AND it contains quotes from real estate agents attempting to squeeze the last remnants out of 2010 by promising that 2011 looks promising.
Here's the article;
'By Monique Sasson Wakelin December 1, 2010
Property Takes a Breather
PORTFOLIO POINT: Residential property isn?t approaching anything like a fire sale despite the headlines.
In recent weeks there has been intense focus on falling auction clearance rates in our major capital cities, supported by commentary that real estate markets are facing a significant overhang in supply that is bound to lead to lower prices.
Let?s look at the picture more closely, and test this hypothesis.
Clearly, auction rates are markedly down from their highs of early 2010. In Sydney and Melbourne rates have fallen from percentages in the 80s in March down to the high 50s in November, with similar stories across the country. Now, my rule of thumb is that auction clearance rates of 65?70% represent a balanced market, 70%-plus is a seller?s market, and below 65% is a buyer?s market.
So in the space of a few months we?ve moved firmly from a seller?s market into a buyer?s market across Australia. There is little doubt that prices have softened in recent weeks, with a noticeable reduction in attendance levels at auctions and, more importantly, serious bidders.
Does the argument stack up that persistent low clearance rates will lead to an overhang of stock and greater downward pressure?
I spoke to a couple of estate agents to gauge what was happening at the coalface in Melbourne and Sydney.
David Thiessen, a director of Biggin & Scott in the inner northwestern Melbourne suburb of Kensington, says the market is tough. ?Our clearance rate is around 50% at the moment. Of those properties passed in, half sell within a week or two, leaving about 25% of all properties being withdrawn from the market.?
Thiessen believes some vendors have struggled to reconcile themselves to the new market. ?They still have the price expectations of nine months ago.?
In Sydney, Susannah Anderson, managing director of upmarket Di Jones Real Estate, is more positive. ?There are currently fewer people at inspections, but the genuine buyers are there. The other week we sold six out of 10 properties before the auction.? (Although one needs to be a little cautious about viewing high levels of pre-auction sales as good news: agents who take a buyer?s early offer can be a warning sign that they aren?t confident of selling the property at auction.)
Anderson is seeing a lengthening in times for passed-in properties to sell. ?It?s patchy. Stock still sells quickly in sought-after suburbs such as Darlinghurst and Paddington. But in the city it is taking longer than a few months ago.?
Despite a high number of properties passed-in and unsold, Thiessen does not believe we are facing a glut of stock in the New Year. ?Like many other agents, Biggin & Scott publishes a summer brochure in December. I?m confident that demand from a wide range of sources ? such as people changing roles in the New Year, farmers buying apartments for their children going off to uni, and from those who prefer private sales ? will see the excess supply mopped up.?
Anderson is also bullish about 2011. ?We?re now showing some properties due for sale in 2011, and we?re getting good quality buyers in.?
I agree that the end of the year may well be a ?circuit breaker? that curtails the extent of the softening of the housing market. So while prices may have weakened, say, 5% from their peaks, I don?t anticipate a major correction of 10% or more. Such a reversal is only really likely to happen when vendors feel compelled to drop prices.
At the moment, many of the sellers are discretionary, looking to cash in on recent rises. Despite the interest rate rises, mortgage stress is still not severe. Discretionary vendors will tend to withdraw properties from market rather than discount.
Indeed, with the gloomy focus on clearance rates in recent weeks, it is possible that a number of vendors will shelve plans to sell in early 2011 and we will actually have a shortage of stock come late January and February. If so, buying will then become more competitive and prices may begin to rise again through 2011. But back to 2010. So, with three property-buying weekends to go in 2010 (the volume of stock around means the last Saturday before Christmas ? the 18th ? is the last big working day for many agents), what?s the best strategy for vendors and purchasers?
It is certainly a good time for buyers. Auction crowds aren?t as big and the competition is not so fierce. If you have been looking for a while, there?s a good chance you can wrap up your search in time for Christmas, and even extract a price concession in negotiations. For vendors, I say don?t panic. By all means accept a slightly lower offer, especially if you?re sitting on big capital growth and want to rule a line through 2010. But assuming your property is valued realistically, don?t accept a deep discount. Home buyers will be back in January ? for most properties that is.
Although there is generally an orderly softening of prices around our capitals at the moment, I believe certain sectors will perform worse than average: outer suburbia and high rise apartments. If you have a property on the market at the moment in these two categories, you may be wise to accept a deeper discount, rather than suffer a long hot summer trying to offload in a declining market.'
