Vendor expectations at the end of a boom.

How long does it take for vendors to realise that the boom is over? It's painful to see sellers thinking that because properties have been on a sharp incline in the last few years they will continue to rise.

I know I see people posting stats saying an area has grown 10% a year for the last 5 years so I'm going to buy there as I'll have great CG. And others discounting an are that has had lower than expected growth for 8 years.

Example- A house in Kings Langley, Sydney was sold in April 2015 for $805K. Young buyers decided after a few months that they want to love in the country (story I got). They put the house on the market and didn't get what they wanted. They then relisted in September. They decided to go to auction (was supposed to be on as I type). They had an offer for $850K but rejected it (according to the agent). I estimate they would need $860K to break even. So I went to watch the auction and it's been cancelled and is now for sale for $899K.
It's a nice house, but not real big and it has a pool but not much yard.

Onthehouse says $825K (for what that's worth). I'll see how it plays out.

 

A house 2 doors up from me sold a few months for $651k. It has had one of the worst renovation jobs I have ever seen, and is up for rent for $460pw. Probably banking on the market going up up up and are now left with a dog.

 

My observation is that it takes a while .

We've just sold two properties in Sydney and I've mentioned this to a few people outside the forum and they've all replied " it's a good time to sell " as in the markets hot , not its peaked and it's about to come down , so while most on the forum think Sydney has peaked , my perception is that it's not " common knowledge " .

Good areas is Sydney are still quite ok . It's the lesser areas which are going to suffer .

If it was a regular forumite selling that property , they'd just take the loss and move on quickly know things could get a lot worse , however most people don't act like that . They want their money back and are quite prepared to wait until they do , or until reality or the bank hits them over the head with a piece of 4*2 ...

There are several of the more experienced members who are saying that it will be a little while before there are more widespread drops l though there may be some earlier pain in the OTP market when people can't settle , but personally I'd be selective about what I was buying .

Cliff

 

Charlestown is hot, hot, hot

Advertised offers over $699,000 sold for $804,000
http://www.realestate.com.au/property-house-nsw-charlestown-120848345

Offers over $660,000 sold for $703,400, property is a lot smaller than it looks
http://www.realestate.com.au/property-house-nsw-charlestown-120980366

 

It can obviously take a while - but there are so many variables - in particular, the vendors circumstances and vendors motivation. I've been working with a vendor (through a sales agent) for nearly 4 weeks now. Their original expectation was Offers Over $450,000 - I appraised the property as good buying up to $420,000, but very early on told the agent I didn't believe the property even had a 4 at the front of the price - the vendor was obviously very annoyed/disappointed but after a couple of open homes we have agreed on a price of $400,000 - overall a fantastic result - sometimes you just need to sit it out and wait. Especially if it is for an investment - there are plenty of other properties out there - in a plateauing market, if you can hold off - you will get the price. Either that or someone else will overpay - and you are still the winner - because you didn't overpay! Good luck!

 

Some vendors have been holding out riding the boom, waiting, waiting.. Then try to sell when they should have sold 3 months earlier..

 

In Spain it took more than 3 years for sellers to accept the new reality. In the meantime there were just hardly any sales. I tried hard not to laugh at a few asking prices at properties I was viewing, one they wanted 380K it would not be worth 200 now. I just bought another property here for 105K they started at 175K a while ago.

A lot of sellers seem to chase the market down. I think if you want a sale you have to get in front of the crash and accept the lower offers while they still exist.

 

This one was an auction, "bidding expected" from 690. Which I thought was pretty cheeky given that it sold several years ago for that exact price. Clearly the agent knew it would go for a lot more. Is this considered underquoting?

 

Classic case of loss aversion. If you can still service your mortgage, why realize a loss when you could hold out (at virtually zero cost) and wait for a potential pickup in prices.

 

it took the vendor of our weekender four years .

in the mean time , the asking price almost halved ., and he almost went bankrupt

cliff

 

Yeah true! Unfortunate. Don't they read the papers? The boom is over!
I saw people get caught out at the end of the last boom. Friend of ours had a good offer on a property. Agent said wait until auction. Cost him 6 figures.