Home buyers are gaining the upper hand as the downturn in Sydney and Melbourne deepens, forcing vendors to readjust their price expectations.
The number of homes selling at auction has plummeted in the past 12 months, giving would-be buyers key bargaining power for the first time in years.
More than three-quarters (75.4 per cent) of properties sold in the three months to October 2018 went for less than their original advertised price, new data from property market analysts CoreLogic shows.
By contrast, a tiny 7 per cent of homes sold for their original list price, with only 17.6 per cent selling for more than the original list price.
“Over the past decade, even in periods where dwelling value growth was quite strong, the majority of properties sold nationally continued to sell for less than the original list price, highlighting that even during the boom times vendors will need to be flexible on their price expectations and buyers will seek out room to negotiate,” CoreLogic research analyst Cameron Kusher said.
In Sydney and Melbourne, auction clearance rates – the number of homes selling at auction on a given weekend – have dropped dramatically in the past year.
Last weekend 1127 homes went to auction in Melbourne, with a final clearance rate of 46.2 per cent. At the same time last year, 1296 homes were auctioned across the city, with 69.2 per cent sold.
In Sydney, 844 homes were auctioned, with 42.1 per cent sold. That compares to this time last year, when 1102 auctions went under the hammer, with a clearance rate of 58.5 per cent.
“Geographically the rising trend of a greater share of properties selling with a discount is being driven by the Sydney and Melbourne markets where buyers have endured a long period of low advertised stock levels, rapidly rising prices and intense FOMO (fear of missing out),” Mr Kusher said.
“As housing market conditions have weakened, buyers have more stock to choose from and far less urgency. They are gaining more leverage, negotiating harder and a growing proportion of vendors are selling at prices lower than their original advertised price.”
How to get a good deal in a buyers’ markets
The sub-50 per cent auction clearance rates in both major cities are “quite a turnaround from 12 months ago”, Real Estate Buyers Agents Association president Rich Harvey said.
“It’s a natural part of the property cycle after five years of an unprecedented boom in which the markets overshot,” Mr Harvey said.
“It’s not a crash, it’s a natural correction, and the market will find its level soon.”
The downturn offers a “short window of time” for buyers to gain a foothold in appealing suburbs at more affordable prices, Mr Harvey said. However, overpaying in a falling market remained a real risk.
“Even in a falling market you can overpay and make an emotional purchase,” he said.
“We recommend that people do extensive research. You’re buying your biggest asset so don’t just look at three properties and buy.”
Many vendors are still desperately holding out hope that they can achieve prices not seen since the market was at its peak in mid-2017, Mr Harvey said.
“There’s always a lag affect,” he said.
“Vendors that need or want to sell are meeting the market, those that are holding out for 2017 prices are going to be waiting.”
REBAA’s tips for finding a top deal in a buyers’ market:
1. Look for recent comparable sales
Research sold prices in the area you’re looking in but make sure they’re no older than 2017 (one to three months old is best).
2. Focus on your negotiation skills
Agents are going to be hungrier to close deals pre-auction and will foster a sense of urgency. Buyers need to play the negotiation game well. The REBAA recommends having someone negotiate on your behalf who has your best interests at heart.
3. Get your finance pre-approved
In this tight lending environment, it’s imperative buyers and investors get their finance pre-approved or risk incurring unwanted costs.