National Media Release

RP Data Weekly Property Pulse

Released: Thursday 28 March 2013

Less discounting required to sell a property Owners of properties currently listed for sale will welcome the results of RP Datas recent analysis on vendor discounting wh ich confirmed that since average levels of discounting started to trend down across Australias combined capital cities in late 2011, this trend has continued into 2013
Based on a collection of results to January 2013, RP Data research analyst . Cameron Kusher confirmed that at the point of contract, the average discount on a typical home was -7.5 per cent from its initial list price; across the combined capital cities the figure was lower at -6.4 per cent. At the same time last year, discount levels were recorded at a greater -8.1 per cent nationally, and, -7.2 per cent across the combined capital cities. Across most capital city housing markets the level of vendor discounting in January 2013 has improved compared to that in January 2012. The exceptions were: Melbourne a shift of -7.1 per cent a year ago to -7.4 per cent Hobart a shift of -9.4 per cent from -7.8 per cent. Across the individual capital cities, vendor discounting was measured at: Canberra (-3.9%) Darwin (-4.0%) Sydney (-5.4%) Perth (-5.6%) Hobart (-9.4%) Brisbane (-8.3%), Melbourne (-7.4%) Adelaide (-6.9%) According to Mr Kusher, if sellers have to apply fewer discounts in order to sell a property, it is a positive sign for the housing market. Sales activity offers another positive sign for stronger housing market conditions where over the second half of 2012, RP Data reported that sales volumes were almost 8 per cent higher compared to the first half of 2012. Capital city home values also increased by 3.3 per cent between May 2012 and February 2013. This spike in activity equates to a higher level of competition amongst buyers at a time when there are fewer homes available for sale. Lower levels of discounting by vendors can also mean that sellers are becoming more realistic about their final sale price. Having said that, there is always going to be a level of negotiation on price, Mr Kusher said. Ongoing value falls between October 2010 and May 2012 at a national level has meant that vendors may now realise that with fewer active buyers, they are unlikely to attract a sale price as high as in 2009 when market conditions were much stronger, Mr Kusher said. Based on the findings in the vendor discounting analysis, and as highlighted in the adjacent graphs, there is a relationship between home value growth and vendor discounting. For the analysis, Mr Kusher inverted vendor discounting and then compared it to the quarterly change in capital city home values where the correlation confirms that values begin to rise on a quarterly basis and the level of discounting in the market reduces. Over the period between January 2005 and January 2013, the result shows that there is a 78.7 per cent correlation between the two measures. With home values continuing to increase over more recent months we would expect that the level of discount over the coming months will produce further improvements in the level of discounting by vendors. An improvement in levels of vendor discounting is also expected to be supported by higher auction clearance rates evidenced so far in 2013 and the recent increase in sales transactions and lower number of properties available for sale particularly new properties being listed for sale, Mr Kusher said.

Average level of discounting by vendors across Australia

0.0% -1.0% -2.0% -3.0%

-4.0%
-5.0% -6.0% -7.0%

-8.0%
-9.0% Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Jan-13

Source: rpdata

Average level of discounting by vendors across the combined capital cities

0.0% -1.0% -2.0% -3.0%

-4.0%
-5.0% -6.0% -7.0%

-8.0%
-9.0% Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Jan-13

Source: rpdata

Average level of discounting (inverted) vs. quarterly change in capital city home values
10.0%
Vendor discounting (inverted) 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% Jan-05 Quarterly change in home values

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Jan-13

Source: rpdata

Average level of discounting by vendors over time across individual capital cities
0.0% -1.0%

-2.0%
-3.0% -4.0% -5.0% -6.0% -7.0% -8.0%

-9.0%
-10.0%

2009 Sydney

2010

2011

2012

2013 Adelaide Perth Hobart Darwin Canberra

Melbourne

Brisbane

Source: rpdata

DISCLAIMER In compiling this publication, rpdata.com has relied upon information supplied by a number of external sources and RP Data does not warrant its accuracy or completeness. To the full extent allowed by law RP Data excludes all liability for any loss or damage suffered by any person or body corporate arising from or in connection with the supply or use of any part of the information in this publication. RP Data recommends that individuals undertake their own research and seek independent financial advice before making any decisions. 2012 RP Data Ltd.