According to CoreLogic, homeowners and property investors offering vendor discounts are rising as housing conditions continue to deteriorate.
Vendors are increasingly accepting lower prices for their homes as the reality of a cooling market kicks in. The vendor discount is the difference between the originally offered price of a property for sale and the final sale price. According to research by CoreLogic, approximately 75 per cent of properties sold by private treaty in Australia sold at prices lower than the original asking price.
Below, charts from CoreLogic reveal the degree of vendor discounting as well as the median discount over the recent decade.
Over the last three months in the capital cities, the median vendor discount was reported to be at -5.7 per cent. This was the biggest level of property selling at a discount since August 2012.
Vendor discount in capital cities
As of January 2019, the median vendor discount in the capital cities combined was at -6.3 per cent. This is the most considerable median vendor discount since January 2009. As compared to January last year, discount values were more insignificant at -4.7 per cent. This emphasises how rapidly property market conditions have deteriorated in one year. The current discounting levels match those experienced at the time of the financial crisis.
Compared to the time of the financial crisis, real estate in Sydney is experiencing much more significant discounts. The present median vendor discount is -7.5 per cent which has plunged from last year’s -4.8 per cent and is at its weakest level since February 2006. The selling environment in Sydney is deteriorating at a fast rate.
In Melbourne, discounting has come to be much more considerable since last year. As home values continue to plunge at a rapid pace, vendor discounting has fallen from -3.6 per cent to -7.0 per cent. The current level is the weakest on record.
Discounting levels have been fairly moderate over previous years in Brisbane. As of January 2019, vendor discounting was reported at -5.3 per cent compared to -4.3 per cent in 2018. This level is also the weakest discounting level since February 2013.
There has recently been a slight improvement in median vendor discounts in Perth in spite of the on-going decrease in the housing market. A year ago, discounting levels were at -6.5 per cent and has now marginally gotten better to -6.4 per cent.
According to CoreLogic and with the current housing conditions, it is realistic to assume that vendor discounting will intensify even more. The broadening gap around seller and buyer price assumptions shows the reality that there are fewer home buyers. Consequently, homeowners who are determined to sell their property may want to take a few significant price adjustments if they want to make the sale.
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