Short settlements might be coming to an end with new data showing it’s taking longer for properties to change hands in tight market conditions.
Analysis from Ray White shows a steady reduction in settlement times during the year. In September, only 5.9 per cent of properties settled in less than 30 days, compared to 9.4 per cent last year.
After a long period where property markets have been very strong and buyers keen to settle quickly, the numbers suggest things are changing.
Chief Economist at Ray White Group, Nerida Conisbee believes the tight market has been a contributing factor to longer settlements.
“From the start of the year, we’ve seen a sharp reduction in the number of people settling quickly and as a result, there are still plenty of people who are keen to buy, but in terms of settling they are keen to wait a little longer,” Ms Conisbee said.
Ms Conisbee said highly competitive conditions for buyers were playing a big part in the way people were choosing their settlement terms.
“It’s likely that sellers are quite keen to have longer settlements, and that’s probably because the market is very strong for sellers,” she said.
“We know, most sellers are subsequent buyers, so if you sell a property now, it can take quite a bit of time to buy.
“From a buyer’s perspective, they are also likely keen to buy, but still want time to sort out things like financing.”
Ms Conisbee said the move towards longer settlements would mean agents will need to adapt to the market.
Agents often ask vendors when they want to be in their new home and work backwards from that date, so lengthier settlement periods will need to be taken into account when bringing properties to market.
“Agents have likely started to see a lot more people wanting to have longer settlements, so flexibility will be important when dealing with sellers in any market,” Ms Conisbee said.
But Ms Conisbee said longer settlements doesn’t necessarily indicate the market is cooling down.
“While there has been some talk from people that the market has been slowing, we’re not seeing any data to suggest that’s the case,” she said.
“Things are strong and everything is continuing to get higher and higher prices every week.
“While buyers would like it to be a slower market, it doesn’t appear to be slowing down just yet.”
Recently, The Australian Prudential Regulation Authority tightened lending criteria, increasing the interest rate buffer from 2.5 per cent to 3 per cent.
Ms Conisbee feels this change to lending, along with easing restrictions, could see a further increase in average settlement days.
“We are seeing a big pickup in property’s for sale, particularly, in Melbourne and Sydney as they ease up their restrictions,” she said.
“Also, from 1 November, there will be some restrictions on lending, so that could potentially slow things down a little as well.”