Tassie's Days on Market are Way Down

Aaron and John are joined on this weeks Pod by Andrew Leggett (sitting in Pat's Seats whilst he is checking out Central Australia) and Chris McGregor- listen in as they discuss Tassies current Days on Market stats and what they mean for buyers and sellers in the current climate.

John: Five minutes later, they've seen the property on the internet. They're like, "oh, it's already under contract, sorry about that" or of course, going under contract before going to the first open home. So that's the real pressure of people just not being able to even visit a property in time to even one get looking into and submit an offer.

[intro music]
Going once... Going twice... SOLD! You're listening to The Property Pod!

Aaron: All right, guys. Welcome back to The Property Pod, your weekly engagement into real estate here in the Hobart marketplace. I'm your host, Aaron Horne, and I'm joined at the desk by a savvy crew of real estate agents and financial advisors and king of all things Hobart and Tasmania. I've got Johnny Mac, his old man, Chris McGregor, and Andrew Leggett joining me here again on The Property Pod. Welcome, boys!

John: Howdy, gentlemen!

Chris: Oh, man!

Andrew: Thanks for having me.

Aaron: Not a problem. Did I get your title right? What am I meant to call you?

Andrew: Uh... broker

Aaron: Broker. Broker!

Aaron: No, what are they? What do they do?

Andrew: Advise on super...?
Aaron: Yeah, crap. I'm way out of it. [laughter] All right [laughter] started the week, but we'll get there. We're going to have a really in-depth discussion today and we'll have a bit of fun with it. Patty is away--I don't know if anyone's been out there watching, but Pat's... if you're following him on Instagram or any of those things, it looks like he's having an absolute blast of a time out there in the wild wild west.

John: Oh that caravan that they got would be awesome--it's an absolute monster.

Aaron: Yeah no, just looking at them kind of crossing... well, they're not even in the west yet or I don't... maybe they're not even getting to the west.

Chris: They had to make some changes because of weather conditions.

Aaron: Yeah, I heard that he's what are the bit that sits out the front that's like your awning... it almost took off like a sail and ended up in Antarctica, so yeah, very interesting times for our boy [laughter] I have heard that Abbey still won't listen to it even though they're driving kilometers and kilometers, you know...

John: Just put some headphones on, either tune out entirely or fall asleep.

Aaron: Yeah, well that's what Marcus and Kirsten do. They're listening in their car [John agrees] yeah, we're putting them to sleep every week. [laughter]

John: Not driving obviously.

Andrew: Yeah, I know I was sort of wondering how much fuel he's going through.

Chris: Well, I sent him some fuel jokes the other day to just make him feel warm and fuzzy. [laughter]

Aaron: All right, boys. So let's jump into some property- related stuff today. What we were hoping to talk about was this kind of days on market trend and how things are heading south on that thing. Well, that's what I think is happening. I'd really like your input on what's happening out there with days on market and what it means for buyers out there in the local Hobart marketplace.

John: Yeah, well I guess when we talk about 'days on market', it's really from the day it's active till under contract. That's why I'm sure a lot of people that have been buying in Tasmania, especially over the last two years, have just been... have found when they've even called up five minutes after they've seen the property on the internet, they're like, "look, it's already under contract. Sorry about that," or of course, going under contract before going to the first open home. So that's the real pressure of people just not being able to even visit a property in time to even one get a look in and to submit an offer.

Aaron: Yeah, so is there anything that's kind of led us to this point where if you're not kind of on all the apps and on all the realestate.com straight away and you're missing your opportunity, like the window seems so small, is there a reason that that's kind of what's happening in the marketplace or is it kind of...?

John: What yeah... how is it that…

Aaron: Yeah, how can you win?

John: In many ways, it's actually in line with the process that we engage in Tasmania specifically, other states do it but we don't do a lot of properties that sell by auction. Because generally speaking, we're measured by days on market whereas Victoria and Sydney for example, might measure theirs by auction clearance rates because an auction is gonna be advertised over a campaign of about three to four weeks, so there's time obviously in between a visit and then you're making your bidding on the day; whereas ours is what's called a 'private treaty' so you're advertised by an advertised price. There's no set time frame in which the property can go under contract and so therefore then, it's up to just the agent and the owner, connecting the property with a buyer and then securing a deal and that can happen, you know, you can have a days on market of five minutes if you wanted to, because you know, it's like, "I'm not going to sell, there's a contract done" [Aaron agrees] Whereas an auction is going to be over a set time frame, so to see, dad, when we... prior to the verge of the internet and you've seen hot and cold markets even before then, what was an average expectation for buyers and sellers of how long the property would take to sell and what did you do to move it faster?

Chris: A lot of it depends on what suburb you're talking about like areas like in a city, there's always like we were using the open home strategy and in the cit, of course, they'd get 10, 15, or 20 people coming to open home, where out in the northern suburbs, if we got one or two, we'd say we had a great day. And it was really really different to that kind of market and in those days, too, I mean if it probably hadn't been on the market... it had been on the market for a while and then it was a case of looking at it's generally its price, you'd certainly looked at its marketing. But if the marketing was good and the presentation was great and it's still sitting on the market for a while, then you really had to have a crucial conversation with the owners to talk about price. [John agrees] There was a strategy that one agent used many years ago. It was under another system and they said when it was one of those real tough markets and they guaranteed that they could sell a house in 18 days and a lot of people looked and thought, "geez, that'd be great!" but what the strategy was, they just reduced the price every day until they hit the sweet spot. [laughter]

John: Fair enough.

Chris: And that'll do it and then it will do it. But I mean that strategy didn't last all that long but a lot of it. And then there's a friend of mine in L.A. He always said to me he runs a huge re-max office with 150 sales people and he said to me there's nothing about real estate that price cannot cure and that is quite true.

Aaron: I feel like I've heard that before…

John: Yeah, I have specifically quite a dad's, mate. [laughter] I think Julia with a thicker accent.

Aaron: I was gonna say your dad didn't go into any of the accent work that you would generally do, John, but I have heard that before, so it obviously sticks and obviously works.

Chris: His birthday is around now totally.

John: Well like actually, this was an interesting one. So, anecdotally in the market, what we're seeing is that we find there's a bit of a demand disparity, you could say, where we just had one in Glenorchy which was a really true renovator and that went absolutely bonkers comparatively, let's say. But, you know, 20 to 25 people through the open home, there were I think seven or eight offers and it was really really popular. [Aaron agrees] Then at the highest end, we've got in the same suburb. You've got the property that's absolutely immaculate, so there's not you know you're moving straight away there's nothing you need to do so you're really buying time where you can just move into it, enjoy the property. You know, off the show, right in this middle zone of where it's not a true renovator, people don't get super excited by the decor. It's this sort of middle run where also the prices have increased dramatically for them, so there is a little pocket in the market at the moment where it's not gangbusters in every every aspect and I'm just curious to see, Andrew, what that looks like from a lending perspective of the challenges you're having from the lower, middle to upper end of the market…

Andrew: Yeah, it actually has been a bit of a challenge where I've had a few examples recently of some first-time buyers. They've looked at a property and I've said, "well, I'm going to need 50 hundred grand to throw at it, can we sort that out after settlement?" at their short hands, it was "no" [laughter] because they're already max lending 95 percent right of purchase price, so there's no equity to borrow against it and so we've sort of got to go down the line of completion, so they've got to go and get plans and specs from a builder, and get the property valued as if the work has been done. And then it's a draw-down sort of scenario like a construction loan and not every time, if you're spending 50, it's not adding 50 grand [John agrees] to the overall valuation of the property, so it is tough, but there are people out there… they're cashed up and they're in the position to buy the ones that need a bit thrown at it because they've got the money behind them.

Aaron: Yeah, I guess that's the tricky spot. I think of myself when I jumped into the market here, which again, looking at my plan was jumping in, purchasing a place, and doing some things like knocking a wall out or updating the kitchen and all these things. When I got into the market, I was in a position where it was at a three hundred thousand, four hundred thousand dollar price range where it was like, "oh, my budget allows me to have that little bit extra cash to fix up the place" [John agrees] but if I was trying to do it now, I'd be like, "oh crap! I'm gonna have to wait another five or six years before I can rebuild the cash flow to then put that back into this place again" which is then probably at the stage where it's time to move the house on [John agrees] and I haven't actually got anywhere.

John: Yeah, and I think that yours is an exact point of those where you were [Aaron agrees] now, that's the market that's probably potentially the most that's suffering from slowing down, I guess. Not that the prices have softened, that's not what we're saying, but just that it's taking a little bit longer because I suppose if you're to have your time to get there and you think well if I have to extend my budget, stop it. I'll just find a way of paying a little bit more and not have to worry about all that time wasted in renovating a house because one, you know, it's going to take another year, like you said, five to ten years-- to have that money and in that time, you're not enjoying the house anyway. [everybody agrees] So, it's a really interesting little anecdotal small part. I know in the notes we're preparing, they had obviously a few interviews from local agent, a different property economist, and I think the Chief Economist from the Ray White Group as well and I think one of the notes that they had all referenced to, I guess, was the demand that Tasmania is currently under. And I know I gave you, boys, the REIT statistics and highlighted a couple of years specifically wherein you look at 2003 and 2021. So these two years are the two fastest-selling years that obviously we've got since 1996 with our stats, before that, we don't know. But what's really interesting, though, is that the median days in the market for Sandy Bay in 2003, well we used Glenorchy because it's even faster. So Glenorchy was 13 days and there were 228 sales.

John: Now the days on market, they've said it is 15--it's probably about the same, so 7 to 14. But there's 77 sales. So, we've got just as much pent up demand but there's like less than half the properties available for people to purchase. So when we look, there was another thing we looked at too, is that there's resurgence from the REIT said that in this state as a whole, there's a about an average of 20 percent people moving from interstate so be it investors are moving in, that number has normally sat around about 15 so that-- [ Aaron: --that is an increase there as well] that's an increase again. Yeah, now I remember you telling me something interesting, dad, about what happened before the first boom of back in the late 90s and moving into the early 2000s the difference of what people were doing. You said there's a lot of investor stock getting it was hard to move on, was that right?

Chris: On what happened before--just before the boom, a lot of properties were getting very hard to sell, so what happened was a lot of people got transferred for reasons of employment, whatever, family, to go to the mainland and in the end, they just put them into rentals and moved on. And then, of course when the boom came, it gave the people a chance all of a sudden an opportunity to offload a property that they had in the end of the rental departments that they didn't want in there and and sold them, so they've created a lot of good stock at that particular time for that reason. So there was a lack of being able to move some properties. A lot of it is because the owners wouldn't accept a particular price, I mean every house will sell if you know the market [John agrees] but a lot of them were prepared to sell at a certain price range and they just put them into the rental market.

John: Yeah, absolutely. Well, I mean again, look at the... we can have these in the show notes, obviously, but in 1996, in Glenorchy, there are 120 sales; in 2003, there were 228 sales; and then back into 2000, you know, 202 as of September, there was 77 recorded sales--we're assuming it's going to be 100.

Aaron: Yeah, if you're kind of equated out to the end of the year, that's probably a safe number to guess.

John: Absolutely. So, I mean, but that's so interesting because last time when the prices doubled, there were way more properties available; whereas the environment's just completely different this time around. You think the amount of stories of people just getting stuck because they can't move sideways. There's not enough properties to rent, there's holiday accommodation these days, we've got a population growth, we didn't have it back then. So, when I went in a bit of a deep dive this morning, so I thought, "yeah, I'm going to just go stat-heavy" so I had like the year, the median, the cash rate, the highest lowest variable rate, all a bunch of stuff, then I sat there and tried to talk through my friend-- and I was just lost in the world, let's not bring that here [laughter] because you know, there's just so many different factors to it and I think one of the good things that when we interviewed Simon Pressley a couple of weeks ago, he said supply and demand's not enough--i just can't remember the way that he expanded on that, because--

Aaron: --the one thing I really took away from that one was when he mentioned how population growth is babies; babies aren't buying properties, so like population growth isn't really a major factor in all of that. There's just so many other factors that lead you down that garden path of what's going on there.

John: Yeah yeah, well I mean, from a lender's perspective, Andrew, like if the old... there was this thing that the CBA said, "oh look, they would expect a correction once interest rates rise" you know so that might have an effect on days on market price, you name it, that's for people much smarter than us. From a practical perspective, what might happen if all of a sudden, yeah the interest rates increase?

Andrew: Well, it's going to affect borrowing capacity first and foremost, so when we, as I've touched on in the past, when we're assessing the deal, we're adding that's the ceiling rate so it's we're assessing at a higher interest rate, so if the rate goes up, loans become harder to service. And so that's probably going to make a bit of a shift in the market in that someone who was looking at a $600 000 property now needs to come back a peg which might trigger some vendors having to just sort of readjust their expectations because the market sort of has downshifted, but with the the latest increase in the assessment rate, we've not really seen too much of that.

John: So what's the assessment rate, just to clarify?

Andrew: So, it's a buffer that's added to the advertiser rate, so when we work out what someone can borrow, we're not working it out on a 1.99 percent;we're looking at in the fives.

Chris: You had about three percent, didn't you?

Andrew: Yeah.

John: So it's if you're already accounting for that future potential change…

Andrew: That's right. [John: Yeah, gotcha!] And I've had a few people that have been concerned because I've heard, "oh, what's going to happen when the rates go up, can I afford this?" Well, yes, because we've assessed at a higher rate so we know that you're good up to this level.

John: Gotcha, gotcha. So when you said they increased the assessment rate, obviously, before that you didn't have to have a bigger buffer, now you've got a bigger buffer, and you haven't really noticed too much yet…

Andrew: No, that's right. It didn't really affect the borrowing capacity too much in a lot of people. There are a few customers that were sort of already on the line at the pointy end already, but for someone that is really in a good solid financial position, it might have meant that their borrowing capacity has reduced by 30, 40 grand... [John agrees] not so much a big deal.

John: Yeah, gotcha. Well, I know like in that these little things, we said in 2003, the standard variable said 5.6 percent; in 2008, it got as high as 8.62 percent, so quite a fair jump, and now obviously, it's all the way down to 1.8 so it's like money's never been cheaper, you could say.

Andrew: That's right. So the concerning thing is if rates go back up to that eight mark,

John: ...in theory, yeah.

Andrew: Add the three percent buffer on top or three and a half percent, that's going to really really reduce a lot of borrowing capacity for a lot of hard-working mums and dads.

John: Yeah yeah, especially for people that have really stretched themselves to the absolute limit just to secure property, in that sense.

Andrew: Yeah, that's right.

John: We'll be... from here on in there, there's still so much pent-up demand for property from
young people and at every sort of age bracket locally, who knows? You know I can't comment on that, Australia-wide, but just--

Aaron: --like just looking at some of these notes that we've got here, as of this November data from realestate.com, it reveals that 87.5% of Australia's fastest-selling suburbs are all located in Hobart. That's just insane, so speaking to what Simon's been saying, it's like the property hit market here is so hot and yeah, each of these areas has a medium time on market of a figure like seven to nine days…

John: So one week and it's gone?

Aaron: So one week and it's gone. So, you've got to be in and out like I'm just going to run through some of these here, like seven days median on mark: Lenah Valley, Mount Stuart, Seven Mile Beach, so that's all here. Eight days: Oakdowns, North Hobart, then it jumps to Cambridge Gardens which is in Sydney, but then again, South Hobart, Old Beach, Rosny. Nine days: we've got Chigwell, Margate, Moonah, Cressy, Lenah Valley, [__] and other passing Sydney, so like just going through all of this, like these are seven to nine days and it's gone, all across yeah, Tassie, it's just insane how fast everything is moving…

John: Oh and I'd just be so fascinated to see what will be the effect this time around in Tasmania if people stop buying property and stop moving sideways, like what would that mean for the amount of people selling? What that means for the days on market? or you know, it's just because, I guess, the landscape now is so vastly different than it was 20 years ago...

Andrew: Yeah, that's right. When I first got into the industry, I can remember seeing a lot of properties where we'd have to check in the valuation report if it had a selling period greater than six months. The bank wouldn't like a property... [Aaron: --that'd sat there for that long and hadn't moved?]

Aaron: Yeah and so we'd have to make sure that the property hasn't been listed for more than six months or if the value was to deem that it would be on the market for more than six months. It's a thing of the past at the moment.

Chris: Yeah, we look at those areas, Andrew, where they depend on the postcode that big bank gave a lot of harder time on postcodes to others like for example, like an area in New Norfolk's postcard, that made a lot more difficult to purchase there for a loan because of where the postcode was and 7030 was a difficult one at the time, [Andrew agrees] none of those sort of matter at the moment.

Andrew: Not at the moment, no, and that's two really good examples, Chris. Given that New Norfolk postcode is such a broad area, someone in Sydney, they don't know what New Norfolk is if someone's buying a residential, they're just looking at the whole postcode saying, "look, don't know about this one."

John: Well actually, I'd be interested to get your perspective, dad, on I mean, you've had to have conversations with clients at every end of the market at every, you know... and so what about
with your sellers then, it's just like I've been speaking with a client. Yes, she said, "I will not sell this house for a million dollars," she's probably not going to be going anywhere but how do you have that conversation with your sellers?

John: When you've got a purchase that's paying a price that you can see, it's a very good value proposition, but the price they're offering and their owner says now we want more and I've said to them, "if you log for example, house at some five hundred thousand dollars, if you had five hundred thousand dollars burning a hole in your pocket right now, would you spend it on this house?" and they would say, "well, no." And that's what I had expected anybody else to. [everybody agrees] And that really brings them back, really brings them back.

Andrew: I feel like I'd be an unrealistic vendor, [John agrees] and I'd be chasing probably too much but that's such a great point, that's a good one to remember.

Chris: John sold my house last year and at the time, we've got a good price for it, but we look at it today, I think I could have got more and John just said to me, "don't act like a vendor, dad" [laughter] and that's what you've got to do, you've got to think, you know, your mindset when you're a purchaser is very different to what the mindset of a vendor is.

John: And it's really, I suppose, it's interesting like from the practitioner's perspective, we might think we're talking logically but we're dealing in an emotional problem, and so the second we're the tables are turned, where we're a buyer and a seller, we're straight into our emotions and doesn't matter how many years of experience you might have under your belt, you'd be like, "nah, nah, not doing it."

Aaron: Yeah, that's why I find it so funny when you come in and you say like a salesperson has like drooped you with your really expensive pen or your really expensive scarf or you're really expensive thing you're like, "oh the sales person got me" I'm like, "you know their techniques, you know all the tricks they're pulling, you know all the things they're doing," but you're just like, "no, they got me."

John: They got me. [laughter]

Aaron: I got in here in my heart and yep, so I bought an emotion and it's just kind of like it's so interesting that even knowing the tricks, you still can be a victim to it.

Chris: Yeah, that's so true because people, when they're talking to an agent to tell them what their specifications are, but they're actually when they purchase it, by motivation. [everybody agrees] emotional motivation and that's why I used to, when you have people in the car, I did that the other day for the first time in many years. I actually had buyers hop in the car with me. I took them to properties and showed them this is what that's going for, that's what's going for...
and then I showed them what probably I wanted to look at and by the time they got there, they put a contract on it because, this is great to be what you've just shown us, but you can't do that when people are just going to open homes…

Aaron: ...or just flicking through something on a computer and being like, "oh yeah, I saw that one, I saw that one" and yeah, often we're making the properties look the absolute best in their photos, so yeah you're not actually getting a real representation of what really was there like where it's as accurate as it can be. But yeah, you're also dressing it up to look pretty, looks like it's going to prom.

Andrew: So, Chris, that must be a bit of an old-school technique...
Chris: Work very well.

Andrew: Take the buyers with you because I can remember my father doing it when he was with Roberts in the early nineties. Because the car always had to be [ __ ] and spam because every day, there were people in the car with him.

Chris: Oh yeah, I used to follow him see where the houses were trying to sell... [laughter]

John: And the thing is that we haven't changed. If people were... we had it for the house at Dowsing Point, I told the clients about it, they said, "no, we don't like the air". I said, "look, you're five minutes away, drive past, and if you hate it, tell me I'm an idiot, we'll find you something else." 10 minutes later, "Come outside, John, what do we do to buy it?" I guess this has just... had this thought is it in these really strong markets, it's actually-- take all the economic element--it's just a strong emotional market. People are high on emotion in these, you know, if with the fear of missing out which really drives these elements so maybe then, if things soften is that people are trying to just subdue their emotions generally to let themselves breathe a little bit better to take the time to make a decision…

Aaron: ...but you don't have the time to make the decision at the moment

Aaron: Yeah, looking here Angus Moore of PropTrack Economist has basically said yeah, "buyers have to make quick decisions with limits on how many inspections and checks they can do beforehand." You've got to kind of roll the dice. Also, saying here, there are not many options for buyers to choose from so when it comes, you've got to snap it up quickly, [everybody agrees] which all this data is saying.

Andrew: I've got a great example of that. One of the customers that I'd bumped into at one of your open homes actually, I didn't even know that she was in the market. And she was looking for something and she explained what she was after. I got an email yesterday and she's purchased the polar opposite.

Chris: Oh absolutely. [John agrees]

Andrew: She was looking for unconditional and I'm just thinking…

John: --"what?" [laughter]

Andrew: Yeah, you've gone from this extreme to this extreme and you've gone cash.

Chris: And that's the reason why you show them everything. [Andrew agrees]

Aaron: I was thinking about getting a Porsche but then I got a Volvo... [everybody agrees]

Aaron: ...it's really safe. [laughter]
John: I heard this idea: we buy on emotion and we justify with logic later.

Chris: You do. A lot of people do. And that's what you, people, say, "I won't buy this area, don't look at that area" then they've purchased an area from another agent, so you always just show them everything that you've got because the once they get inside, the emotions will come in. The other thing would say to them that they're not to look at too many properties because in the end, they just get house indigestion and everything starts to look the same and then they can't make a decision.

John: Yeah, absolutely. We'll be, I suppose then, in days where there is limited stock, you really got to allow yourself to cast the net further and actually drive through. Don't eliminate it; allow that, then maybe…

Aaron: Yeah no, I really like that, John. I really like everything that's come up today. I think that's probably a good point to jump off the bike and just say thank you for coming in again, Andrew. It's always a pleasure. I think while Pat's away... [Andrew: I'll stand in...] you'll stand in [Andrew agrees]

Aaron: Yeah, excellent to have you on board.

Andrew: Thank you!

Aaron: Thank you again, Chris! Always a pleasure to have your expertise on The Property Pod.

Chris: Thank you, Aaron.

John: Beautiful!

Aaron: Thank you, John, for just being John.

John: Until next time…

Aaron: Until next time, gang. That's The Property Pod.

Andrew: Thank you!

Aaron: Alright, bye!

[extro & disclaimer]
You have been listening to The Property Pod, recorded and edited by 4one4 Media House in conjunction with 4one4 Property Co. This podcast is general information only and the thoughts and views expressed are the opinion of our panel and listeners should always seek to use their own investigation into any topic we discussed to ensure they fully understand their own situation. It does not constitute and should not be relied on as purchasing, selling, financial, or investment advice or recommendations, expressed or implied, and it should not be used as an invitation to take up any agent or investment services. No investment decision or activity should be undertaken on the basis of this information without first seeking qualified and professional advice.

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