Pandemic property boom: The catch-22 facing sellers

author-avatar By on March 30, 2021
Pandemic property boom: The catch-22 facing sellers

With property prices booming and an insatiable demand for property among buyers, sellers hoping to buy and sell in the same market are left facing an impossible choice.

Sell first because property prices are surging, or buy first because there’s such limited stock on the market?

“It can be a catch-22 situation - because sellers are not selling, they are not adding homes to the buying pool,” buyers agent and Director of Chamberlain Property Advocates, Wendy Chamberlain told Savings.com.au.

“This is exacerbating the problem of limiting the choice for buyers, including themselves (sellers), of new homes for sale coming onto the market.”


Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner-occupiers.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • Refinance only. Fast online application
  • No Nano fees. Free 100% offset sub account
  • Mobile app, Visa debit card & instant payments
VariableMore details
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
YOU COULD WIN $100k TO PAY DOWN YOUR LOAN*

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
VariableMore details
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
AN EASY ONLINE APPLICATION

Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^

Rates correct as of October 20, 2021. View disclaimer.


Buy or sell first?

The catch-22 of whether to buy or sell first isn’t new, but the rapidly booming property market has caught out many sellers.

Ms Chamberlain said vendors are now afraid to sell first because they’re worried they might not be able to buy back into the market.

“Most owners like to sell first, to know how much they have to spend on the next purchase. However, the situation we are in right now means that the right home just may not be for sale,” she said.

“The seller has the conundrum of whether to sell and risk not having found somewhere else to buy, or to hold off selling so that they can buy a home that does suit, then put their existing home on the market.”

She says most of her clients end up selling first if they can afford to rent or have alternative arrangements such as staying with friends or family.

But while selling first can give vendors some peace of mind, it also puts additional pressure on them if they haven’t found another property to buy - especially in the current market.

“As the settlement date approaches, the more pressure the seller will feel to buy something else if they have not yet done so,” Ms Chamberlain said.

“It can really put unnecessary stress on a seller that could otherwise have been avoided if they'd bought a home first, then sold.”

Vendors are pushing for longer settlement periods, up to three to four months, to give them extra time to find a new place to live.

“Where a home is for sale and the home is owner occupied, I am seeing that many vendors are looking for 90, but more commonly 120 days as a settlement.”

Buyers are having to increase their budgets or look at bridging finance

With house prices surging and a fear of missing out (FOMO), Ms Chamberlain said buyers are paying through the nose to get into the market.

“There are huge numbers of buyers showing up at inspections and for some homes, prices are being pushed well above the expectations of the vendor and the real estate agents,” she said.

“There is a fear of missing out for many buyers and as a result, they are prepared to stretch their budget to buy a home, particularly whilst interest rates are so low.”

See also: Australia’s property boom: 'Sobering’ decisions facing first home buyers

She said one of her clients looking to buy into a particular school area in Melbourne would need to up their budget by at least $300,000 or consider moving somewhere else because the market was so hot.

“The Melbourne market really is a sellers market right now…buyers are really stretching themselves and their budgets to buy into the market.”

Some sellers are taking out a bridging loan to help bridge the gap between selling their old home and buying a new one.

A bridging loan is an interest-only loan with a limited loan term (usually a maximum of 6-12 months) with the expectation you will sell your home in this time.

Aussie home loans chief customer officer David Smith said it’s important for sellers to do their research in this market.

“You can talk to your broker to find out if you can afford a bridging loan or have enough equity within your property to capitalise on interest,” he told Savings.com.au

“Regardless of your family and financial situation, taking the time to properly evaluate your options and investigate the pros and cons before buying your next home could save you time, money and give you peace of mind.”

With the average days on market plummeting and no end in sight to soaring property prices, Upside Realty National Sales Director James Kirkland said sellers should remember they wield the power.

“Sellers are in the driving seat at the moment; they know that property is presently in high demand and so can more easily dictate terms,” he told Savings.com.au.

“The market is changing so rapidly, so do your research. National dwelling values, for example, increased by 2.3% in just one month, in February.

“With this in mind, we would be advising sellers to stay across all the sales in your local area, to make sure you're not underselling your home.”

Despite the market running hot, the fundamentals haven’t changed.

“The best presented properties in the best locations are still the top performers in terms of sale price,” Mr Kirkland said.

“If you’re buying as well as selling, we suggest you get a pre-approved loan from your mortgage provider as early as possible; properties are getting snapped up so quickly and vendors will look more favourably on those offers from buyers with finance in place.”


Photo by Vincent Branciforti on Unsplash

Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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author-avatar
Emma Duffy is Assistant Editor at Your Mortgage and  Your Investment Property Mag, which are part of the Savings Media Group. In this role, she manages a team of journalists and expert contributors committed to keeping readers informed about the latest home loan and finance news and trends, as well as providing in-depth property guides. She is also a finance journalist at Savings.com.au which she joined shortly after its launch in early 2019. Emma has a Bachelor in Journalism and has been published in several other publications and been featured on radio.

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