Property sellers are dropping their prices – if you know where to look
Home sellers are dropping their asking prices as buyers struggle to keep up with sky-high housing costs, pointing to further declines later this year.
Asking prices for all homes in Sydney fell by 1 per cent in the month ending 6 August on SQM Research data. They fell by 0.9 per cent in Melbourne. The figures include properties that have passed in at auction and turn into a private treaty sale.
Sellers are cutting their asking prices as they are forced to meet a cautious market.Credit: Dion Georgopoulos
The overall figures were dragged down by bigger declines for house asking prices, down 1.3 per cent in Sydney and down 1.4 per cent in Melbourne. They were buoyed by an increase in asking prices for units in both cities, up 1.2 per cent in Melbourne and 0.2 per cent in Sydney – a sign of more buyer demand for affordable homes.
It comes as Sydney and Melbourne buyers have more homes to choose from after a rise in overall listings in the year to July. Auction clearance rates have dropped below 70 per cent in recent weeks, meaning more than three in 10 homes fail to sell at auction, signalling a more balanced market.
SQM Research director Louis Christopher said a decline in asking prices was a good insight into future house price growth.
“Asking prices have been a good leading indicator of actual prices, so our expectation is a fall in housing prices for the September quarter,” Christopher said. “[Asking prices] is a representation of vendor confidence. When vendors lose confidence, they’re willing to negotiate more, that’s fundamentally what’s going on.”
He said with the expectation of rate cuts evaporating earlier this year did confidence in the market.
“Let’s remember when we started the year, there was a great expectation of a rate cut in the March or June quarter. But that never happened. That’s why confidence sapped,” he said.
PRD chief economist Dr Diaswati Mardiasmo said sellers were forced to cut their expectations because of cautious buyers.
“The buyers are there… Sellers are cottoning on that the prices they were asking for before is getting a look in, but it’s not translating into proper sales,” Mardiasmo said.
“That’s why asking prices have dropped because they obviously want their property sold and sold in less time than it currently takes…we’re seeing longer days on market,” she said, noting discounting was on the rise too.
She said despite the cash rate remaining on hold on Tuesday, buyers will continue to be cautious as they face higher mortgage repayments for longer.
Menck White auctioneer Clarence White said Sydney’s property market has been stagnant for some months.
“It’s been tricky with buyers. There’s been very low confidence with buyers. It is a market gripped by price caution and buyer uncertainty,” White said, adding many were waiting for a rate cut.
He said many sellers who were going to auction with too high an asking price were failing to get engagement from buyers.
“There is a strong penalty if they’re not pricing right. That’s sort of forcing agents and vendors to put attractive price guides on properties. Buyers are price cautious, and they’re looking for value.
“It’s a delicate balance … you’re going to see this situation for quite some time. Until you see interest rates drop, we’re going to see a fairly delicate and tentative market.”
Village director and auctioneer Joseph Luppino said a fall in asking prices in Melbourne was a reflection of the market pulling back across the board.
“The market pulling back is coming down to serviceability. With interest rates tripling effectively, people’s borrowing capacity is to the dollar of what they can spend.”
Luppino said while conditions were still tough for buyers with high mortgage repayments, competition was easing on the ground.
“They don’t have that aggravated competition to deal with. The transaction is a lot less stressful … it’s definitely softer [conditions].
“It’s easier in terms of they’ve got more choice, and they’re generally up against less competition, but their difficulty is a battle of, are they able to meet sellers’ expectations based on their serviceability?” he said. “It is a massive tug-of-war.”