If you’re selling in Sydney and Melbourne today, odds are you’ve noticed fewer people turning up at opens and few bidders competing at auction. There’s a few reasons why buyer numbers are down, so here’s what’s happening and what you can do about it.
1. Investors have lost interest
After five years of exceptional price growth, rental yields in Sydney and Melbourne are pretty low (3.2% and 3% respectively) in comparison to other capital cities (4.4% in Brisbane, 4.6% in Canberra) and the prospects for further capital growth in the short to medium term have diminished.
At this point in the cycle, investors leave to pursue other markets, which is something we are seeing in Brisbane now as more southern city investors look north for opportunity. First home buyers are somewhat filling the void left by investors but only in the lower price brackets.
If your property offers particularly strong investment credentials, such as separate accommodation that improves the overall yield; or a large land size with potential for re-development or sub-division, include these specifics in your marketing to capture investors’ attention.
2. Owner occupiers have made other choices
There comes a point during booms when a sizeable proportion of owner-occupiers give up and depart the market. They decide prices are just too high, it’s simply too hard to compete and they’re better off staying put and renovating or doing a seachange out of the city altogether.
Having said that, there are still plenty of buyers out there today – your agent just has to work harder to find them and negotiate with them.
In this market climate, owner-occupiers are not willing to buy anything just to get into the market anymore, which means the better quality properties are attracting the greatest attention.
You and your agent need to do all you can to help buyers fall in love with your home. You can’t change the location but you can change the presentation of your property. You can also reach more buyers with a comprehensive marketing campaign.
3. The credit crunch
Buyers’ borrowing capacity has changed and it’s taking longer to get approval following further credit tightening this year. This is a big issue in the market today. We’re hearing many stories of buyers pulling out the night before auction because their loan hasn’t come through in time.
Agents need to educate their buyers and ensure their pre-approvals are recent. If not, it’s wise to suggest they double check with their bank. The rules are changing day by day as each individual lender determines their new assessment criteria.
Agents should proactively refer buyers to high quality mortgage brokers that they personally know and trust. It’s part of an agent’s role right now to ensure every buyer interested in your home has their finance. With few buyers around, you don’t want to lose further competition because one or two of your best prospects have loan troubles.
If you’re selling via auction, you can always postpone if one or more of your serious buyers aren’t ready due to financing delays. This is a strategic decision though – talk to your agent.
4. Fewer foreign buyers in our market
Australian property is less appealing to foreign buyers following the introduction of arbitrary application fees in 2015 and rising stamp duty surcharges and other taxes in several states.
The latest annual report from the Foreign Investment Review Board show approvals for residential property were down from 40,149 in FY2016 to 13,198 in FY2017. This is partly explained by the effect of the application fees, with investors now only applying when a purchase is highly likely.
Other factors include China limiting capital outflows and Chinese investors looking to cheaper and closer South East Asian markets like Thailand and Vietnam, which are also associated with the Belt and Road policy that aims to link China more directly with Eurasia via massive new infrastructure.
A drop in overseas investment, particularly from China, is being felt mainly by developers and investors selling newly-built homes, as non-resident foreigners can typically only buy new.
It is normal for homes to take longer to sell in a post-boom market. The most important things you can do to ensure as many buyers as possible engage with your home is choose a good agent, price your home correctly and invest wisely in its presentation and a comprehensive marketing program.
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