If you read the Financial Review one thing is clear, every property writer wants to have an article out there saying that the property market is in bubble territory. I suspect many are doing it for no other reason than being able to say ‘I told you so’ when the market does eventually come off. I’m the one normally writing warnings about being careful while everyone else is saying ‘up, up, up and away’.
I’m not saying I have changed my mind yet. The world is a mess but banks are still lending and the market is hot. Share price slumps might be the trigger to change things but I suspect not. In October 1987 Black Monday on the stock exchange triggered the biggest real estate boom we will probably ever see. Go figure.
What is interesting about this market from an agent's point of view is the fact that auctions have gone from being only for the top end property to the main preference for selling standard houses - no matter where they fit within the price spectrum for an area.
And while it used to be that it was eastern suburbs and the inner west areas that were more auction centric, now suburbs like Parramatta and Ermington and Rydalmere seem just as comfortable. It will be interesting to see if that trend continues when the market growth starts to level out.
Units are also getting massive figures and pricing strategies are now principally, ‘Offers Over’ rather than the old days of a fixed figure like $599,950; though if it was really the old days it would be $399,950 or even or $299,950. Again nothing is cheap anymore (back then we said the same thing). We don’t market property anymore by declaring the price a seller will start negotiations from, we now invite interested parties to make an offer in the knowledge that other buyers will be making offers as well.
When this first started as a regular practice 2-3 years ago, offers were typically just a couple of percent higher than the offers over figure. Now depending on the level of interest, the top offer can be as much as 10% more than the advertised starting price. I remember the boom back in the 80’s (and that was bigger, more aggressive and a lot more unrealistic than now) and the boom of 2000-2003.
The difference between then and now is that agent's approach to marketing and pricing property back then was a lot more primitive and unresponsive. Most agents were not able to run auctions well, tendering and managing competitive offers was usually handled poorly. Back then auctions were as scary for the agent as they were the buyers and sellers.
The speed this market is moving, and as I said, it’s not moving as fast or as unsustainably as I have seen in the past, is in part because we have a more efficient and responsive market place. The internet lets buyers see nearly everything for sale. Before then, it was the Sydney Morning Herald and not all property was advertised all the time. Buyers had to go to agents and ask what was for sale. Now you can see anywhere in Australia, see what has sold, and look at pictures, floor plans and Google maps.
Buyers know more, sellers know more and fortunately, while not perfect, agents know their jobs a bit better too.