Few listings until late spring rush: The property crystal ball

There’s no guarantee we’ll see a lift in the housing market as we go into spring this year. On the supply side, there’s a build-up of long term unsold properties (stales) and a compounding shortage of exciting, well-priced new stock. On the demand side, buyers have had a particularly hard time of late – not so much in finding homes, but in finding homes of quality; however when those homes are found they sell well, proving there is a solid level of underlying demand.

Buyers do want to buy and they’ve been out there in good numbers most weekends. James Buyer Advocates’ demand indicator, Bidderman, has shown an average of two bidders an auction some weekends. But they have proven to be stubborn on homes that are not market priced. James specialises in the $1 million-plus Melbourne market.

There are actually two spring markets: early spring (September and October) and late spring (November). They’re intimately connected. According to Sam Gamon of Chisholm and Gamon, what happens in late spring is always greatly influenced by the early spring results. It’s all about confidence says his Elwood auction partner, Torsten Kasper. “A few weeks of good results in early spring may lay the platform for an increased level of homes for mid to late spring.”

On the other hand, David Hart of Buxton Brighton says there’s a strong pattern favouring a late spring recovery – at least in bayside. “Human nature being what it is, many people wait until they are almost out of time to put their property on the market. And there are those who purchase October onwards, who need to sell their own property prior to Christmas. I expect this year will be no different.”

So what about price?

Despite the continued negativity from overseas, Buxton’s Mark Earle can’t envisage any significant changes in housing prices. “Fundamentally there is a shortage of houses in Melbourne with population growth. And Melbourne has been widely recognised as the best performing city in the country in terms of stability over recent years.” Cycles seem to be getting shorter, he points out – “take the 2008 financial crisis and the subsequent boom market of 2009” – and things can change quickly.

According to Benmac’s Iain Carmichael, given the low stock levels, prices are likely to hold. “Agents will have far less trouble achieving full results for good family homes in the $2 million to $3 million range. Vendors at the very top end have a tendency to feel that their property is somehow guaranteed to appreciate in the face of a steadying market. Curious, really!”

Kay and Burton director Ross Savas also believes that prices will be steady. “The fundamentals of our economy are still very good and we have amazing employment levels in our country. So as long as nothing occurs out of left field, I believe prices will hold in Victoria.”

So when do you buy and sell?

Peter Kennett of Hocking Stuart says his advice to sellers is to get in early rather than late. “Late spring is when supply usually increases with more motivated sellers as they have most likely bought.”

As for buyers, David Hart, of Buxton Brighton, believes that the later in the year before Christmas, the more motivated sellers are to lock in a result. “Although you should never pass up the opportunity to purchase the right property on the assumption that if you wait, you might get an early Christmas present!”

With the mix of school holidays, horse racing weekends and the shift in the Grand Final from the last week in September to the first week in October, there are effectively only 16 Saturdays that will give a vendor the traditional four Saturday auction program,  points out Richard Winneke of Jellis Craig. “And of these no doubt some will be more popular than others – creating super Saturdays on dates like 27th August, 24th September and 3rd December.”

For bargain hunters, late spring may be a better market than early due to vendors having to sell and time running out. However you do take the risk that what you may not be there by late spring.

This is where patience presents a conundrum for buyers: if many of us pass on buying in early spring then the late spring surge may not happen at all. And come Christmas time we will still be in a buyers’ market but we won’t have bought. The question is then: how long are you prepared to wait?

“Love is in the air and there is no home more beautiful than one being auctioned on the perfect sun-drenched spring day with the fence painted, the light streaming in and the garden looking stunning,” says Marshall White’s Justin Long – with some poetry and just a little bias.

Historically though, over the last decades Melbourne buyers and sellers have agreed with this statement.  John Clarkson of Hocking Stuart says the market swells by as much as 200% even 300% in terms of activity in spring months when compared with the winter ones.

However, while every agent assumes the supply of stock is sure to increase on what we have now, there is also a thinking that this increase will be less this year than what we’ve seen on average over the past 10 years. There is universal agreement at the moment that we will not see stock levels approaching what we saw last year. Last year was a big year at the beginning, in the middle and at the end in terms of activity. So far 2011 has not been – and it will not be.

Why is spring looking to have new stock shortages? According to Kay and Burton director Ross Savas, it’s because vendors are perceiving that the market is under pressure, so they are holding off placing their homes on the market till conditions improve.

Benmac’s Iain Carmichael agrees: “Unlike last year there are few opportunistic sellers thinking, ‘Wow, our home is now worth a mint – let’s go!’. So the only driving forces are the traditional sellers such as upscalers, downsizers, and job relocators.”

Is this just false spin to get sellers to act? We don’t think so. Richard Winneke of Jellis Craig for instance reports that most agents are admitting to a 25% volume reduction of high end stock being transacted between this year and last. Balwyn and Kew are down around 20% in overall transactions (not just the high end).

In Bayside Jason Gill paints a similar picture of diminishing turnover but uses a different measurement: “In Brighton in July 2009, 2010 and 2011 we have seen stock on the market go from to 92 to 125 to 150 meaning older overpriced stock is simply not selling.”  What this means, he adds, “is that the stock that comes on in spring will need to be of good quality and be priced correctly, rather than more of the same, if it is to excite the market.”

In our opinion, with the type of market contraction (turnover more so than price) we have had in 2011 we are going to need some excitement to kick start the market in the way that it took the Chinese community in 2009 to lead us from the GFC.

Sellers want prices and while buyers do as well, they also want good quality at the upper end levels. More of the same will only compound the problems of this market for both buyers and sellers.

For vendors who are prepared to swim against the tide, there could be rewards, says Steve Burke of Jellis Craig says, and sure we know he’s biased but he’s right on this occasion. “Forget about when the roses bloom in the garden, it is all about the demand and supply equation. As we are currently in a market place of perceived negative conditions I believe that there will be a real shortage of stock at the start of spring. This will definitely favour the brave vendors who will be able to capture a marketplace where there is little competition.”