Welcome to our Great Ocean Report for April 2022 and as usual, there is a lot of commentary around what is happening in the property markets so let’s try and work out what is actually happening.

As we suggested in our previous Great Ocean Report, the return to the normality of life post peak COVID has taken the FOMO (fear of missing out) out of the markets. What we mean is that when people were locked down and had nothing else to focus on except themselves and their life status, they started to plan and focus on changing their future lives. Many of those who acted on this bought or sold real estate (or both). Once life started getting back to normal then life’s distractions took the focus off themselves as more top of mind options opened up. This includes a return to the office, kids back to school and even going to the footy etc. This is actually a good thing because it takes the craziness out of the markets and makes the property markets more balanced and sustainable as the rates of appreciation level off.

As you can see we refer to the property markets in the plural as there are many markets in Australia and as FOMO dissipates as the over arching sentiment, then these individual markets start to be more affected by local influences rather than herd mentality.

So what happens when the FOMO wears off? Buyers tend to get more choosey as stock levels rise simply because they have more choice. Properties that are obviously over priced or are aesthetically challenged, that may have sold previously because buyers didn’t want to miss out, now tend to sit on the market a bit longer.

Stock levels vary from market to market and in the lifestyle towns on the Great Ocean Road stock levels remain tight with buyers still out numbering properties for sale but their urgency has somewhat dissipated. However if the right property comes onto the market, in a position they like and in a price range that makes sense to them, they will act. We are still regularly conducting private Zoom auctions on properties that fall into this bracket when we have 3 or more buyers at reserve.

One of the reasons for this and one of the best outcomes of COVID is a more flexible work place that allows people to work remotely.  We call this the Zoom effect. This has been a significantly positive outcome for coastal property and it looks like it will remain. Once a buyer emotionally attaches to a property or an area, they then justify their potential purchase to themselves. Often as part of this justification process, the ability to work from that coastal property via Zoom (or online), either permanently or more commonly on a part time basis, is very much part of the buyers thinking and helps justify the purchase. Added to this there continues to be many planning for later life as they downsize in the city and move their main residence to the coast.

As real estate agents, what is incredibly fascinating to watch from a macro behavioural perspective is how strong the herd mentality is and how much it governs peoples actions. As we revert to a more balanced market we look back at the real estate frenzy that was 2021 and remember our phones ringing constantly with people desperate to get information and register their interest in a particular property.

What drove them to do this? We can talk about lifestyle change and we can discuss the availability of cheap money. Yes these were factors and may have ignited or fuelled their interest but really, for many, it was simply the fact that everyone else was doing it. Now, as we mentioned earlier, the charge of the herd is slowing as they get distracted by the normality of life and this year those distractions includes an election, interest rate talk and even the war in Ukraine.

So historically what does a balanced market look like? It’s often hard to remember after what we saw in 2021. The best guide is to watch the metropolitan auction clearance rates. For us the most relevant auction clearance rates are Melbourne’s. Forget about national clearance rates they are just too diluted and irrelevant.

Broadly, these clearance rate percentage ranges will give you a good guide.

A balanced market between buyers and sellers will see consistent clearance rate of between 60% and 70% range.

Below this and it will be what’s called a buyers market where the buyers are calling the shots and dictating prices.

Between 70% and 85% (and above) is seen as a sellers market where typically there are more buyers than sellers.

Once it gets above 85% its seen as a peaking market where you see unexpected prices achieved and every dinner party you go to the main topic is real estate (which is really boring for a real estate agent after talking real estate all day at work!).

I hope you found this Great Ocean Report informative. If we can be of assistance in any real estate matter please do not hesitate to call.