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There is no doubt that Melbourne's property market has changed its dynamic from the peak of prices in Spring 2017. Prices have been falling since then and the biggest falls were experienced in Spring of 2018. Most agents will cite prices are down by approximately 10% overall however there are certainly examples of properties selling for up to 20% less than what they sold for at their highest point.
In the bayside suburbs of Melbourne these changes equate to hundreds of thousands of dollars on some properties, which could be equated to years of salaried work people would otherwise have to undertake to earn that kind of money.
But it seems for some property buyers, that is still not good enough and they are hoping for further price drops before they feel like dipping their toe into the market.
Let us make a distinction here between the advertised prices and the market values. Many people say "Well we are still seeing prices coming down." That may be the case however the price of the property you just saw coming down, was only lowered because it was too high to begin with and not in-line with the market value. That may have been the reason it was unsold. This is not a case to prove that the property values in the market overall are currently decreasing. We will not know if they have done so until we look back retrospectively at a range of results to see the pattern of values. In much the same way, at some point in time we will be able to look back at the values and report that prices have increased. The property value itself differs from the advertised price in that it is 'the value that a reasonable but not desperate buyer will pay to a reasonable but not desperate seller'. Sometimes the market value and the advertised price are in line with one another and other times they are not.
So when property buyers report seeing prices come down, this may be an observation of one or more properties they have noticed and may lead these individuals to adopt a 'wait-and-see' mentality falsely thinking that values are declining. As agents we will of course wait and see ourselves what the market does next however one thing we can certainly report seeing is that there is a lot of curiosity from 'would-be buyers'.
I have been selling real estate for around 20 years and i can say for certain that every time the property market has had a hiccup, the vast majority of 'would-be buyers' miss out on their window of opportunity due to their inaction. The most recent person I met last week paid $400,000 more than they could have, had they bought 4 years earlier.
As we've discussed you cannot pinpoint the exact moment in time that the market has a peak or a trough until you look back retrospectively so it begs the pragmatic question; "What are the chances of the perfect property for my needs being sold at the perfect time in the market?" It's probably not going to happen! It reminds me of the old real estate adage, "It's not about timing the market, it's about time IN the market" meaning that property ownership is a long term venture. You can try your best to buy at the right moment in time however, with enough time IN the market of ownership, a high level of capital growth is normal.
One day we will wake up in the morning and listen to the media reporter saying that the market has bounced back and for probably 80% of 'would-be buyers' they will have been too slow. No-one knows exactly when it will be until months after it happens but a lot of people will be kicking themselves for saying 'No' to what ended up being a good opportunity that was snapped up by someone else.
Furthermore, as many buyers have found, buying a property is not just about the price you pay. This type of purchase is often an extremely difficult venture considering the elements that inevitably ensue such as battling with other buyers at auctions, attending weekend inspections, frustrations with limited stock levels, adjusting expectations and destination suburbs and so on.
Normally people are trading in a 'sellers market' so relax and enjoy the easier market conditions, the increased choices of available properties on the market and the willingness of vendors to be fair and reasonable. Take comfort in the fact that you have already made a significant saving had you purchased a year or two ago.
For any real estate advice or information, contact the author Simon Wendt on 0407 040706.