Over the long term, our real estate market tends to exhibit stable or steadily increasing prices due to inflation and demographic influences. Sometimes the gain or loss of population or a change in interest rates can have a more moderate influence, but overall we see only modest changes month to month that people can easily digest and assimilate into their buying and selling decisions.
Once in a while however, the market gets spooked. Something comes out of the blue and emotions take over decision making. One example was the first nationwide lockdown of March/April 2020. The market essentially stalled. Understandably, when people are fearful and uncertain - they sit on their hands. Once the dust settles though, like in June/July 2020, buyers tentatively re-emerge, assess the opportunities available, and start to buy again. Enough of these buyers and the market builds a head of steam as seen in the boom market of late 2020 through till late 2021.
The same happens when the reserve bank lifts interest rates... typically they do this in 0.25% increments which while hurting borrowers - is not considered a substantial lift. In recent weeks however they lifted the Official Cash Rate by a record 0.75%. While not entirely unexpected, mortgage rates lifted soon after and the media increased negative press coverage and pundit forecasts of market decline. The inevitable result was a slowdown in market activity as buyers ‘wait and see’ which is confirmed in auction clearance rates, along with anecdotal evidence from agents themselves. Most buyers clearly have FOOP (Fear of overpaying) and are waiting on the side-lines for a bit.
We’re now heading into the holiday period when buyers are already focused elsewhere with family and socialising, while lawyers and other professionals are mostly unavailable for conveyancing until early/mid January in any case.
Come January when people turn their attention back to the housing market, it would appear likely there will be an adjustment in price expectations from buyers - albeit at a lower level given their reduced serviceability levels and the greater quantum of available listings.
To summarise - a lack of buyer interest doesn’t always mean you are overpriced. Sometimes it’s just that buyers need time to digest a change in their circumstances and decide at what level and on which terms they are able to transact.
Horses calm down after being spooked - and so do buyers of real estate. If you’re concerned about a lack of interest in your home, it’s probably worth revisiting your pricing and marketing approach in the new year. Other vendors (both new and existing) will be trying to attract the very same buyers as you - and your pricing needs to align or else you risk being left behind.
Take care
Scott Morison
