NAB: Aussie house price crash worst since Great Depression

MacroBusiness 1:00 pm on April 9, 2019

David Llewellyn-Smith

I reckon we’re going to redo the 1890s in real terms in Sydney and Melbourne.

 Blowout in time needed to sell property

Australian Financial Review Apr 9, 2019 9.00am

Duncan Hughes

 KEY STATISTICS

·         69 days Median time on the market in Sydney.

·         54 days Median time on the market in Melbourne.

·         Close to 80 days Median time on the market in Perth and Darwin.

·         $1500-$5000 How much it costs to get your property up to the top of online sales for your postcode.

Property owners are taking four times as long to sell their Sydney dwellings than at the peak of the market, forcing many into expensive bridging finance and costly extended sales campaigns.

For Melbourne it is twice as long and for other capitals, such as Perth and Darwin,  it has blown out to nearly 80 days, shows analysis by CoreLogic, which monitors sales and prices.

National median times have increased from 43 to 60 days, says CoreLogic.

For many sellers – often in blue chip suburbs where properties were snapped up in hotly contested auctions until recently – successive auction campaigns followed by attempts to privately negotiate a sale are stretching out the process for six or more months. In Sydney the median time on the market is 69 days and in Melbourne 54 days.

“There’s lots of paddling underwater but most appear to be paddling upstream,” says Emma Bloom, a director of buyers’ agent Morrell and Koren. “If you drill deeper, you’ll find sellers spending thousands and thousands of dollars by picking the wrong sales process in a falling market.”

Bloom claims the number of top-end deals in prestige inner Melbourne suburbs, like Toorak and leafy Hawthorn, is at 40-year lows, which takes sellers back to when Liberal prime minister Malcolm Fraser was attempting to pull the economy from a slump, Gerry Rafferty was topping the charts winding his way down on Baker Street and the median price of a house in Sydney was $43,000 and $37,000 in Melbourne.

“This is the first time in 40 years there have been so few transactions in a quarter,” she says. “The knock-on effect is going to be quite profound.”

Change of strategy

Domain Group analysis shows the number of properties being withdrawn from auctions has recently doubled to 20 per cent, or one in five properties.

The property slowdown and plunging clearance rates mean sellers need to review offer prices, marketing, time on the market and whether to risk an auction or sell privately.

Jarrod McCabe, a director of buyers’ agency Wakelin Property Advisory, says sellers increasingly need to develop alternative strategies to an auction in a changing market.

An increasing number of sellers are switching to “expressions of interest” or “blind” property sales where key details about pricing and terms are undisclosed.

Buyers' agents claim "expressions of interest" sales are four times more popular than auctions since the market downturn. These involve prospective buyers making offers by a specific time and date.

But Bloom says: “The auction system might be struggling but expressions of interest should be pronounced dead. They are not working. The real estate agents are not able to transact. If the property continues to hang around, then it is not working.”

The rules vary between states, but typically the buyers make their best and final offer in writing, which can include terms and conditions and settlement dates and finance.

The real estate agent negotiates individually with prospective buyers to achieve a sale as close to the seller's price as possible.

Advocates of expressions of interest claim it improves deal flows by attracting only serious bidders, saves the seller expensive auction costs and avoids hosting hordes of might-be buyers on open days.

"But the problem is it is not transparent and this is what buyers do not like," says Bloom. "Buyers are increasingly reluctant to engage in an opaque process."

Victorian and NSW rules require agents to provide vendors with a "statement of information" that includes a "reasonable" indicative selling price based on recent comparable sales, the median price for that suburb and details of three comparable property sales within two kilometres of the property in the last six months.

Expressions of interest close on a specified day and time and each potential purchaser needs to submit their best and final offer in writing.