The factors that will determine the spring market

The spring market is upon us and there are several key market indicators that will determine how the market fares between now and then.

Availability of credit:

The current market slowdown has been a manufactured slowdown, driven by a credit squeeze through the retail banks. The respective bank’s willingness (or lack of) to work with home buyers will have a huge impact on the market conditions. Buyer sentiment in terms of enquiry and inspection numbers has remained surprisingly healthy during this downturn. The hesitation of buyers to follow through and make an offer/bid has become a hallmark of the current market.

Stock levels:

If there is a considerable surge of new listings in spring, the question will be whether there is sufficient buyer demand to absorb the stock. If there is good demand relative to stock through spring, that will be a welcomed signal that the market has stabilised at the current price points. If supply swamps demand, vendors may face the prospect of reducing their price to achieve a sale.

True clearance rates:

Not to be confused with the auction clearance rate quoted through the media. The auction clearance rate is a fudged number with agents having a bias for promoting their successes and burying failed campaigns through nonreporting. Most transactions in the market occur by negotiation and buyers are conscious of the performance of listings in their market niche. If buyers see properties selling, it promotes confidence in the overall market.

Sentiment:

Clearance rates directly impact market sentiment. If buyers feel the market has stabilised, the risk of buying a home that subsequently drops in price diminishes. Market performance is not necessarily a home buyer’s primary motive. If you buy a home that you intend to live in for the next 10 to 20 years, there will be periods where it rises and falls in price. Many prospective buyers are simply looking for definite signs of stability in prices and then they are ready to act. The market may be more resilient than many anticipate.

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Article by Peter O’Malley, Author of Inside Real Estate