Trend points to buyers’ market

REIWA has flagged a subtle upward shift in vendor discounting figures as more evidence that Perth’s slowing property market has swung in favour of buyers and will likely stay that way through 2015.

After remaining steady in the buoyant market of the past two years, the “straw in the wind” vendor discounting measure — the average number of vendors forced to reduce their original listing price — has increased for the second consecutive quarter.

The figure inched from 48 to 51 per cent in the September quarter, before moving to 54 per cent in the December quarter.

The average amount of discount has remained steady, at 5.3 per cent.

It’s a far cry from 2008-09, when up to 80 per cent of vendors had to drop their prices in order to sell.

However, REIWA executive manager of research Stewart Darby said when combined with other indicators such as the increasing amount of listed stock — up to 12,030 from 10,370 in September — it represented a telling shift in seller sentiment.

He said history showed as soon as Perth listing stock exceeded 12,000 and became a buyers’ market, discounting tended to take off.

“We’re starting to see a shift and maybe our first signs of where things are headed, ” Mr Darby said.

“There’s more stock in the market now so, therefore, you’re potentially going to see more discounting happening.”

He said the record amount of new building in the works, which would add even more stock to the market, could well deepen the trend.

“We’ve got a softening market environment and we’ve got a record amount of dwellings under construction right now. As they finish across 2015 and beyond, so too will we see that supply balance change and there’ll be more excess stock coming into the marketplace, ” he said.

“Usually a build-up of stock creates a downward pressure on price and certainly in our outlook we’re suggesting that could potentially happen in the latter part of the year.

“It doesn’t always happen, but it’s about people’s expectations. People have to adjust their expectations of the price point in the market when they come to sell. If there’s an excess of stock, well, it’s a buyers’ market and the buyer has the whip hand.”

Acton Corporate director Travis Coleman said while the landscape had shifted in favour of buyers, there was no reason for sellers to panic.

“Certainly it’s very competitive and has shifted towards more of a buyers’ market, so vendors have to do everything they can to attract buyers, through good presentation, a good marketing campaign and a good pricing strategy at the beginning of the campaign, ” Mr Coleman said.

“I think it (the shift in discounting) is a bit of a wobble, myself. It’s certainly not panic stations or anything like that. Quite the opposite — people should just spend a bit more time talking to their agent and pricing the property correctly at the start.

“If you are proactively listening to the market and to the agents, because they have the feedback from buyers coming through, you’ll quickly work out if your pricing is not right. I guess it’s one of those bird-in-the-hand scenarios. You can sit there for ever and a day hoping to get that price or you can adjust your price and probably get a deal done.”

In the September quarter, it was the City of Perth leading the nervous seller discounting charge, with the proportion of vendors discounting jumping significantly from 44 per cent to 67 per cent across the quarter. Mr Darby said that on average in September the Perth market stock listing average was 1.2 per cent. By contrast, the City of Perth had 4 per cent of its dwelling stock listed.

Other sub-markets to record a big jump in vendors discounting were Canning (up from 32 to 49 per cent), Kwinana (38 to 57 per cent), Rockingham (41 to 63 per cent) and Wanneroo South (40 to 65 per cent).

Vendors in Belmont, South Perth, Victoria Park and Wanneroo North-East were more likely to either get the price right or hold out, with a big downward shift in vendor discounting in those areas.