The Chaos Theory.

With current media reporting on interest rate rises, price falls and the apocalypse that is now upon us the market has become a chaotic place, many people don’t know what’s going on.

Buyers are confused, some properties are dropping their price guides significantly yet others are still trading at respectable levels….what’s the deal?

I’ll start by saying that when a market shifts it doesn’t shift in a linear way. To function the expectations on both sides of the transaction need to align but with a clearance rate now hovering around 30% it’s all out of whack.

In my opinion there are a number of factors at play here.

Firstly, prices have fallen by 10-20% depending on the quality of the property. If any agent says something like ‘yeah but Mosman is different, David Murphy is being negative’ please break up with them. Realism is the new black.

Secondly, there are fewer listings and the same amount of agents. The demand for listings is huge. Overquoting to win business is at a level I’ve never seen. This week a house sold in Mosman for $4.1M, agents appraisal $5.5M. Let’s analyse this. Has the market dropped by 34%? No. Did they overprice the house? Yep 100%. How much do the buyers that watched the campaign think the market has dropped? 34% (Oh…and did the agent jump on social media to celebrate the sale and say it was a huge success? You know it!).

So the market looks like a bit like this, sellers are overconfident, buyers are overconfident and lots of agents are desperate to make sales.

Now that school holidays are coming to an end I have a prediction. More stock will come onto the market and this will lead to more sales.

An increase in activity will probably create a level which will give buyers and sellers more comfort to transact.

Interesting times…

Until next week,