Currently the average capital city level of vendor discounting sits at -5.1% for houses and -4.6% for units. These results suggest that vendors expectations of what they will sell their property for are fairly closely aligned with what the purchaser is willing to pay, with vendors only having to reduce their initial list price by a small amount in order to obtain a sale.
During the last four years, vendor discounting for houses reached its greatest level (-7.1%) during December 2005. Meanwhile, discounting levels for units were at their greatest during March 2006 at -6.8%.
During both these periods, the market (outside of Perth) was quite flat and witnessed minimal levels of growth. However, after strong growth between 2001 and 2004, vendors obviously felt that they could still ask a premium for their properties, clearly this was not the premium that the market was willing to meet.
On a historical basis, current levels of discounting are actually quite low. Across the last four years the average level of discounting has been recorded at -6.1% for houses and -5.7% for units.
On a capital city basis, Canberra had the lowest level of vendor discounting for houses during October at a miserly -2.5%.
Coincidentally, Canberra recorded the strongest level of value growth for houses during the month at 2.6%. On the other hand, Hobart, which recorded the greatest fall in values during the month (-1.2%), also recorded the greatest average vendor discount (-6.4%).
Across the unit market, the lowest level of discounting during October 2009 was recorded in Perth (-3.2%). However, Perth was one of the poorer performers during the month with values increasing by less than 0.1%. The greatest discounts were recorded in Hobart at -6.5% even though the city witnessed value growth of 1.9%.
Average time on market levels within capital city markets sit at 31 days for houses and 28 days for units. On a historical basis these results represent quite a short time on market. Over the last four years the average time on market has been recorded at 36 days for houses and 33 days for units.
The graph shows that each year there is a spike in time on the market during January to March as many real estate agencies revert to skeleton staff and many potential home buyers hold off on their decision making as they take off on holidays.
Outside of this period, the greatest time on the market was recorded during August 2008 for houses (45 days) and September to October 2008 for units (42 days). It’s no real surprise to see such weak results at that time with property values falling during late 2008 and the Global Financial Crisis having its most significant impact at a similar time.
On a capital city basis, Canberra had the lowest average time on market for houses along with its lowest level of vendor discounting, at just 24 days. As previously stated, Canberra recorded the strongest level of value growth for houses during the month at 2.6%. On the other hand, Adelaide, which recorded below average value growth (1.1%), recorded the longest average time on market during the month (39 days).
For units, the lowest average time on market during October 2009 was recorded in Perth (19 days). Again, Perth also had the lowest level of vendor discounting during the month. The greatest time on market was recorded in Hobart (as were the largest average discounts) at 43 days.
Vendor discounting and time on market tend to go hand-in-hand as the results show. If it takes longer to sell, the vendor is likely to have to drop their asking price in order to achieve a sale. The results also show that currently the market is strong with low levels of discounting and below average time on markets, indicating extremely healthy conditions. This fact is reinforced by the latest National Home Value Indices results which show an increase of 1.4% during October 2009.
Tim Lawless is the Director of Property Research at RP Data.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
