Cracks appearing at the top?

Ignore the whooping and hollering from further down the ladder, at the top it’s about as dead as it gets. Since Easter there’s been less activity than you would usually expect in the depths of January.

Charlie Aitken of Bell Potter has been speaking of a perfect storm: Limited choice, low dollar, lower interest rates augmented by Chinese and expat activity; all leading to FOMO and explaining the post-Christmas rush.

But now? Post-Easter, at the top end, there’s a lot of tension between FOMO and FOGS. Those motivated by Fear Of Missing Out counter-balanced by those who suffer Fear Of Getting Stung — it’s as common among sellers as buyers.

What could really end the rises? An almighty heft in interest rates or a sudden glut of top end homes rushing onto the Sydney and Melbourne markets.

Not likely.

The Reserve Bank has little room for a rate hike (see below) and while there has been much mutter on the grapevine about an avalanche of Highly Desirable Executive Homes expected in May, as yet there’s been little sign in the trenches.

But What Do The Doctors Prescribe?

Over much of last year MEL sprinted while SYD stalled, and now Sydney is sprinting again.

The hard question is: Can it continue? Or is there an almighty hurdle ahead?

Sub-$7 million, both cities have seen rises of 10-15%. Can that continue? How long before the FOGS begin?

And yet …

Supply/demand says that supply still isn’t meeting demand and that should keep prices high. Interest rates appear more likely to fall than rise, the Oz dollar is falling against US and Asian currencies and nullifying the effect of even SYD’s 20%+ price rises, so expat and Chinese activity is still strong.

So while there’s a lot to say that rises will continue — even without foreign influences — there’s not a lot to explain why post-Easter vendors are still hiding in the bushes. There hasn’t been a top end transaction in the last month.

And then there is …

Is it time for a check-up?

Over the past 35 years, the surest indication that we are reaching the top of a market cycle is that doctors start morphing into property developers.

Rock + Hard Place At The Reserve Bank

It’s not our place to offer advice to Mr Stevens — for surely that is everyone else’s job — but mortgage rates are now at about a third below their historic average and that has been one very big reason for the rising market.

But if rates were to be raised to slow the market, that could kill the recovery we have to have. There’s not a lot of room to move.

“Do high clearance rates explain everything?”

Thank you for the question. It provides an opportunity to repeat: Clearance Rates provide about the Most Useless Metric Known To Man.

Kindly stop paying any attention to it.

What really matters is how many people are interested in a property and the depths of their desires and pockets.

How To Get Poor, Slowly

  1. List a home in George Street, East Melbourne.
  2. Reject offers that are over $5 million.
  3. Wait two years.
  4. Wait during one of the most buoyant markets since the 1880’s land boom.
  5. Be patient.
  6. Reject pre-Christmas offers in the high $4 millions.
  7. Wait months more.
  8. Finally, come to the table somewhere in the high $3’s.

It’s a strategy that can lose you $25-50,000 a week.

You can get a half-decent lunch for that.

Can We Under-quote You On That?

It goes on.

The stats seen by realAs* are often frightening — mostly because what they are saying about some agencies; including some of the largest. So-called professionals who cannot or will not come within 30 or 40% of actual sale prices. Consistently.

And, surprise, surprise, among the worst offenders are some who insist that no mere algorithm (even one based on human inputs) could come close to their predictive abilities.

There are expletives for that.

… but their Day Is Coming

If you take a look at tomorrow’s Fin Review, you’ll get a peek at what can really make a difference to under-quoting. realAs is heading toward a time when it rates agents.

The most accurate 10 in Sydney and Melbourne already appear (as below) on the AFR website and you can now also read the full story on Domain. In time you can expect Australia-wide realAs Ratings, from best to worst, area by area, for both auctions and private sales.

realAs Ratings will be the most objective measure buyers, and sellers, will be able to use when deciding who they should trust with their business.

AFR most accurate agents - 20 April 2015

What can an agency do?

realAs Ratings will be based on the same information buyers depend on — agents’ published price estimates — which the algorithm will then rate against subsequent sales results.

Ratings will be current. They can change in a week.

The smarter agencies will consistently get their estimates right, will make them available, and will publish results immediately after sales are made (realAs will also be monitoring for accuracy in reporting).

The real winners? People in the market — and trustworthy agents.Morrell and Koren, the 1st buyer's advocates

* Disclaimer: David Morrell is a founder of realAs.

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