RP Data: Vendor discounting easing

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By Leith van Onselen

RP Data has today released data on vendor discounting across Australia’s property markets, which continues to improve. According to the Media Release:

…the average discount on a typical home was -7.5 per cent from its initial list price; across the combined capital cities the figure was lower at -6.4 per cent. At the same time last year, discount levels were recorded at a greater -8.1 per cent nationally, and, -7.2 per cent across the combined capital cities.

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Across most capital city housing markets the level of vendor discounting in January 2013 has improved compared to that in January 2012. The
exceptions were:

  • Melbourne – a shift of -7.1 per cent a year ago to -7.4 per cent
  • Hobart – a shift of -9.4 per cent from -7.8 per cent.

Across the individual capital cities, vendor discounting was measured at:

  • Canberra (-3.9%)
  • Darwin (-4.0%)
  • Sydney (-5.4%)
  • Perth (-5.6%)
  • Hobart (-9.4%)
  • Brisbane (-8.3%)
  • Melbourne (-7.4%)
  • Adelaide (-6.9%)
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According to Mr Kusher, if sellers have to apply fewer discounts in order to sell a property, it is a positive sign for the housing market. Sales activity offers another positive sign for stronger housing market conditions where over the second half of 2012, RP Data reported that sales volumes were almost 8 per cent higher compared to the first half of 2012. Capital city home values also increased by 3.3 per cent between May 2012 and February 2013.

“This spike in activity equates to a higher level of competition amongst buyers at a time when there are fewer homes available for sale. Lower levels of discounting by vendors can also mean that sellers are becoming more realistic about their final sale price. Having said that, there is always going to be a level of negotiation on price,” Mr Kusher said.

Ongoing value falls between October 2010 and May 2012 at a national level has meant that vendors may now realise that with fewer active buyers, they are unlikely to attract a sale price as high as in 2009 when market conditions were much stronger,” Mr Kusher said.

…there is a relationship between home value growth and vendor discounting. For the analysis, Mr Kusher inverted vendor discounting
and then compared it to the quarterly change in capital city home values where the correlation confirms that values begin to rise on a quarterly basis and the level of discounting in the market reduces. Over the period between January 2005 and January 2013, the result shows that there is a 78.7 per cent correlation between the two measures.

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“With home values continuing to increase over more recent months we would expect that the level of discount over the coming months will produce further improvements in the level of discounting by vendors. “An improvement in levels of vendor discounting is also expected to be supported by higher auction clearance rates evidenced so far in 2013 and the recent increase in sales transactions and lower number of properties available for sale particularly new properties being listed for sale,” Mr Kusher said.

Media release below.

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www.twitter.com/leithvo

RP Data Property Pulse (28 March 2013)

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.