"Making sense of the market"

The following article is sourced from the Acton Real Estate April 2013 newsletter.

"Buyers, it's time to panic, you'll never find a house, and prices will soon be out of your reach - you should rush out and buy whatever you can, pay whatever is necessary. Sellers, the market is on fire, prices are rising and you can ask whatever you like for your home. These are some of the messages we've been hearing lately in the news, current affairs shows and newspapers. Should we believe them? What is really happening?

Are properties in short supply? 

Listings have fallen significantly over the last year, from 14,000 at this time last year to around 8,400 now. This is below the 12,000 that is considered to be ideal for a balanced market, however this is still much higher than the 4,800 properties that were available at the height of the boom in the June quarter of 2006.
Increased buyer activity has reduced the supply of property, but there is still plenty to chose from. Some areas are experiencing greater demand than others, and there may be fewer properties available in these areas, however a neighbouring suburb may have more on offer. There is no need to rush out and buy the first house you see - unless of course you absolutely love it!
If you are thinking of selling, this is a very good time to put your property on the market.

Properties are selling faster

 At the time of writing, according to the latest REIWA statistics, properties in the December 2012 quarter took an average of 62 days to sell, down from 79 days in the March 2012 quarter, but not close to the 36 days in the booming June 2006 quarter.
Yes, some properties are selling at their first home open, a few are selling almost as soon as they come on the market. Is this a reason to panic? No, what it does mean is that if they don't want to miss out on any opportunity buyers should register their interest with local agents, so that when a property meeting their criteria comes on the market they are notified immediately and have a chance to act.
 And while some properties are selling very quickly, sellers cannot assume that their property will sell as soon as it hits the market. Demand varies from suburb to suburb and within price brackets. The greatest demand is still being felt in the under $500,000 price range.

Prices are booming (or are about to) 

The announcement that the median price had risen to $510,000, above the previous high of $505,000, caused a bit of a stir. "Houses more expensive than ever", "Perth prices at record highs" were some of the media's comments. The median is just the middle price and more sales in higher price brackets (which is what is occurring) can lead to a higher median, while more sales in lower price brackets can see the median fall.
We are starting to see prices rise slightly and conditions suggest that further modest price rises are on the cards.
If supply tightens further and buyers feel they must buy at any cost, then we will see a more significant rise. However first homebuyers are still the driving force behind the market, and if they are deterred by price rises and decide not to buy we may see reduced demand and a softening in the market.
One of the factors behind prices rises is a buyer's willingness to pay. If a seller decides to ask a higher price and someone is willing to pay that amount, then we will see prices rise. If buyers think it is too much and look elsewhere and are prepared to wait for a cheaper property to come along, we will have a reasonable check on prices.
Overall, a boom is not expected, and sellers cannot just ask whatever they like for their property; buyers are still cautious about price and careful with their finances, they won't pay inflated prices.

I'll have to pay above the asking price 

This is happening in some cases, but only when there are several buyers interested in a property. These buyers will have to compete against each other if they want to secure the property, but unlike at an auction, they don't know what the other buyers are offering and so must make their offer as attractive as possible. This may mean offering above the asking price.
If you are the only buyer, then you can make whatever offer you like, but you are advised not to make a 'cheeky' offer to try and get the property for a bargain price. As we know, demand is strong and most sellers can afford to wait and see if another, better, offer comes along. They may even refuse to negotiate if they feel your offer is insulting.
Sellers, don't let stories of properties selling for above the asking price sway you when it comes to setting price. Buyers are very market savvy, and have a good idea of what a property is worth. Trying to take advantage of market conditions and adding on another $10,000, $50,000 or $100,000 may delay, or even cost you a sale. The properties that are selling quickly are those that are reasonably priced, so be guided by your agent. If you really want to see what the market is willing to pay, try selling your property via the auction process."