The Melbourne properties being passed in despite the rising market
Melbourne homeowners are so accustomed to homes selling under the hammer for well above the quoted price range that some properties with “realistic” price guides are being passed in.
Real estate agents and buyer’s advocates say there are many reasons why homes are still getting passed in at auction despite strong buyer demand driving up competition and prices across the city, including unrealistic vendor expectations and a “glut’ of apartment stock in some areas.
The overall auction clearance rate in Melbourne reached 75.3 per cent in February, its highest point since April 2017. At the same time, the median auction price for a Melbourne house increased by $100,000 in the space of a year.
As of February 21, the three-month average median for houses sold at auction was $1,010,333 compared with $909,100 over the same period last year, while the median auction price for units reached $662,500, up from $656,833, Domain figures show.
Several agents and buyer’s advocates told Domain that, in a fast-rising market, many house hunters had become conditioned to adding an extra $50,000 or $100,000 to the top end of the quoted price range and didn’t bother turning up to the auction, believing they would be priced out.
“I certainly think in any rising market, many buyers see the price guide, look at the top end, and then mark it up some more from there because they have become used to seeing properties sell for a lot more than the quoted range,” said Matthew Young from Buxton St Kilda.
The downside of that, he said, was that when properties were listed with a realistic price guide, buyers still expected they would sell for a much higher price.
“Once it gets passed in and the reserve is declared you get a spike in calls from people saying, ‘I thought it would’ve sold for $50,000 above the price guide, otherwise I would’ve tuned up.’ They are just so used to properties selling for a lot more,” he said.
Buyer’s advocate Cate Bakos agreed that “sometimes the auction quote range can put buyers off”, particularly in a rising market.
“If the vendor is against putting a quote range that’s lower than expectations, it can influence [fewer] buyers coming to auction,” Ms Bakos said.
“What we’re finding is that our buyer market has become conditioned to calibrating a lot of agent quotes; they are therefore looking at a quoted price range then adding more on top of that,” she said.
“In a way, a vendor that’s quoting honestly and realistically is getting penalised for doing so. However, once a property like that is passed in and the reserve is quoted we tend to find that it sells pretty much straight after.”
Ms Bakos said there were other reasons properties were still passing in at auction despite strong buyer demand and increasing competition.
“The categories that are tending to pass in are properties where there is a glut of stock – where, for example, there are high levels of apartments and where supply and demand are out of balance,” she said.
“Also, anything with a flaw, such as nasty special levies, or a special levy to fix something that is very costly, or a flaw in location, where you have a compromised location such as on a main road. Or it could also be a zoning or title that’s difficult to finance.”
Jarrod McCabe from Wakelin Property Advisory said unreasonable seller expectations were another reason why some homes were failing to sell under the hammer.
“Even in a market where you’ve got strong buyer demand, if the seller’s expectations are too high and buyers don’t see the value in a property they will turn their focus to something else,” he said.
Mr McCabe said that in these instances, passed-in properties “generally sell pretty quickly after auction if a vendor comes to the realisation that they were asking too much at auction”.
He said the current moratorium on evictions and rental increases, which is set to expire at the end of the month, was also leading to some properties getting passed in.
“What we’re finding at the moment is that properties that are subject to a lease are sometimes getting passed in because of the uncertainty around whether these moratoriums will be extended,” he said.
“Because at the moment if your buyer is an owner-occupier it is very difficult to guarantee vacant possession, given the current laws. Instead of serving a notice to vacate to the tenants, you have to go through VCAT and so guaranteeing you can provide a vacant property is a lot more difficult.”
Ref: RACHEL WELLS (on 11 Mar 2021). The Melbourne properties being passed in despite the rising market. Retrieved from https://www.domain.com.au/news/the-melbourne-properties-that-are-getting-passed-in-despite-rising-market-1033849/#:~:text=The%20Melbourne%20properties%20being%20passed%20in%20despite%20the%20rising%20market,-Rachel%20Wells%20Mar&text=The%20overall%20auction%20clearance%20rate,the%20space%20of%20a%20year.
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