The market is hotter than most people think.
There was some chat in the press this week about a surprise sale in Melbourne.
Basically, the property, completely unrenovated, sold for $1.1m over the reserve!
It was a three-bedroom house on 427 square metres at 1 Nyora Street, Malvern East, Victoria. Here’s a picture:
Pretty tidy. But an extra $1.1m tidy?
In a market that is supposedly “crashing”?
I mean, that’s what’s surprising about it. The national market is down 5%. Prices are going down. In theory, we should be undershooting reserves, not overshooting them, and definitely not completely blowing them out of the water.
So why did it sell so well.
Supply. There’s just not enough supply on the market.
Listen to the agent:
Why did this one sell? It sold because it fits so appropriately in a low-supply market and is a product that [buyers in] a lot of different markets want. It also attracted young couples and first home buyers.
And on the price? Lol.
Was it overpriced? I believe so. It’s unjustifiable for me from an analytical perspective. I cannot articulate how we got to that price, but that’s the beauty of real estate – what price do you put on emotion and falling in love with a place and scarcity?
What did you think it would go for? In all honesty, $1.6 million, based on what the one at the back sold for ($1.55 million) 18 months ago, in a stronger market with work done to it. That’s where I told my client we would be at. But it adjusted and adjusted and we had to meet the market.
What was surprising about it?
We’re dealing with a market where interest rates are causing effects and wars overseas [are affecting confidence]. This fitted the cohort of people that aren’t being affected by interest rates [or market confidence].
They’re downsizers. They’ve sold for four, five, six or $7-plus million and if they go over a couple of hundred thousand here or there, finances aren’t part of the issue.
A $200,000 renovation needed: The bathrooms were also still in their original state.
There’s just not enough of these properties out there for people to be buying. These people are happy to pay – a crazy premium – for a single-level property that is their own land.
Exactly. This is the thing that I’ve been saying.
Yes, prices are sliding on the back of interest rate hikes.
But at the end of the day, there’s still a huge shortage of properties on the market. So far, the spring selling season has failed to spring at all. Listings are flat.
And from there it’s just basic supply and demand; Economics 101. When supply is low, prices rise.
Sometimes they skyrocket an extra $1.1m!
But for me it’s just proof that there is zero chance of a ‘crash’ in property prices.
The rate hike cycles seems to be coming to a close. Prices will normalise and adjust.
And then once rates are out of the picture, it all comes down to supply and demand.
And prices will lift from early 2023 onwards.