Buyers gaining leverage over sellers

RP Data have been suggesting that the Australian housing market is likely to show, at best, flat growth in property values over the remainder of 2010 which will in-turn result in increasing levels of vendor discounting and a longer time of sale.

With today’s release of the September RP Data-Rismark Home Value Index we also receive the latest ‘time on market’ and ‘vendor discount’ data.

Across the combined capital cities it took an average of 47 days to sell a house and vendors had to discount their initial list price by an average of -5.9% during September 2010.  At the same time last year properties were taking a similar amount of time to sell (45 days) but were having to be discounted by just -4.9%, a full one percent less than the current discount rate.

TOM HousesSource: rpdata.com, RP Data-Rismark Home Value Index

Units have also recorded an increase in vendor discounting over the year, up from -4.3% last September to -5.3% this September.  The average time on market for capital city units has remained unchanged, when compared to the same time last year, at 41 days.

TOM UnitsSource: rpdata.com, RP Data-Rismark Home Value Index

As with the overall property market, vendor discounting and time on market have predictably not acted homogenously throughout the country.  Despite the fact that Perth has been the weakest performing capital city market of the last 12 months, Sydney, Melbourne (both -6.5%) and Brisbane (-7.5%) all have a greater average discount for houses.  Meanwhile, for units Perth and Hobart have the greatest average discount (-5.8%) closely followed by Brisbane and Darwin (-5.7%).

VEE HousesSource: rpdata.com, RP Data-Rismark Home Value Index

On the other hand, Canberra is well and truly recording the lowest average vendor discount for houses and units at -3.7% and -3.4% respectively.  Canberra has been the second best performer across the capitals over the last year and is the strongest performer over the last quarter.

Brisbane and Perth have the longest average time on market for house sales (56 and 54 days).  Within the unit market, Brisbane (48 days) and Hobart (46 days) have recorded the longest average time on market.

VEE UnitsSource: rpdata.com, RP Data-Rismark Home Value Index

Houses are selling quickest in Canberra (39 days) whilst units are selling quickly within both Sydney (34 days) and Canberra (35 days).

When the results are paired with value growth figures it shows that the average time on market calculation is more reflective of the overall performance of the market than vendor discounting, with Perth, Hobart and Brisbane having been the weakest performing markets of the last year.

Sydney and Melbourne have performed well over the last year however, as the market now transitions out of its growth phase the level of vendor discounting has increased.  This suggests one of two things: either there is a lack of buyers and plenty of keen sellers, as a result there is increasing levels of discounting or the vendors were a little too optimistic with their price expectation and are now having to be more realistic (i.e. drop prices further) in order to sell.

As the market continues to slow, expect that some of the stronger performing markets of the last year to record an increase in discounting and to a lesser degree time on market as vendors take some time to become accustomed to the changing market conditions which will require more competitive pricing.

For those buyers active, it means more choice, less competition for stock and potential to purchase properties at a hefty discount.

Let us know you’re stories, for recent buyers, what was the percentage you were able to negotiate off the vendor’s asking price?  For sellers and agents, are you finding buyers are becoming cheekier and making offers that would have been unheard of this time last year?

About Tim Lawless

Tim heads up the RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia

Connect with CoreLogic

Enter your email address to subscribe to our e-newsletter, and have new posts delivered via email. You can also connect with CoreLogic on social media.

One Response to Buyers gaining leverage over sellers

  1. Phillip Ennis February 15, 2011 at 6:42 am #

    My work is in the semi-rural area around Dural and the Hills District of Sydney. I maintain a comprehensive spreadsheet of what properties are listed for, who the listing agent is, how long the property is on the market and who the selling agent is. Taking an average of between 15 and 20 sales per agent, some of our local agents have a list price to sell price ratio of 75%.

    It’s not fair to lay the blame solely with the agent, as vendors are equally responsible when agreeing an asking price. However, some agents need to develop the ability to say no and walk away from ‘unhealthy’ business.

    When a home is listed for $2,395,000 and 12 months later is being fire-saled at $1,650,000 it reflects badly on the overall market and affects well-priced listings. Sadly, this is not an isolated incident and as more salespeople struggle to achieve their listing and sales targets the temptation grows to list anything at any price in the hope that something will happen.

Leave a Reply

Notify me of followup comments via e-mail. You can also subscribe without commenting.