David Taylor  

You could argue the Australian property market has never been “hotter”.

That is, property price growth is at or near record highs, repaying a mortgage has never been cheaper and buying a first home has never been harder (in terms of the size of the deposit required).

But what is it actually like selling property right now?

We just sold our two-bedroom apartment in Sydney and I was genuinely shocked by the market’s appetite for a new listing. The speed at which it sold — in just 10 days — points to a once-in-a-generation property market phenomenon.

An already existing property boom has been raised to a whole new level with the aid of the pandemic — and the supply shortfall that came with it.

It’s in a time like this you can learn a thing or two about how the housing market, and its participants, operate — because otherwise subtle or niche developments become more obvious.

Lesson one: Demand is strong

The pandemic has revealed the strength of the demand for both apartment and detached houses, especially when supply is constrained.

We prepared ourselves to move all the clutter from our place to and from the garage at least four or five times so prospective buyers could move through the open home inspections without tripping over a toy or two.

As it happened, we did that just twice: Our property was on the market for 10 days in total.

The statistics were extraordinary. Within the first 48 hours of the property being advertised there were 80 inquiries. The first Saturday open home saw 21 people move through the apartment (one at a time), and seven of those asked for contracts. Within the first week our online property listing had clocked up 1,000 page views.

There was a second open home on Wednesday. An offer was made on Thursday and a bidding process began over the phone and on email. It was finalised on Friday evening with an exchange of contracts.

Due diligence was done; all parties had lawyers in tow, and strata and building reports were requested and downloaded.

However, apart from all parties concerned abiding by Real Estate Institute and Department of Fair Trading guidelines, there were no rules.

The bottom line was a property was for sale in an area where supply was low — very low — and both investors and owner occupiers were waiting to snap it up.

The demand in the market was so strong that the idea of a Saturday street auction — once the norm in Sydney — was never really entertained. Indeed, an auction date was never set.

Our experience, it turns out, was a microcosm of the greater Sydney market.

According to CoreLogic there were 841 auctions held in Sydney last week, compared to 786 over the previous week and 812 over the same week last year, overtaking the previous week as the busiest auction week for Sydney since late June.

Lesson two: Limits are being stretched

There’s evidence some agents are also acting as auctioneers, stretching the limits of the market.

Janice Andrews recently sold her mother’s Dingley Village unit in Melbourne. She chose Kevin Chokshi as her agent because he pitched the benefits of being both an auctioneer and agent simultaneously.

What’s the advantage of this? Well, it gives the agent plenty more work to do but the idea behind it is that it prevents an in-person or online auction from slowing down.

Auctioneers thrive off a pacey auction. This is one way to achieve that.

Janice Andrews says her agent told her that he could be “quite responsive” if the auction “wasn’t going well”. In other words, with the vendor’s permission, the auctioneer makes on-the-spot decisions depending on how the auction is unfolding.

It’s evidence that when a market reaches a heightened state, participants find ways to squeeze every last drop out of sales prices, which can lead to unorthodox and potential risky sales tactics.

Lesson three: Emotions are high

It’s also clear the property market is feeding on itself and being driven by emotion.

Di Jones real estate agent Linda Ratcliff has been selling homes in Sydney for 26 years and says properties are on the market for the shortest period she has ever seen.

What’s striking to her, though, is that it’s showing no signs of slowing.

“It’s been consistently like this for about 2.5 years, it’s just getting stronger now,” Ratcliff says. “It’s been the longest consistent market that I’ve worked in — and it comes down to the supply.”

Importantly, she says, vendors have high expectations on price, and it’s pushing prices up.

If a vendor hasn’t already bought a property, they’re compelled, in Ms Ratcliff’s experience, to spend all of the proceeds of their sale on a new home, further inflating property prices.

“They think, ‘I’ll spend what I’ve got to spend to get back in again’,” she says. “It’s emotional for everyone at the moment.”

At the market’s core

Like any other market, it’s impossible to accurately predict how prices for apartments and detached dwellings will track over coming months.

What we do know is that record low interest rates, fewer listings (due to pandemic restrictions), relatively low rates of unemployment among property owners, a willingness from the banks to lend, and fear of missing out (FOMO) are also supporting and, in many cases, consistently pushing property prices higher.

What I and other vendors have learned from our recent sales experience is that the sales process itself is fuelling the rapid rise in prices. The market, on occasion, represents something of a frenzy.

It’s also what is now concerning policymakers.

The regulator APRA confirmed to the ABC it’s now looking “particularly closely” at price-to-income ratios (currently six times, according to Treasury).

This is an ever-so-small policy shift, but it’s a rare shift all the same.

The Council of Financial Regulators, meanwhile, is stalking what’s become a highly strung property market. It’s just inched a little closer to its prey.

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