Developers and real estate agents across Australia are dangling carrots in front of apprehensive buyers to sell homes as the coronavirus begins to affect property prices.
The buyer of this five-bedroom Kedron home, which only entered the Brisbane property market this week, will receive a $90,000 Lexus NX300 sedan free of charge.
House-and-land packages in High Grove at Box Hill, in Sydney’s west, are sweetened with a $30,000 ‘lifestyle studio voucher’.
And the eventual owners of these units in the Perth suburb of Balcatta will receive a $2000 Harvey Norman gift card.
Property analysts say it’s the latest sign sellers are desperate to get out of the market as expectations about property prices sour.
Commonwealth Bank’s latest forecast released on Wednesday is the most damning of the big four banks.
Australia’s biggest lender suggests prices could crash 32 per cent if the economic downturn lasts upwards of 12 months.
Pete Wargent, a buyers’ agent and co-founder of property advisory firm AllenWargent, said evaporating demand has forced developers and vendors to use incentives to win over the few buyers left in the market.
“Right now, there’s very few people who would be keen to buy a new property and there’s no foreign buyers around either,” Mr Wargent told The New Daily.
“So that’s when you expect to see incentives thrown in like steak knives and whatever else.”
Why are sweeteners offered instead of discounts?
Widely tipped price falls have yet to show up on CoreLogic and SQM Research’s property indexes – and the use of vouchers and other incentives may lessen the falls when they come.
That’s particularly crucial for capital city CBDs and urban fringe estates, which have a high proportion of newly constructed, off-the-plan properties.
Digital Finance Analytics principal Martin North said sellers would only consider discounting the sale price as a last-ditch effort, because any reduction would accelerate the market’s “negative spiral”.
“There are a lot of new high-rise units that were built in the previous construction cycle that are precisely the same as each other, so if you start discounting your property, then others have to follow suit to maintain market relevance,” Mr North told The New Daily.
“People in outer areas will also have to march to the same song – for instance, we’re already seeing pricing falls in western Sydney of more than 10 per cent compared to where they were a few months ago.”
Mr Wargent cited the recent example of Brisbane’s CBD, where the twitchiness of valuers during the banking royal commission dragged down the price of off-the-plan apartments by roughly 10 per cent upon completion.
Potential buyers warned to avoid ‘red flags’
Although added incentives may tempt those who are financially stable through the current crisis, buyers should exercise caution.
Mr Wargent said buyers who commit to a higher sales price could encounter financing issues if the price of neighbouring properties falls, as BIS Oxford Economics’ Angie Zigomanis explained to The New Daily in November.
“You should usually ask yourself: ‘Why does the developer or agent need to offer these bonuses?’ because it’s usually not a good thing,” Mr Wargent said.
“So you need to question whether the value of the incentive is really going to be enough to make up for potential lower value.
“And if you have a longer-term view, you’d probably be more inclined to try and negotiate on price.”
Meanwhile, Mr North said free cars and furniture discount cards distort the true value of a property and trick buyers into thinking they are getting a good deal.
“So if you are a buyer in the market and you are not pursuing a deeply discounted deal, you’re probably paying too much,” Mr North said.