The tumbling housing market in Australia

in #life5 years ago

I wrote a post about declining housing prices, consumer-spending in the retail sector and its effect on the Gross Domestic Product (GDP) figures, inflation and unemployment last week. It related to Australia however I am pretty sure similar scenarios are playing out in other places as well. I received a few comments however the blog wasn’t what I would call well-received by the Steemit community. So…I’ve decided to do it again!

This time I thought I’d provide some insight into vendor discounting. A vendor, in the real estate sense of the word, is a person selling a property; The owner essentially, although it could be a financial institution, company, self-managed super fund, legal firm, Government department etc. Just think of the vendor as the person or entity selling a property. The discounting part relates to the price a property is presented to the market.

In simple terms vendor discount can be calculated by determining the change between the initial advertised price and the actual contract price. Approximately 75% of properties that were sold by Private Treaty in the three month period to January 2019 sold for less than the initial listing price throwing the spotlight on how common vendor discounting is. This discounting is generally shown as a negative percentage in reports so the lower the figure the greater the discounting. (For example a -0.5% would be less discounting from initial marketing price than -1.8%.)

OK, so let’s get into the figures huh?

Nationally, in the three month period mentioned above, the median vendor discount was -5.7%, the greatest level of discounting since 2012 and substantially larger than the -4.6% median of a year earlier. This points towards fewer active buyers in the marketplace and vendors being forced to discount significantly to get a sale secured. In dollar terms on a $550,000 property value:-

  • 5.7% discount = $518,650
  • 4.6% discount = $524,700
  • A difference of $6,050

Below are figures from around the country relating to vendor discounting: The last three months

  • Capital cities combined: Median discount -6.3% the most significant since January 2009. January 2018 was -4.7% so 12 months has seen a dramatic downturn.
  • Combined regional: -5.2% compared to -4.5% 12 months ago. Worsening discounting reflects the fact housing prices have begun falling in regional areas recently.
  • Sydney: -7.5% down from -4.8% 12 months ago the greatest discounting since February 2006!
  • Melbourne: Rapidly falling prices reflect a -7.0% vendor discounting. Much greater than the -3.6% of 12 months ago. It’s a very weak market there, with few on-the-ground buyers.
  • Brisbane: -5.3% against 12 months ago at -4.4%
  • Adelaide: -5.3% over the -4.8 of 12 months prior. Adelaide is a conservative market (and group of people) so the rate is quote mild.
  • Perth: Interestingly the west have improved marginally to -6.4% from the -6.5% of 12 months ago.
  • Hobart: -4.2% against the -3.8% of a year ago.
  • Darwin: -8.2% against 12 months prior at -6.5% although metrics can be volatile in Darwin due to low sales-volume.

These figures may not seem dramatic at this stage however with market conditions deteriorating, a thinning of buyers and high-volumes of stock for sale the coming months are likely to see vendor discounting accelerate with greater speed. This highlights the importance of meeting the market with initial marketing prices when vendors first hit the market with their property. The market certainly (generally) won’t surprise the selling Agent with an over-the-top price and the best way to achieve the highest price is to sell within the prime selling time of 30 days when the market sees the property as fresh. After that time interest wanes and through lack of interest and time on market discounting invariably occurs.

There’s a great deal of pressure on a person these days, mostly applied by the person themselves and their spending habits. Selling property for some is the only way to relive that pressure and maximizing sale prices is critical in many cases. I’m not here to provide advice as I’m not legally engaged by you to do so and my indemnity insurer would have a fit…However, many people have found great success in applying the three P’s to their property sale: Price, Presentation and Positioning and when they come together, with the right Agent (not necessarily the cheapest) who knows how to represent a property and vendor, negotiate the best terms and conditions and then hold the deal together an advantageous result can be achieved.

A suggestion if I may…Adjust your spending habits, stop credit-spending, work off your credit-debt, let go of ego and hubris, be humble and kind. Just saying.

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I was going to be shocked at the "adjust your spending habits" part but then... "let go of ego"? What is that??
giphy.gif

Ego? Hmm, how best to explain it...Maybe just go and observe pretty-much anyone and you'll see it demonstrated perfectly. 😂

P.s. You look good with that crown on... :)

Posted using Partiko Android

I would, but then I would have to put the mirror down and stop admiring myself first...yeaaah, not gonna happen. ;)

PS: I look good regardless of crown :))

Yes, you certainly do. So modest too...Endearing qualities. 😉

Posted using Partiko Android

This is apparently not just down under but the people with space capital (ie the 1% and smart money) are getting a gleam in their eyes and are rubbing their hands

Posted using Partiko iOS

Yes they are...I guess some make the best out of these situations though positioning themselves well in the first place.

Posted using Partiko Android

Interesting. I'd not heard of vendor discounting being a metric that's tracked; but it makes sense and it's not telling a pretty story at the moment. It's not like interest rates can come down any further; so I can't see it having a happy ending.

Nope, it certainly won't end well for many. Yes, the industry tracks everything and obviously I have to stay apprised of all the information. Some of it is pretty frightening to be honest and considering housing is linked so closely to GDP...A lot of pain on the way for many.

Posted using Partiko Android

Maybe some of the issue here is real estate agents over valuing property in this current market hence higher vendor discounting required. And it sure is not looking good for property values for some time. Glad I have no debts it is very freeing.

Posted using Partiko Android

Possibly, as some of the more average ones buy their listings through over-inflation of expected sale price although Agents know they won't sell at those prices and so in reality will generally work to reduce the vendors expectation prior to marketing to give them a chance to actually sell the property and get their commission payment. Over-quoting rarely pays any dividends to the Agent and often means no sale and therefore no commission payment.

I think you'll find that Agent over-quoting would be the most minute contributing factor to these metrics.

I think you'll find vendors expectation on price is a bigger factor. Agents are obligated to act under the clients' instruction at all times unless that instruction contravenes Legislation (law) and so either have to take the listing at the vendors desired price or walk away. Many take the work and hope the vendor adjusts their expectation.

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Yes I see the vendors wanting higher prices then what they are likely to achieve. Thanks mate :)

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Get the popcorn and firecrackers ready, this one is going to be one hell of a landslide. Pun totally intended. :)

Yep, agreed...I'd like to see some Smith's chicken chips in a bowl also...And some Tim Tam's...😂

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Things did get out of control there for a while and an adjustment was always going to be inevitable.

It's going to echo through the economic landscape for years to come though, the housing sector carried the country to a certain extent, especially when the mining boom slowed down. The artificially inflated housing prices were serving as bit of a buffer that obscured the true state of our economy.

With the drought, the downturn in mining (it's picking up in some areas though) and a largely eroded manufacturing sector we are starting to look a lot less rosy than we did 10 years ago.

Yes, I'm no expert of course however financial pain is imminent.

#economicarmageddon

Hmm... Maybe I should get some Aussie Dollars and buy some property down there!!! Just can’t get myself on a plane ride that long!

Posted using Partiko iOS

Well, it's probably not such a bad idea. Remember the sub-prime situation in the States not so many years ago? Loads of very cheap houses on offer then...Hundreds and thousands of them.

We'll see a return to those 2009/10 days when people were selling off "toys" cheaply too, you know: Speed boats, race cars, jewellery, beach houses, jet skis etc. Luxury items. I might pick up something cool! Cheep guns maybe?

Get a house down here mate, we'll indoctrinate you into being an honorary Aussie!

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