Getting ahead of the pack: How to buy the home you want when new stock is limited

Market conditions for buyers appear to be the most favourable for some time. Lending restrictions have eased, interest rates have fallen, and there’s renewed confidence in the property market.

Median house prices are bottoming out, and are forecast to rise between 5 and 7 per cent in Sydney and between 2 and 5 per cent in Melbourne by the end of next year, according to Domain economist Trent Wiltshire.

But tough selling conditions mean fewer vendors have listed their homes for sale. The number of new listings in July was 42 per cent lower in Sydney and 36 per cent lower in Melbourne than the peak of the market.

With limited new properties available, buyers have the choice of purchasing old stock, waiting for more properties to come onto the market, or competing for the fresh properties being listed.

The latter appears to be unfolding in the auction market. While the number of auctions each weekend is about 40 per cent lower than during the boom, preliminary clearance rates have edged into the mid-70s in both Sydney and Melbourne, levels not seen since 2017.

Buyer’s agents at the market’s coalface say strong competition between buyers, rather than desperation from vendors, is behind the high clearance rates.

“We’ve seen escalated pricing and houses selling above reserve,” says Melbourne buyer’s agent and Parker Buyer Advocates director Lisa Parker. “The only reason is there’s not a lot of alternatives for the buyers to be buying.”

Sydney buyer’s agent and Propertybuyer chief executive Rich Harvey says a turnaround has occurred quicker than most expected.

“Before May it was all doom and gloom,” he says. “A couple of months later we’re in a situation where there’s a critical shortage of stock.

“Buyers have got the confidence that the market is not going to fall. It’s amazing that fortunes are turning around so quickly.”

Risks for buyers

While buyers’ budgets and confidence have been boosted, paying too much to secure a property can cause settlement headaches, according to Parker.

“There’s the risk of valuation shortfall because things are so precarious with the banks at the moment,” she says.

“Valuers are ringing agents to find out how much interest there was in the property, and finding out if someone has then just gone crazy at auction. We’re advising buyers to not overpay.”

On the other hand, if a recovery is quicker than expected, waiting too long will mean buyers miss out on current prices, according to Harvey.

“They’re going to have to be ready to move quickly,” he says. “They’re going to have to revise their pricing expectations. You may need to actually pay a little bit more.”

Securing hidden gems

Developing good relationships with agents can allow buyers to get ahead of the pack, according to Parker

“They are acutely aware of where buyers are at in their buying journey,” she says.

“When they know you are serious, committed, ready and able to purchase, that’s when you will get access to the properties that are pre-market or off-market.”

But she warns buyers that divulging too much information can hurt their negotiating position.

Harvey says pre-auction offers may help secure properties outside competitive auctions, but lowballing is unlikely to work.

“You can’t just make any pre-auction offer,” he says. “It has to be within the ballpark.”

Planning for the future

Parker says buyers should expect more new listings and better buying opportunities come spring, traditionally the busiest time of year for the property market.

“The next five months, I believe, is the best time for people to be buying,” she says. “The buyers are going to be spread out and the prices should technically be more subdued.”

But Sydney buyer’s agent and Buyer’s Domain principal Nick Viner says vendors who have been holding off selling during the downturn may continue waiting for evidence of price growth before listing, limiting supply and increasing upwards pressure on prices during spring.

“Many feel the longer they wait, the more chance for capital gains,” he says.

His advice? Buy the property that ticks the right boxes while it’s available. “In six months’ time I do believe buyers will be paying more for properties.”