The typical four-week sales campaign for property is becoming too short because loans are taking so long to approve amid the tightened lending environment.
The difficult lending approval process is driving down auction clearance rates, which have dropped to the low 40 per cent range in Melbourne.
Property market analyst Louis Christopher from SQM Research says real estate agents and property sellers should think about extending the four-week marketing period to accommodate the slower loan approvals.
“With the increased scrutiny on expenses by the banks, they are taking longer to process loan applications,” he told Australian Financial Review.
“They are taking four weeks or more to process a loan application from a good loan applicant.”
Mr Christopher said the average auction period has been typically around four weeks.
“Here’s the problem, if you don’t spot that property as a buyer the moment it’s listed you’re going to run out of time to bid at auction,” he said.
“I think it’s got worse because of the scrutiny on expenses. This could be having an influence on the auction rate reported,” he told AFR.
Mr Christopher said in response agents and vendors should consider stretching auction campaigns to six weeks as part of their strategy.
It can now take up to double the time it used to get a home loan approve and the focus is especially on borrowers’ discretionary spending.