A buying strategy for Melbourne 2023

Starting 2023, the working strategy for a Melbourne buyer should look different from the playbook that worked in 2021. The period of ultra-low interest rates, abundant credit, and FOMO driven bidding, which defined much of 2020 and 2021, has largely receded. The competitive sprint to secure property has been replaced by a more considered, strategic approach, demanding patience and a nuanced understanding of the current market dynamics. This is no longer a market where speed and aggression are the primary determinants of success.

The 2021 Melbourne buyer playbook was simple: act quickly, bid hard, accept that you would pay above guide. During that period, particularly after the initial COVID-19 lockdowns, demand surged. Anecdotal evidence from agents across inner-city suburbs like Richmond and Prahran, to middle ring areas such as Balwyn and Bentleigh, suggested properties were routinely selling for tens, if not hundreds, of thousands above their advertised ranges. The Reserve Bank of Australia’s cash rate was at historically low levels, fuelling borrowing power and a strong sense of urgency. Buyers often waived due diligence conditions, hoping to win favour with vendors looking for a clean, swift transaction. This was a seller’s market by almost every measure. The 2023 playbook needs to be different in five specific ways.

One: extend the search window. The market is no longer auction-driven across all segments. For some time, particularly in established inner and middle ring suburbs of Melbourne, a property’s journey from listing to sale was often dictated by a four-week auction campaign. Buyers in desirable areas such as Camberwell, Hawthorn, or even regional centres like Geelong and Ballarat, felt compelled to make swift decisions to avoid being outbid. The high clearance rates reported by the REIV across much of 2021 underscored this dynamic. Today, the landscape has shifted. While auctions remain a prominent sales method, especially for detached houses in popular locations, the market is no longer uniformly hot. Properties are taking longer to sell, and the "time on market" metric has expanded. The right home may need six to nine months of search, not six to nine weeks. This extended timeframe allows for more thorough due diligence, deeper market analysis of comparable sales, and crucial time for finance approval. Buyers who pressure themselves into a short window, perhaps due to wanting to settle quickly or simply out of frustration, will pay a premium that the market no longer requires. Patience here is a strategic asset, not a luxury.

Two: re-engage with the off-market and pre-market channels. During boom times, listing a property publicly through major portals like realestate.com.au or domain.com.au was almost a guaranteed path to multiple strong offers. The sheer volume of active buyers meant agents had little incentive to work outside this established framework, as fierce competition typically emerged on public platforms. However, in 2023, many premium-market vendors will choose to test the market quietly before committing to a full-blown public campaign. This preference might stem from a desire for discretion, an unwillingness to invest in expensive marketing campaigns until genuine buyer interest is established, or simply a reluctance to expose their property to an uncertain public market. Buyers who are accessible to selling agents, through buyer's advocates, registered platforms, or direct relationships, will see opportunities not visible to portal-only searchers. This means cultivating relationships with local agents in specific target suburbs such as Armadale, Brighton, or Williamstown. Buyer's advocates, for instance, often have privileged access to these quiet listings due to their continuous contact with agencies and their strong professional networks. Additionally, proprietary online platforms or agency databases that house pre-market listings have become more relevant conduits for discerning buyers. This requires proactive engagement and a shift from passively browsing listings to actively signalling intent to agents.

Three: write contingent offers more confidently. The period of waving conditions was a hallmark of the overheated market. Vendors during that time held significant leverage and could easily dismiss offers that included clauses like "subject to finance" or "subject to building inspection". Buyers were often advised, or felt compelled, to present "cash-equivalent" offers to stand out. In the current market, this dynamic has significantly altered. Subject-to-finance, subject-to-building-inspection, and even subject-to-sale clauses have a better acceptance rate in 2023 than at any time in five years. The vendor's leverage to reject contingencies has weakened. This is partly due to softer demand, but also a growing understanding among vendors that a clean, unconditional offer may not materialise as readily as it once did. The increased scrutiny from lenders, driven by APRA's oversight and the higher interest rate environment, makes a "subject to finance" clause a sensible safeguard for buyers and often a necessary one. Furthermore, conducting thorough due diligence, including professional building and pest inspections, protects the buyer from inheriting costly problems. Consumer Affairs Victoria routinely advises buyers to perform these checks, and the market now permits this prudence. Vendors are more inclined to accept these terms, understanding that they broaden the pool of potential purchasers and ultimately can lead to a successful, albeit slightly slower, sale.

Four: use the auction window. For many years, an auction "passing in" was often seen as a failure of the campaign, indicating misaligned price expectations or lack of buyer interest. The immediate post-auction negotiation was often overlooked in the rush for properties to sell on the day, particularly during high clearance rate periods. However, properties that pass in are negotiable in a way they have not been since 2019. The post-auction negotiation often delivers the cleanest pricing of the entire campaign, and the cleanest entry for the buyer. When a property passes in, it typically means it has reached the vendor's reserve price or that the highest bid was below it. This moment represents a crucial pivot. The vendor, having invested in a campaign and gone through the public process, is now often more pragmatic and motivated to sell. At this point, the competitive theatre of the auction is over, and negotiations move into a private, often less emotionally charged, environment. Buyers who have done their research and have their finances in order can make a compelling offer. This window provides an opportunity to negotiate on price, settlement terms, and even specific inclusions, potentially securing the property at a more favourable price than if it had sold "under the hammer". This strategy particularly benefits buyers observing auctions across Melbourne's diverse suburbs, from the tightly held bungalows of Brunswick to the family homes of Forest Hill.

Five: stay close to the rate cycle. Historically, factors such as population growth, supply levels, and economic conditions were seen as the primary drivers of housing affordability and price movements. While these remain important, borrowing capacity is the binding constraint on Melbourne pricing in 2023, and the rate cycle is the primary driver of borrowing capacity. The frequent adjustments to the Reserve Bank of Australia’s cash rate, and the subsequent upward revisions to mortgage interest rates by commercial lenders, have significantly impacted how much people can borrow. APRA's mandated serviceability buffer, which requires banks to assess loans at an interest rate comfortably above the current rate, amplifies the effect of each rate hike. A buyer whose strategy assumes specific cuts at specific times will need to revise the strategy regularly as the actual rate path unfolds. For instance, an expectation of a particular cut in the RBA cash rate within a six-month period can dramatically alter a buyer's potential budget, but this is a highly uncertain forecast. Flexibility on timing matters more than precision on forecasting. Buyers need to be acutely aware of how each RBA decision, or even the market sentiment surrounding future decisions, impacts their borrowing power. This means regular conversations with mortgage brokers, understanding the implications of any changes to interest rates, and being prepared for their borrowing capacity to fluctuate. The ability to pivot quickly in response to changes in the economic environment is a significant advantage.

The overall posture: a 2023 Melbourne buyer is in the strongest negotiating position of the past five years, but only if they are organised, patient, and disciplined about the brief. This is not to say that prices are plummeting across the board, or that every buyer will secure a bargain. Rather, it means that the balance of power has shifted, albeit subtly, from sellers to buyers. The frantic energy of 2021, where buyers frequently compromised on their wish list and overpaid due to fear of missing out, has dissipated. Today’s successful buyer is one who has a clear understanding of their needs and wants for location, property type, and budget. They are prepared to attend numerous open homes, research comparable sales data from the State Revenue Office, and engage in considered negotiations rather than impulsive bidding. They understand that rushing will likely lead to overpayment or poor decision-making. The buyers who win this year are not the buyers who bid the hardest; they are the buyers who know what they want and wait for it.