further market improvement.

Ironically, the two are inextricably linked, and it’s all about supply and demand. Many property owners have recently decided to sell after seeing reports of above market results. This is creating an increase in supply – but many of those attractive above market results were originally achieved due to a shortage of supply. At the same time, demand appears to be moderating, with general economic uncertainty and an overall unwillingness to over-pay turning some potential buyers away from the market.

Meanwhile, last week’s news that the official cash rate would remain on hold for the eighth month in a row was no surprise. But what is more relevant to sellers is the increasing debate over when, not if, interest rates will rise – some analysts are now suggesting it could be as early as November.

All of these factors point to the importance for sellers to form a realistic view on current market value and not become fixed on achieving any premium over and above. The properties that are currently achieving good sales outcomes are those where the reserve is reasonable and at a level where buyers see value and are prepared to compete. Paying close attention to buyer feedback and comparable results over recent weeks is critical for effective price evaluation.

The team at Jason Andrew