Beleaguered Buyers Put To The Test After Rate Rise
The Age
Saturday March 8, 2008
REAL estate agents and people on both sides of the auction block are bracing for this weekend's residential property sales after Tuesday's interest rate rise.
It will be the market's first opportunity to react to the Reserve Bank's decision to lift rates, with the Real Estate Institute of Victoria expecting 400 auctions and 750 private sales today and tomorrow."Some auctions are full of people and others are just dead. It's a feast or a famine and not much in between, and so people are very selective right now," said Eric Cohen, of Eric Cohen Real Estate, in McKinnon.Adding to buyers' nerves this morning as the auctions kick off will be the expectation that the nation's leading banks and home lenders will soon pass on the RBA's 25 basis point rise plus a further lick to their customers as they buckle under the higher cost of funding home loans.National Australia Bank, the country's second-largest home loan provider, was the first to raise its standard home loan rate on Thursday, by 29 basis points. Other banks are expected to follow."I think one of the concerns . . . is the fact that we are seeing the banks increasing their own rates beyond the RBA," said Craig Stephens, director of sales at Jas H Stephens. "Buyers don't know how much their banks are going to raise their rates by."Clearance rates in Melbourne have been dropping since January, falling from historic highs of 85 per cent just before Christmas to 71 per cent last weekend. Due to the long weekend there will be a smaller number of properties up for sale, but agents said it would still provide an insight into buyers' confidence.Mr Cohen said he expected those with bigger budgets not to be affected by the rate rise, but buyers would be keen to grab well-presented properties."Houses that need work might tend to be bypassed . . . people know if they buy at their maximum they don't have to spend any more money, which means whenever interest rates hit them they are set."Mr Cohen said clearance rates were suffering, with many agents preferring to sign up a buyer before auction. "People . . . are not going as high as they would, and a growing trend is the agents are ringing pre-auction to try to get the only buyers that are interested to make a pre-auction offer."This is in order not to take to auction where it might be passed in and therefore they show their hand for what the market really is . . . If it gets passed in and then negotiated the price could drop $20,000 or $30,000 or not meet the vendor's top-end expectations."This is because a passed-in property instantly deflates the buyers' interest.Mr Stephens, whose firm operates in Melbourne's inner west, said he expected good houses in good streets to be popular but suburbs on the edge of hotspots were suffering from lower clearance rates.
© 2008 The Age