When vendors see that they can't achieve their expected price
they will either drop their selling price or will take their property off the market.
Both actions result in less properties on the market so as a buyer
you could end up with less choice than before.
Cheers
This is such an excellent point and I agree 100% BV. Exactly my line of thinking- listings are already dropping this quarter as stock just isn't selling. In fact RP alluded to this in their latest Pulse Report:
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Slow market conditions = less competition in the marketplace
Buyers have been slow to capitalise on the prime buying conditions the residential real estate market is currently providing. Sales volumes for residential property across Australia’s mainland capital cities fell by 24% during the first three months of 2008 as more and more buyers choose to wait on the side lines.
The volume of residential property sales peaked during the second quarter of 2007 when 28,550 houses and units sold across Australia’s mainland capital cities. Since this time market activity has been falling. The drops in volume were relatively subtle during the second and third quarters of 2007, however the first three months of 2008 saw many buyers abandon the market resulting in the total sales volume falling 30% below the June peak.
The slow down in market activity comes as no surprise considering factors such as the US sub-prime meltdown, the share market collapse, and ongoing domestic inflationary pressures have largely eroded consumer and business confidence. The key measures of both consumer and business confidence are now at long term lows. Consumer confidence hasn’t been this low since January 2002 and Business confidence is at its lowest level since the September 11 terrorist attacks.
The slow down is further evident in housing finance figures released by the ABS recently. Just 52,000 new mortgages were recorded during May, the lowest number since the post boom slow down of 2004. The total value of housing finance commitments during May was just $18.1 billion, down $6.5 billion from the June 2007 peak.
On a more positive note, it appears that interest rates may be on hold for the time being. Recent statements from the Reserve Bank suggest the economy is slowing and domestic demand is being reigned in. The minutes from the Reserve Bank’s July board meeting reinforce the notion that domestic demand is slowing. Quoting the most recent RBA minutes:
"On balance, while members remained concerned about the current rate of inflation and the uncertainties about the outlook, the increasing signs that demand was slowing suggested that the existing policy setting was exerting the appropriate degree of restraint.‘’
Borrowers appear to be reacting to this view, with the proportion of new housing loans on a fixed interest rate falling dramatically over the last two months. The proportion of new housing loans on a fixed interest rate fell from 24% in March down to 13% in May. It appears that more borrowers are selecting a variable rate of interest, a sign of improving confidence that rates are stabilizing.
We don’t expect a mass return of buyers to the market anytime soon however. For this to happen there needs to be a dramatic improvement in market confidence and economic conditions. Most importantly, we need to see a leveling in inflation which will in turn give some certainty as to the direction of interest rates. In the meantime, for those buyers who are confident enough to stray from the pack, the current conditions can provide some great buying opportunities. We can safely say this is a buyers market where buyers hold most of the cards. Buyers can take their time to locate the most appropriate property and undertake all the necessary research essential to negotiate the best possible price on the property.
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