The volume of listings refers to the number of properties available to buy at any given time. When listings are low, there are fewer property owners willing to list their property for sale compared to the previous period. This can have far-reaching effects on the property market because it can tip the balance of supply and demand.
This is a hot topic right now because we are experiencing record low volumes of properties being listed for sale. Buyers, sellers, and agents are monitoring these numbers reported by CoreLogic and the most recent data suggests national volumes of new listings as of the four weeks ending 5th March 2023, are down by -15.4% compared to the same period last year. And in Sydney, new listings are down by -20.8% compared to the same period last year! Why are listings so low and what does it mean for buyers?
There are a few reasons behind the low volumes of properties being listed for sale:
- Vendor discounting: In the current economic environment, some households unfortunately cannot afford to hold onto their properties. In other cases, vendors may be in a position where they need to sell urgently and do so at a discounted rate. The median vendor discount 3 months to February 2023 in Sydney was -4.5%. Compared to the same period in 2022 (when prices started to decline), the median vendor discount was -3.3%. Vendor discounting suggests that vendors are unrealistic in their price expectations or, vendors are desperate and are willing to slash their price to get a deal done. With vendor discounting still at high levels, property owners who don’t need to sell may be less inclined to list their property for sale because they are not prepared to reduce their expectations.
- Waiting for housing market recovery: property owners who do not need to sell or, who are trying to time the market, are waiting for prices to increase before listing their property on the market. The danger with this tactic is that once the property market begins to climb, the vendor may have to pay a premium for the property they are upgrading or downsizing to.
- Unable to find anything to buy: This is a challenge for upgraders and downsizers who experience both sides of the equation. If a vendor is unable to find a property to buy in the current market, they hold onto their property and withdraw their plans to sell. If other property owners follow suit, the trend of short supply continues, perpetuating the cycle. Coupled with sky-high rents, homeowners feel added pressure to find a property to buy before settlement.
What does this mean for buyers?
- Competition: We are starting to see high turnouts at auctions once again. In the past weeks, I have watched auctions with 20+ registered bidders. We are seeing the auction clearance rates begin to climb. Despite the interest rate rises and the rising cost of living, there are still active and competitive buyers out there. With less to choose from, they will focus their sights on available property and compete to secure a home or an investment (before further rate rises).
- Premium prices for A grade property: Buyers are still hoping for a bargain. And yes, you can find them. But they are likely compromised properties. These properties have factors that can restrict future capital gain. For example, a property located next to the airport or on a major arterial road. The properties which tick universal boxes such as wide leafy streets, large yards, natural light, character, high quality renovations, are still attracting buyers because these assets are scarce in any market.
- There may be off-market properties: We have recently bought several properties off-market and in doing so, have saved our clients thousands. This is because we have developed relationships with selling agents who understand that buyers’ agents represent qualified, ready-to-go buyers and are unlikely to waste time. We can organise due diligence fast and use time to our advantage by beating other buyers to close deals quicker. We assess property sales and listings around us and can determine the right price for the property and be confident about what offer to make in favour of our client. Experience is essential when dealing with off-market properties because there is often a lack of marketing requiring increased reliance on market data, understanding the underlying motivations of the vendor, and understanding key market fundamentals.
What are agents saying?
There is no cause for concern as the Easter holidays are nearly upon us. After each holiday season, buyers become hopeful that more stock will be listed for sale. And while there is seasonality in listing volumes, we are not seeing the opportunistic sellers anymore. In 2021, owners would consider selling even when they had no immediate desire to if they could achieve an outlandish price. And often, they could. We could now be experiencing a hangover from a wild property market and the return to business as usual.
An influx of property might not eventuate until we see the next boom, by which time there will be even more pressure and stress on the buyer to keep up with the market and do everything in their power to avoid missing the boat.
If you are in the market to buy and are struggling to find the right property, contact Nick Viner on 0405 134 645.