Nicole Lindsay June 11, 2012
WHILE wary buyers have been keeping hands firmly wedged in pockets at auction, new research indicates they are also reluctant to make early offers on properties before auction day - with good reason.
During the booming 2007 property market, 23 per cent of homes sold before auction, according to new research from the Real Estate Institute of Victoria.
But to date in 2012, the proportion of properties selling before auction has fallen to 17.9 per cent.
Woodards chief executive John Piccolo said the reluctance to pounce early on a desired property was directly related to the slow market.
In 2007, property values were booming and could increase in the five to six-week period between listing and auction day.
''If a market is likely to increase at a 20 per cent rate a year, that's a 3 per cent increase from the time of listing a property until the sale. On a $1 million property, that's $30,000,'' Mr Piccolo said.
''That's directly related to market sentiment. There's not a burning desire for people to make a move right now.''
While the values of most properties are not falling at such a dramatic pace, they are unlikely to increase in value before auction date.
Reserve Bank of Australia governor Glenn Stevens indicated in a speech last week that he did not think there was a danger of a new property boom in the foreseeable future.
''Our judgment is that the risk of reigniting an unsustainable boom in housing and so on is not very high at all,'' Mr Stevens said.
Research firms are recording declining median house prices in Melbourne and buyers are looking for bargains.
Greg Hocking Real Estate director Greg Hocking said buyers ''don't want to over-
cook the price by jumping in before the auction''.
''Buyers like to get a feel for the market by watching other people's reactions,'' Mr Hocking said. ''But in a surging market, buyers like to try and get in before other people.''
However, that layer of competition has been eliminated in some weaker areas of the market.
While some properties are attracting multiple bidders, the weak 60 per cent auction clearance rate indicates plenty are not.
There is also a large amount of new and existing housing stock languishing on the market.
Data from property advisory and research house SQM Research show there are more than 52,000 properties for sale in Melbourne, a 20 per cent increase since May 2011.
SQM Research managing director Louis Christopher said vendors had been getting their asking prices wrong and demand had fallen.
''What happens is this accumulation of old and stale stock builds up and clearance rates fall away,'' Mr Christopher said.
''People are over-valuing their properties and not willing to accept the prices people are prepared to pay.
''They would be far better off taking properties off the market and risk waiting for the market to improve.''
Even after last week's 25 basis point cut to the cash rate by the RBA, the long weekend has recorded a weak 50 per cent clearance rate from 131 auctions.
Despite this rate, the volume and quality of the stock has not offered a good enough sample to judge the market's health.