Spring is not necessarily the best time to sell - buyers are too busy socialising.
The conventional wisdom that spring is the best time to sell property ignores the basic laws of economics.
With topsy-turvy weather, daylight savings and wall-to-wall racing fixtures, spring in Melbourne is in full flight.
So, too, is the property market, as vendors spruce up their gardens and shell out for expensive advertising campaigns before taking their properties to auction.
The number of auctions in Melbourne virtually doubles during spring because vendors believe that displaying their properties at their best will bring more buyers out of the woodwork.
This flurry of activity means that there are usually 700 to 900 sellers competing for the hearts and wallets of buyers each weekend, compared with 300 to 400 during winter.
As vendors trim their roses and wait in nervous anticipation, however, their would-be buyers are marching to the beat of a different drum.
In spring, social activity gears up after the long winter hibernation. Melbourne buyers tend to be preoccupied with the spring racing carnival, end-of-year parties and plans for the Christmas holidays.
They may begin to think about buying, but most defer the actual search process until they're back at work and in the swing of things in late January or February (the time-honoured "I'll leave it till next year" approach).
As a consequence, buyer activity only increases by 20 to 30 per cent during spring, creating a major misalignment between the expectations of vendors and the reality of buyers' behaviour.
The auction system relies on competition. When there are fewer buyers than properties in a given area, there's insufficient competition to encourage strong bidding and drive up the eventual purchase price.
At the same time, supply and demand in nearby areas may be more evenly matched, purely because there happen to be fewer vendors or more buyers.
The net result is a patchy market in which the effectiveness of auctions as a method of sale varies considerably from one area to another.
This can happen occasionally even in "blue ribbon" inner suburbs such as Hawthorn, Prahran and Carlton, which traditionally experience strong demand from homebuyers and investors across a range of price brackets.
In one street, there may only be two buyers for a particular property. If one drops out of the running, the remaining buyer is in the box seat to negotiate a competitive price.
Meanwhile, at another property just a few streets away, several buyers could be battling it out for first prize in the bidding war.
What it all boils down to is that the laws of economics are more powerful than the laws of nature. There's little point having a showpiece garden if there are no buyers to be enticed by it.
If there are more properties on the market than there are buyers, or if there aren't enough buyers for a particular property to create a competitive environment, all the pretty flowers and neat hedgerows in the world won't change the final result.
Selling agents are understandably keen to recommend that vendors take their properties to auction - it's a good piece of street theatre and the culmination of a four- to five-week advertising campaign that provides intensive exposure for the agency.
However, vendors in a patchy market should think carefully before accepting such a recommendation at face value. Even if the property is in a blue ribbon area, a private sale may be more effective than an auction in some cases, particularly if the property is compromised in some way.
For example, it may be on a main road, have major structural defects, or be one of dozens of apartments in a large complex in which several similar properties are being sold at the same time. Alternatively, it could simply be a case of bad timing, where a number of properties have been sold recently in the immediate area.
In a patchy market, the most successful sellers and buyers will be those who understand how the effects of supply and demand work on a particular property and location, and who plan their strategy accordingly.
Mark Armstrong and David Johnston are directors of Property Planning Australia, which advises on property and finance strategies. www.propertyplanning.com.au
Keep in mind
- Auctions in Melbourne virtually double during spring.
- Buyer activity increases by only 20 to 30 per cent.
- Auctions rely on strong competition to drive up the sale price.
- If competition is weak or the property is compromised, a private sale may be more appropriate.
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