The property market is on fire, and it’s only going to heat up from here.
Property data firm CoreLogic [https://www.corelogic.com.au/news/over-2000-homes-taken-auction-across-combined-capital-cities] has been tracking auction clearance rates, which are at highs not seen since 2015. Last week’s clearance rate was at 84.4%, slightly down from 86.1% the week before. Final figures were 77.1%, compared to 72.7% a year earlier.
Rural areas are even more in demand. Housing values are up almost 8% over this time last year across regional Australia thanks to a shift away from urban centres. Anecdotally, agents report that they’re receiving offers on properties in the first 24 to 48 hours after the listing goes live. In some areas, average time on market has fallen from 120 to just 15-20. Some are being snapped up sight unseen, with buyers in the capitals making an offer on the basis of a virtual inspection only.
So what does all of this mean for buyers? It might be a sign that you need to change up your strategy.
When there’s plenty of stock on the market, buyers can afford to take their time. In today’s market, you don’t have that luxury. You can still get the house of your dreams, though. You just need to be a little more strategic.
1. Get on the waiting lists
If there’s an area you’re interested in, don’t wait for new properties to be listed. Contact your local real estate agent and ask them to add you to their buyer database. That way, you’ll be on the mailing list for new properties before they’re advertised publicly.
Many agents will also do a preliminary inspection with a few buyers from their database before the property is officially up for sale. It helps the agent and seller get a feel for how the market sees their property. For you, it’s an opportunity to make an offer on something you love before most people even know it exists.
2. Be prepared for a ‘Dutch auction’
In such a tight market, many agents are switching to an Expressions of Interest (EOI) model — otherwise known as a ‘Dutch auction’. Here, a property is advertised without a price. Buyers submit their best and final offer in writing, and the seller chooses which one to accept.
This approach means that buyers have to do their research ahead of time to work out what they think a fair price will be. You won’t have the chance to negotiate, so if you’re willing to pay a certain amount you should put that amount in the offer.
The risk for buyers is that you offer a lot more than your competitors, meaning that you could have got it for less. Offer too little, and you’ll miss out. Bottom line? Make sure the amount is worth it to you and make your peace with the idea that this is just how it works in a tight market. If you still don’t like the idea, keep looking around: many agents are still sticking with their usual methods and you definitely aren’t locked into an EOI approach.
3. Get pre-approval
This is always good advice, but it’s never more important than in a tight market. If it comes down to you and a buyer who makes their offer unconditional (i.e., not subject to finance), you’re likely to miss out.
If you’re unsure what you can afford, talk to a broker ahead of time. They’ll be able to help you get the pre-approval and also give you an idea of how strong a candidate you are. Even pre-approval isn’t a complete guarantee that you’ll be able to get finance, but there are things you can do to boost your chances. Armed with that preparation, you can seriously consider making an unconditional offer.
4. Get your best offer in first
In a strong selling market, vendors don’t want to wait around. Even if you’re not buying via Dutch auction, there’s a good chance the agent won’t get back to you if your first offer falls short. Whether it’s an auction or private treaty, put your best foot forward from the start.
Before you hit the opens, sit down and work out how much you can really afford. You should also do some research on what properties are really worth. If you’re getting a bank loan, you’ll need to make sure that the bank values the property at what you’re paying. The property might be worth an extra $100,000 to you, but if the bank disagrees you might fall short of the finance you need.
If possible, you should also try and get building and pest inspections done ahead of time, and check with your lawyer or conveyancer about the conditions of sale. The more you know now, the stronger your offer can be.
5. Don’t be afraid to get personal
Want to persuade a seller that you’re the buyer for them? Make them see the person beyond the dollar signs with a personal letter.
For many sellers, letting their home go is an emotional time. Downsizers in particular might have decades of sweet memories wrapped up in that house. They might be ready to move on, but they still want to know that the home will be loved by its new owners.
If you can add a personal touch to your offer, it might just sway them in your direction. Tell them about your children and how much they’d enjoy that gorgeous garden. Or rhapsodise about how much you love the wrought iron detailing on the verandah. For some sellers, the best offer isn’t the highest: it’s the one from the people who will love the house the most.
Planning to buy a house this year? Get in touch with your local real estate agent as soon as possible to help you on the way.