Are we experiencing a Spring oversupply?



Last month saw a spike in new listings as well as a spike in auction listings for Ray White.

Our brand represents approximately fifteen percent of the industry in Australia, so this could allow us to assume this trend is being felt more widely across the industry.

Our August new listing numbers are at a five year high for this time of year, clearly lots of sellers have seen an opportunity coming together, peak pricing across most of the country as well as daffodils in full bloom, what more could you ask for?

While we are still seeing price increases across parts of Australia, both Sydney and Melbourne actually saw price declines for the month of August. 

Could this surge in listings be reflective of sellers attempting to pick the top of the market?

I was once told that there’s a fairly good rule of thumb for predicting when the market has peaked and it’s when you start hearing language like ‘I think we’re near the top of the market!

Usually this is the indicator that we’ve actually surpassed the peak and are in fact sliding down the other side.

So what does this mean? No doubt, we are now operating a multi-speed market. Not only confined to city limits, we are seeing markets moving differently by postcode. 

For some, the extra stock will all be comfortably lapped up by a hungry buyer pool, but for others this extra stock may simply start to pile up on an already full plate. 

In NSW/ACT and Vic/Tas our ‘on the market’ stock is now sitting at a significantly higher number than at the same time for the last two years. 

While in the faster markets of WA, QLD and SA are still seeing on the market stock numbers lower than the same time YOY, the trend line is heading up and with an extra load coming to market, will this push capacity past the tipping point?

Anecdotal evidence suggests that our industry is widely populated by agents who started their career in the past 5 years, essentially through the best market we’ve ever seen in Australia. 

We speculate that in some areas, as many as fifty percent of the industry has never seen a normal market, let alone a declining market. 

There may be some who get caught short if they don’t prepare for changing conditions.

Here are the tweaks I suggest you make to your business now to ensure stock is flowing consistently out of your business during what is traditionally the busiest selling period in our calendar year.

  1. Get better at benchmarking

In a consistently inclining market, it’s easy to become attached to ‘record prices’ being your central marketing pitch. What we must remember is that while great agents certainly extract a premium return, we are still operating within a ‘market’.

Markets by their nature ebb and flow, have peaks and troughs. If prices do start to decline, agents who are attached to achieving a certain price may in fact become the barrier to the sale. 

We see that agents may be stuck on benchmarks, traditionally their appraisal price, and find it hard to let go of these when the market corrects and proves that our earlier estimation of price may now be unachievable in the current market.

Our best agents remain detached from price and uphold a consistent curiosity about what current buyers would be prepared to pay today and treat those offers with respect, even if they come in lower than we may first have thought in line with a great result.

When the market corrects, it can happen with great speed. It’s important that you don’t get stuck in the past and end up costing your clients more money by protecting a dream of a certain price. 

Remember, most owners will sell for reasons that are far more important than achieving a particular price.

 They want to move on to their next chapter and do so with confidence that they achieved the best money the market would pay.

  1. Increase your communication

When the market is in favour of sellers, we see days on market shorten and prices eclipse both agent and vendors expectations.

In this environment, agents will comment that they don’t even get time to produce a vendor report as the first open may be the only open.

When the market corrects and the gap between vendor and buyer expectations widens, sellers will often come to a position of wanting to place blame for their ambitions not being met. 

There are two possible targets for their blame; the agent or the market. Of course, we want to stay out of the firing line, and the best way to do this is to ensure your communication and level of service are flawless.

We often hear of agents claiming they contact vendors with daily updates, but we know that when the going gets tough, the tough get going. 

Delivering hard news is difficult, but ‘professionals act as they must, not as they feel’, and part of the fiduciary duty you signed up to is providing your clients with the full picture, the good, the bad and the ugly.

Now is the time to reinstate weekly vendor reporting and face to face meetings. 

Don’t delay on delivering price re-alignment advice if the evidence suggests your seller is sitting outside of the selling zone. 

Even if you have had no enquiry on a property, that’s still something worth reporting to your seller.

  1. Monitor your critical indicators

Along with growing on-the-market stock, we are seeing a decline in inspection numbers across most of the country. 

While many agents are still happy with their number of organic traffic, a change in this behaviour is one of the early behaviours we must pay attention to in order to prepare ourselves for an eventual drop in prices and clearance of stock. 

There are some agents who accept market fluctuations as a passenger, riding the highs and lows. 

The best agents fail to accept that, and understand that when the buyers don’t turn up organically, it’s the agent’s job to drive traffic to their properties. 

Agents will be the difference between properties selling or sitting on the market; between having no bidders or multiple.

 It’s time to put your money where your mouth is and ensure you communicate with your active buyer lists to create the environment for the sale to occur.

The second critical indicator to be mindful of are your days on market. These changes sometimes start to occur without us realising it’s even happened and you might not understand the greater impact that an extra ten days on market may have to your overall business output over the year.

 If you think of your stock as a quantum of inventory, as with all businesses, you have a natural capacity to turn over this inventory. 

What this means is your available hours across your team to open homes, call buyers, update vendors, conduct auctions, negotiate sales etc.

 As you stockpile, you get stretched, needing more hours to process each individual listing. 

When this happens, it naturally takes time from other areas of your business, most commonly, the ability to prospect for new stock coming into your business.

In a typical sales business with a seventy percent clearance rate and thirty days on market, an additional ten days on market per listing can reduce the overall stock clearance number by almost 20 listings per year, meaning the maximum capacity you can clear would drop from around 84 to 69 listings per year.

As we head into the real estate silly season, I wish for nothing more than unimpeded sales at prices far surpassing your wildest dreams, although it would be remiss of me not to share these smart rules for ensuring you have a fantastic selling season, even if the market isn’t giving us any free kicks.

The post Are we experiencing a Spring oversupply? appeared first on Elite Agent.



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