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Market shifts have been a recent cause of industry anxiety, but both historic data and current vendor attitudes show that there are many reasons to be positive about the current state of affairs.
Speaking on a recent episode of Real Estate Exposed, Real Estate Gym founder and auctioneer Tom Panos shared what he’s hearing on the street that makes him confident in the industry’s ability to weather this moment.
While admitting that “emotions are high” at this point in time, he noted that the most common thing he hears from vendors when met with a less-than-satisfactory price is: “we don’t have to sell”.
“It’s the most common thing: ‘But, we don’t have to sell, Tom’,” he said of the recent reception to low offers.
“A lot of people are not getting the prices that they were previously getting. But when you look at them and say, ‘What do you want to do?’ They say, ‘But, we don’t have to sell. We’ll keep it.’”
Mr Panos pointed out to co-host Phil Tarrant that this recurring comment should have a profound effect on the industry because it’s the exact opposite of the attitude that indicates the market might be in distress.
“What you don’t want to be hearing in the Australian market is, ‘We have to sell. We’re desperate.’ And there are no distress sales showing up. I mean, I can’t remember a distress sale this year. Haven’t had one,” he said.
It’s one of the reasons Mr Panos is spruiking the continued use of auctions because it helps vendors set realistic expectations for their home sale by obtaining an offer to work out how they feel, now that prices are coming down.
Mr Panos related the experience of turning down a recent low offer on behalf of a vendor and explaining to the would-be buyer how much the process had actually assisted them, even without a sale at the end of the day.
Regarding the low figure the buyer had put on the table, Mr Panos recalled telling the bidder: “It’s not going to happen, but I want to let you know, I want to thank you, because of your offer and your negotiations, you’ve helped us get the vendor down from a dream price to a reality price. And I want to thank you because this property’s going to get sold in the next few days because of your offers.”
In fact, the property sold two days later for $200,000 above the price that the buyer had offered and for a sum the vendor felt satisfied with.
The telling element that should reassure agents at this present time, according to Mr Panos, is those two days that the seller was prepared to wait. They may not have gotten their dream price, but they clearly were not in distress.
Ray White’s chief economist Nerida Conisbee made a similar point recently when she crunched the numbers on whether distressed sales are on the rise.
She looked at real estate listings on Domain and realestate.com.au to see how many homes included the word “mortgagee” back to the start of 2020.
“From March 2020, there was a gradual increase in the number of mortgagee sales, driven by Australia going into recession during this time. The number of mortgagee sales however didn’t increase as much as they could have during this time given that banks offered six month mortgage payment freezes from the end of March 2020,” she noted.
The number began falling at the end of 2020 and early 2021 as property market conditions improved, she revealed. The biggest increase over this time period occurred when mortgage payment freezes came to an end in March 2021.
“Despite a red hot property market, and an economy that was getting back to normal, the number was elevated because borrowers who were in mortgage stress were helped through by the freeze on payments,” she said.
In terms of the current moment in time, she said that there have been slightly more mortgagee sales coming to market, but they are still at lower levels than what were seen through the pandemic, when interest rate rises and inflation were far from mind.
“There are a number of things that will help people through this period of increasing interest rates. The first is that unemployment is very low, the second is that banks are well capitalised and the third is that savings rates hit record highs during the pandemic,” Ms Conisbee said.
On Real Estate Exposed, Mr Tarrant echoed these comments, noting that with each cash rate rise, the Reserve Bank governor has emphasised “the strength of family balance sheets and the fact that [vendors] can hold the line and not have to sell”.
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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