What real estate price crash?

If you've read some of my other posts you would have to come to the conclusion that I think we are headed, and in some areas already in, an extreme buyers market in Tasmania.  It is certainly early days but the signs are there.

Potential signs of an extreme buyers market:

More agents than listings

I question the sustainability of thirty agents and five listings.  Though not exact figures, have a look at this week's real estate guide, and make your own conclusions.  The current ratio at some agencies  would not be sustainable in retail, or other forms of high value sales environments such as business to business.

There's an air of complacency that comes with being able to sustain so many people for a long time. In any successful sales role you need people that are hungry to reach goals.

How hungry are you if there are more of you than listings (potential sales)?

Multiple blocks for sale with unit development approval

Multiple blocks with unit development approval, either current, or lapsed, for sale.  I've also noticed that units are sitting on the market for prolonged periods of time and are not selling even at auctions where indications were that the bank or an estate were selling at discounted rates.

Heavily discounted land in new sub-divisions.

Some of the more traditionally poor areas, that have benefited from recent popularity are struggling to sell new land releases.  With recent sharp decreases in building approvals this is not surprising. Though more popular suburbs continue to amaze me with quick, and record sales prices.

Unfinished houses in new housing developments

There have been a trickle of unfinished houses for sale in new housing developments in suburban development north of Launceston, and the eastern suburbs of Hobart.  These unfinished houses look to be to lock up but lack decorative external cladding and most internal work except studs and basic floors.  In most advertisements power tools can be seen which suggests extreme financial distress on behalf of the seller, or more likely the bank trying to gain some capital and minimise their losses.

Undeveloped land in older suburbs

Contrary to popular opinion, undeveloped land exists in areas first developed in the mid 1950s and close to services, other empty blocks, last developed in the early 1990s minutes from the Hobart CBD (not for sale, but completely undeveloped).  Noticing this has me questioning the scarcity mentality that has permeated my consciousness for so long.

Bank sales & deceased estates

Some mortgagee sales are advertised, others take digging to find but they are certainly out there.  Many are being placed for sale at auction.  To add insult to injury units and houses are not selling at auction.  Those that are selling at auction are at discounted rates (as I would expect).

I would take an educated guess that 40-60 per cent of sales are deceased estates.  While agents will argue that this should not affect prices, it will if the property is old and in poor condition.  Newer properties, in good condition, are likely to fetch a decent price regardless.

Traditionally, a deceased estate meant a faster sale and a lower price.  If people are desperate, or banks need capital fast, I expect this practice to become the norm again.  Certainly, some houses and blocks are being discounted by families living interstate who do not want to maintain them. 
Even with discounts, rural properties that are from an estate are not moving off the market in any hurry.

Houses that sold less than eighteen months ago, with few capital improvements, are back on the market.  If the houses have not been improved then my suspicion is that the owner is in extreme financial distress.  Some were sold less than twelve months ago.

Growing vacant rentals

Properties that are vacant rentals and on the market for sale
Growing vacant rentals - it seems to me to be at record highs in my living memory (twenty years+) and likely unsustainable

Properties on the market that did not sell in the last eight years

Pretty self explanatory.  If a property has not sold before but it suits you, by all means make a fair offer.  Be careful to do plenty of checks because there may be good reasons the property has sat on the market for so long.  In many cases I suspect high price and rural location are the things failing to move those properties off the market.  It does not take that long to look up the sales history, zoning, fire risk and flood risk of a property but most people will not bother.  Remember, the local council can be an invaluable resource to help find the information needed.  The Head Gardener always says, "Knowledge is power", and she's right!

Below offer

Increasingly listings are "under offer" or "under contract" and then coming back on the market with the sales incentive of "below offer".  This indicates to me that lender criteria is getting stricter and banks are valuing properties at lower values than vendors and buyers.  I would expect this to get worse as insurers become more conservative due to capital losses on their balance sheets ( QBE recently started looking for a new CEO due to a significant drop in profit with special mention to Australia and New Zealand market: http://www.insurancebusinessonline.com.au/au/news/breaking-news/breaking-news-qbe-replaces-aussie-ceo-following-hy-results-221605.aspx).

Disclaimer:  This blog is for entertainment purposes only.  The above are my personal observations only.  For professional advice please contact the relevant professional body in your state for contacts in the relevant property and finance fields.

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