‘This is overpriced’: Home sellers forced to take a reality check

Many home sellers have overly optimistic price expectations compared to what potential buyers are willing to pay as the property market softens, agents and buyer’s agents warn.

Vendors are left adjusting their hopes to secure a sale or leaving their property languishing on the market.

Home buyers are more cautious now.Credit: Joe Armao

Buyers are cautious of overpaying after 13 interest rate rises pushed up mortgage repayments at the same time as their cost of living has increased. Reserve Bank governor Michele Bullock warned on Thursday that about 5 per cent of people with a variable-rate mortgage were already facing a “cash-flow shortage”, and some may need to sell their homes.

There were 20.2 per cent more homes for sale across Sydney in August than the same time a year ago and 22.8 per cent more in Melbourne, SQM Research figures showed this week, as some sellers sit on the market hoping for their dream price. The number of wallflowers – homes for sale for six months or more – is also ticking up.

Separate figures from CoreLogic this week showed Melbourne home values fell another 0.2 per cent in August while Sydney’s rose just 0.3 per cent – about one sixth as fast as Perth.

Melbourne recorded the largest fall in value among the capital cities over the past quarter, down 1.2 per cent.

BresicWhitney chief executive Thomas McGlynn said that although buyers were looking, the Sydney market was not as strong as in the last boom.

“That does take a period of adjustment for sellers to understand that,” he said. “Buyers aren’t willing to push beyond their limits at the moment.

“[Because of] cost of living which includes normal day-to-day life but also people’s mortgages – and people are really conscious of those things, and they’re only willing to spend within their means.”

He said some sellers were holding onto their dream price for most of the sales campaign, then reducing it to get a deal done, such as by adjusting their reserve on auction day. But he thought that meant there would be opportunities for buyers this spring.

Buyers are wary of the cost of their mortgage repayments.Credit: Joe Armao

OH Property Group principal buyer’s agent Henny Stier said vendor expectations were still high and the market patchy, as some properties fetch “ridiculous prices” while others languish.

She noticed properties launching with one price guide, then dropping it in a couple of weeks due to low attendance at open homes, then going to auction and seeing if the original hopes can be achieved.

Some owners who need to sell, and have perhaps bought elsewhere, are reducing their reserves, she said. Others were switching agents.

“There’s a lot of buyers who are wary of the very high interest cost, and they don’t want to put themselves where they’re stretched enormously, so they’re really self-regulating their financial purchases,” she said.

“Buyers are just very price-sensitive.”

In Melbourne, buyers’ advocate Nicole Jacobs said some agents were listing homes with guides based on seller hopes rather than likely market value.

“Across the board, vendors’ expectations are still very strong,” the director of NJP Property Advocates said.

“Properties that are well positioned, walk in, do nothing, turnkey, are doing well. But across the board unless you’re pricing correctly … there’s a bit of readjusting going on and that will be where agents are having real conversations with their vendors.

Higher interest rates are putting pressure on borrowers.Credit: Steven Siewert

“Buyers are not stupid and buyers are going ‘OK, I think this is overpriced and I’m going to wait.’”

She said some sellers bought a few years ago when interest rates were low and prices were soaring. Now they need to sell, but their home’s value may not have increased.

“If you didn’t buy well, then your expectations are misaligned with the market when you have to sell,” she said.

Some scheduled auctions had only one bidder interested and were selling prior, others had two to three bidders. She said it was unusual to see five or more bidders.

She noted higher land tax on secondary properties had prompted some owners to sell and increased the supply of homes for sale.

Buyers’ advocate Cate Bakos felt more sellers understood Melbourne’s market now compared to three to six months ago.

She thought more expensive homes had been harder hit by the slowdown than more affordable properties.

“Vendors in the upper quartile and middle market, if they’re serious about selling they have to meet the market,” the Cate Bakos Property owner said.

She has seen regretful sellers who bought irrationally or sight-unseen during lockdowns, have a hard time accepting they will lose money when factoring in stamp duty, agent fees and marketing costs.

The silver lining is they could buy in the same market, perhaps enjoying a discount or taking a longer time to make a decision.

“They can see the changed conditions for themselves, if they attend some auctions.”