August 2024

UNDERSTANDING UNDERQUOTING: WHAT YOU NEED TO KNOW

Buying property in Victoria can be stressful, but when buyers are faced with many agents/agencies regularly underquoting properties, it can cause them to abandon their home-hunting journey. I have spoken to many buyers who report properties selling for $100k - $200k above their budget, after attending an auction or making an offer on a property that was out of their reach from the start.

This can significantly slow the home-buying process for buyers as they spend months trying to understand their budget and what they can afford.

To help you navigate this, I want you to understand why agents underquote, what the Statement of Information is and means, and how you can identify the true price of a property.

What Is Underquoting?

Underquoting occurs when agents advertise a price for a property below what they know it is worth, what the vendor wants, or would accept, and potentially even below a price that the vendor has previously rejected.

This practice is illegal in Victoria.

Why Do Agents Underquote?

Agents underquote to draw more interest to a property and attract more potential buyers. They hope that by generating emotional investment, buyers will push their budgets higher to secure the property.

Some agents justify underquoting by saying it’s a common practice in their area and what the market expects. Unfortunately, new buyers entering the market often learn this the hard way.

What Is the Statement of Information?

In Victoria, the Statement of Information (SOI) is a document that must be provided in online advertising, displayed at open inspections, and given to prospective buyers. It includes either a single price or a price range for the property, for example, $750,000 or $700,000 - $770,000.

The SOI must contain:

• An indicative selling price for the property (which may be a single price or a price range of up to 10 per cent), which cannot be less than:

·        The agent’s estimated selling price

·        The seller's asking price

·        A price from a written offer that has been rejected by the seller

• Details of the 3 most comparable properties, including the address, date of sale, and sale price. If fewer than 3 comparable sales are available, the agent must state this.

• The median house or unit price for the suburb, based on sales from the last 3 to 12 months and not older than 6 months.

To be considered comparable, a property must:

• Be of a similar standard or condition to the property for sale

• Have been sold within the last 6 months and be within 2 kilometres of the property for sale

Why Does the SOI Not Prevent Underquoting?

The SOI can be manipulated. The terms "similar standard or condition" are subjective, and agents can include properties that are vastly different, including near knockdowns.

Additionally, the 2km radius can encompass areas with varying property prices, allowing agents to use less desirable properties to lower the quoted range.

How Can You Check If a Property Is Underquoted?

I’ll cover how to do a property valuation another day, but a quick way to assess value is by using realestate.com.au. In the sold section on map view, look for properties sold nearby within the last 6 months.

Find one or two properties similar in bedroom and bathroom count on a similar-sized block, and compare their sold prices to the property you are interested in to determine if it is better or worse.

Hopefully, by understanding underquoting and using these strategies, you can navigate the property market more effectively and avoid common pitfalls.

IN THE MEDIA:

Four-year auction high for July attributed to property investors selling up across Victoria

Victoria has seen a significant increase in auction activity this July, reaching a four-year high, thought to be driven by property investors selling in large numbers. According to PropTrack figures, the state recorded a 60.5 per cent preliminary clearance rate from 432 early auction results, with approximately 930 homes going under the hammer this week. This surge has been attributed to the rising living costs, multiple interest rate hikes since May 2022, and increased land taxes on secondary and investment properties, making it unaffordable for many to retain their investment properties. Recent Suburbtrends data estimated more than 41,000 landlords sold Victorian homes in the past financial year.

This trend has worsened the nationwide rental crisis, with Melbourne’s median weekly rent increasing by 10.6 per cent over the past year. Many landlords selling their properties, coupled with rising owners corporation fees and insurance premiums, has forced tenants into sharehouses or to move back in with their families. PropTrack anticipates 933 auctions in Victoria next week, reflecting ongoing high auction activity driven by investors exiting the market.

RBA Keeps Interest Rates on Hold for a Sixth straight meeting

The Reserve Bank of Australia (RBA) has decided to keep the cash rate target unchanged at 4.35% for the sixth consecutive meeting, reflecting ongoing concerns about inflation, which remains above the target range of 2-3%. Although inflation has decreased from its peak in 2022, underlying inflation is still high, with a 3.9% increase over the year to the June quarter. The RBA governor, Michele Bullock wants to make sure “that people understand that a rate cut is not on the agenda in the near term”. The RBA's forecasts suggest inflation may return to the target range by late 2025, but this timeline has been extended due to a significant gap between demand and supply in the economy.

The RBA is also monitoring global economic conditions, particularly in China, while remaining vigilant against entrenched inflation. The Board emphasised that future policy changes will be data-driven and responsive to evolving economic conditions, prioritising price stability and full employment.

SUBURB SPOTLIGHT: DONCASTER 🌳🏘️

This month, we're focusing on the thriving suburb of Doncaster in Melbourne's east.

📈 Market Snapshot:

• Median House Price: $1,550,000

• Median Unit Price: $599,000

• Annual Capital Growth: 7.65% (past 30 years)

Doncaster contains a diverse range of real estate, featuring a mix of modern apartments, spacious family homes, and elegant townhouses, catering to various lifestyles and preferences. The suburb is characterised by its hilly terrain, and offers stunning views of the Melbourne skyline as well as the Dandenong ranges. The suburb has experienced steady growth, driven by its convenient location, excellent shopping facilities, and strong community spirit. The expansion of Westfield Doncaster and improvements in public transport infrastructure have further enhanced its appeal.

🌟 Key Attractions:

• Westfield Doncaster: One of Melbourne's premier shopping destinations, offering a vast array of retail, dining, and entertainment options

• Ruffey Lake Park: A sprawling 68-hectare park perfect for picnics, walks, and outdoor activities

• Quality Schools: Including Doncaster Secondary College and Birralee Primary School, providing excellent education options for families

💡 Investment Outlook: Doncaster's steady growth, quality amenities, and convenient location make it a promising investment opportunity. While the median house price is more accessible compared to some neighbouring suburbs, Doncaster still offers strong potential for capital growth and rental demand. The suburb's appeal to families, along with its ongoing development and infrastructure improvements, ensures its position as a desirable location for both living and investing.

I understand buying property can be difficult, stressful and time-consuming. If you would like further help or advice please feel free to email me at [email protected]

Note: This is general advice and does not take into consideration your objectives, situations or needs. Please consider if this advice is suitable for you and your circumstances and speak to a professional before making any financial decisions.