Newsletter - Inner Circle October 2017
Buyers are active, but prices are confusing...
The Melbourne property market is one of only two markets – Hobart being the other – showing resilience as the national housing market begins its natural slow down.
The increase in the city’s median dwelling value was just shy of 2% over the past quarter, with Tasmania’s capital on par, and every other capital recording either a fall or a small increase of less than 0.5%, according to CoreLogic.
Auction clearance rates have also been consistently over 70%, with properties still selling under the hammer, although the turnout at auctions has been varied.
Some auctions are attracting many buyers, while others are attracting only a few. There has been some commentary suggesting low attendance is due to agents finally ceasing the practice of under-quoting – that is, fewer people are attending as they now know the true price guide, which is out of reach for them – but I don’t believe this to be the case.
Rather it’s price confusion that is the primary reason for low attendance and the reason properties with a poor turnout at auction may be passed in. The changes to price quoting are confusing buyers as there is still inconsistency among differing agencies. Consumer Affairs Victoria has neglected to run an ongoing education campaign for buyers, which would definitely help.
As buyers’ agents we’re experts in understanding price quoting, so if you’re looking to buy and you need help in this area, contact us for an obligation-free discussion.
CUBBs are the biggest competition right now
While there are fewer people turning up to some auctions in Melbourne, I can assure you demand is still very strong for the right properties, and there are very disappointed bidders going home every week.
Investors have been blamed for pushing other buyers out of the market in the past, but they’ve now taken a backseat with tougher lending restrictions. It’s clear to us there is now another buyer type taking centre stage and edging out other buyers, and it’s not first home buyers, as some might hope. It’s what we call Cashed Up Baby Boomers (CUBBs).
Often these Baby Boomers have sold a larger home and have cash to burn when downsizing. Given they no longer have debt and are highly motivated to stay in their neighbourhood and community of many years, many CUBB's will pay any price to do so.
Since they can buy with cash rather than borrowing, CUBBs are not affected by the tighter lending restrictions that are impacting other buyers, and they can therefore often outbid the competition. Even if their offers are slightly lower, the fact that CUBBs can sign a cash unconditional contract means vendors will be more likely to accept their offer over others.
For advice on how to balance your portfolio, contact us for an obligation-free discussion.
Over the past few months especially we have been seeing CUBBs outbid both owner-occupiers and investors time and time again.
Homeowners wanting to climb the next rung on the property ladder and first home buyers trying to get into the market simply can’t compete. These buyers have to borrow, and debt ceilings can’t compete with cash buyers.
It’s only going to get worse in time as ageing Baby Boomers look to change their lifestyle from maintaining larger properties to moving into smaller, low-maintenance homes and villas. They’ll be even more incentivised to downsize with the Federal Government’s Budget measure of allowing older Australians to make non-concessional contributions of up to $300,000 into their superannuation fund from the sale proceeds of their home.
So how can you avoid being outbid by a CUBB with the ability to pay more than other buyers?
Using a skilled buyers’ advocate is often the best way to secure a property without competition – or with minimal competition - and to avoid bidding against a CUBB. At Property Mavens we have access to off and pre-market listings via our strong relationships with real estate agents. We engage with over 250 agents every week and 40% of our client purchases are off market.
Your average buyer does not have the existing relationships that buyers’ agents have and are therefore very unlikely to come across off-market opportunities, and in turn are much more likely to come up against CUBBs.
We recently had the pleasure of securing a home in Melbourne for expat buyers, Huong and Kien.
They needed guidance to find the perfect home to suit the needs of their family and in particular, their children’s educational needs. They had determined which schools they wanted their children to attend, and for us, it was a matter of finding the right home within a cluster of high-performing southeastern suburbs, within a strict budget.
Within two months we had purchased a property, under budget and prior to auction. There was buyer competition for the home, but our clever negotiating skills enabled us to outbid every other buyer and acquire the property before it was able to be fought over at auction.
The purchase was much to the relief of Huong and Kien, who were anxious about rising house prices and how they would manage to buy a home in their chosen location on a fairly tight budget.
They now have a home in a fantastic spot that meets most – if not all – of their needs, including proximity to transport infrastructure, parks and schools.
If you want results like this, click here to book a time with us discuss your requirements. It’s 100% obligation free.