Melbourne property price guides ‘completely outpaced’ by massive auction results
When software developer Jon Eaves and his wife Jo started looking for a family home at the beginning of 2020, Melbourne’s property market was rising – by 1.2 per cent in January – but homes were typically selling “pretty close to the top of the quoted price guides”.
Fast-forward 12 months and the father-of-two said the price guides provided by real estate agents when listing new homes for sale had become almost redundant.
“This year … homes are selling well and truly outside those price ranges and sometimes massively so,” said Mr Eaves, who bought a home in Flemington earlier this month, with the help of a buyer’s agent.
“By January this year, it had become pretty clear that the price guides for many houses were not taking into account how rapidly the market was accelerating,” he said.
Many buyers and buyer’s agents are becoming so frustrated by the fact homes are selling well above quoted price guides that some have even suggested some agents are underquoting.
Buyer’s agent Wendy Chamberlain said the current discrepancy between price guides and what homes were actually selling for was causing a lot of frustration among buyers.
“I have one client at the moment who is a first-home buyer and has been looking since the start of the year. Even before a house gets to auction, I am having to tell her that it is out of her budget, even though the price guide says otherwise,” Ms Chamberlain said.
“She is getting really frustrated and confused because the price guides are saying one thing, but we are seeing pent-up demand and a shortage of stock pushing prices to some really ridiculous levels.”
Ms Chamberlain said in the current market she typically added “another $70,000 to $100,000 at a minimum” to the top end of the price guide for any property under $1 million and even more for properties listed over $1 million.
“People are being crazy in what they are offering at the moment. It’s like a feeding frenzy,” she said.
Buyer’s advocate Nicole Jacobs said she believed “underquoting is alive and well” in Melbourne.
“A large portion of the real estate industry is trying to quote correctly,” she said. “However, there are some agents out there who have reverted to tactics that were being used 10 years ago of ‘quote it low and watch it grow’. In this market they think they can get away with it because the media is talking up house prices and we’re seeing fierce competition mixed with a fear of missing out contributing to some houses sailing well over their price guides.”
Earlier this month, buyer’s agent David Morrell lodged a complaint of underquoting against Kay & Burton agent Grant Samuel after he listed a dilapidated house in Armadale for $4 million to $4.4 million. It sold at auction for $5.8 million. Mr Samuel denied it was underquoted.
Ms Jacobs said instances of underquoting had increased so significantly in recent months, she had called on Consumer Affairs Victoria to “get out there and start auditing”.
A spokeswoman for Consumer Affairs Victoria said it received 212 enquiries and complaints relating to underquoting between 1 December 2020 and 28 February 2021, compared to 242 for the same period the previous year.
“Consumer Affairs Victoria continues to undertake year-round compliance activity in this important area for protecting home buyers,” she said.
When a home is listed for sale, real estate agents must prepare a Statement of Information including an indicative selling price for the property, either as a single price or a price range of up to 10 per cent.
Underquoting can occur when a property is advertised at a price that is less than the estimated selling price, is less than the seller’s asking price, or has already been rejected by the seller. But it is very hard to prove.
Since 2015 Consumer Affairs Victoria has taken court action and accepted enforceable undertakings from 12 real estate agencies, with fines and court costs totalling $3,149,550.
Between 1 July 2018 and 30 June 2020, Consumer Affairs Victoria also issued 51 infringements for underquoting totalling just over $300,000.
When Domain asked the Real Estate Institute of Victoria – the peak body for real estate professionals – if it was concerned about underquoting in Victoria, CEO Gil King simply said: “The process for price estimation is well documented in the legislation and all agents are required to follow that process.”
He suggested that “unprecedented levels of buyer interest” had been driving many of the strong sales results in recent months.
Buyer’s agent Melissa Opie from Keyhole Property Investments, who helped Jon Eaves and his wife Jo buy their Flemington home, said he believed the reason why price guides were so far off right now was because some agents were comparing newly listed homes with properties that sold up to six months ago, at the tail-end of Melbourne’s second lockdown.
“When agents quote their price guides they can go back up to six months looking for comparable sales,” she said. “The reality is that the only people who were selling six months ago were those that really had to … and so in many cases, there may not be enough homes that have sold that are comparable.”
Ms Opie said while it was frustrating and confusing for buyers, she believed it would only be a matter of time before there were enough comparable sales to bring price guides and sales results back into alignment.
“I don’t believe the market will be as confused in a couple of months down the track because there will be enough new sales that have had runaway results to create a new normal and erase some of those old comparable results,” she said.
Ref: RACHEL WELLS (on 20 Mar 2021). Melbourne property price guides ‘completely outpaced’ by massive auction results. Retrieved from https://www.domain.com.au/news/homes-are-selling-for-ridiculous-amounts-above-listed-price-guides-but-are-agents-underquoting-1036491/.
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