Nationwide house prices rose for a sixth straight month and rose a further 0.3% in June. As a result, home prices across the country are now only 0.1% lower than they were a year ago.
Markets are recovering and the worst of the economic downturn appears to be over.
Demand from buyers has also increased and more properties are selling above asking prices than at the beginning of the year as available inventory is still low. This helps support family values.
When a property sells below its original posted price, this is called a vendor discount and is one of many measures used to assess the health of the property market.
In June, the percentage of properties sold below asking price decreased from the beginning of the year. The share of sales above asking price also increased, as did the share of selling at asking price.
More and more properties are selling for more than the asking price. Source: Getty Images.
If this trend continues, house prices will continue to rise.
What can you tell about the market by the amount of properties that are selling above or below the asking price?
If more properties are selling below the asking price, it’s an indication of falling demand, and prices are likely to fall.
Discounts occur when the market starts to soften and prices start to fall.
Vendors and agents price properties based on recent sales, which can create an expectation gap between what buyers see in the market and what vendors believe a home is worth. . After all, a property’s value is only what the buyer is willing to pay.
In contrast, an increase in the percentage of properties selling above asking price means that sellers’ expectations of home value are actually underestimated as favorable conditions and demand drive prices up faster than expected. It suggests that For example, pre-pandemic markets were weak, resulting in a high percentage of sales below the asking price.
When Australia went into lockdown, the proportion of properties sold below asking price had just started to decline, causing an increase.
But as the real estate market adapted to the initial shock of the pandemic and subsequent lockdowns, the number of properties selling below asking prices dropped significantly, reaching its lowest level in years.
Current data indicates that the market is once again at an inflection point, with fewer properties selling below the asking price and more properties selling at the asking price.
In October 2021, more than 70% of sales were above the desired price.
The market is now at a tipping point as interest rates have pushed prices down. Source: realestate.com.au
But talk of an imminent interest rate hike created uncertainty among property buyers, and the market faltered. And by the first rate hike in May 2022, the percentage of properties selling below the asking price increased.
Last month, 47.2% of properties sold below the asking price. This is still quite expensive. However, this is lower than half a year ago and lower than the January 2019 peak of 69.7%.
Capital and local vendor discount levels
All capital cities, except Hobart, have seen a decline in the share of below asking price sales since the beginning of the year and an increasing share of properties selling above asking price.
Sydney saw a significant increase in the share of sales above asking price, the largest rise of any capital city. However, Perth and Brisbane also increased their share from January to June.
The region is taking time to recover. Above offer sales increased in Queensland and Western Australia. However, other states are slow to improve.
Performance in metropolitan areas is strong, with a high sales rate that exceeds the asking price.
Perth’s home prices have braved the slump, and while nearly every other city will reach highs and lows in 2022, house prices have yet to hit their all-time highs.
Regions with the most sales above asking price
Five of the six SA4 regions that make up the Perth Metro have the highest percentage of sales and exceed the asking price.
The other five regions in the top 10 are Queensland and South Australia, mostly in the Brisbane SA4 area.
Regions with the most sales below asking price
Strong demand is pushing up prices in cities, but it’s a different story in rural areas.
Markets are starting to bubble in areas that boomed during the pandemic. This is evident in some “lifestyle” neighborhoods such as Richmond-Tweed with Byron Bay.
Regions with the Highest Percentage of Sales Below List Price Six of the top 10 regions are in New South Wales.
After significant price increases in these regions, some parts of the country are beginning to show evidence of a reversal of the regional recovery seen during the pandemic.
In Perth, more and more properties are selling above asking price.
What this means for the property market in the coming months
Despite a decline in properties for sale during the winter months, auction sales are still strong and sales volumes are higher than in late 2022.
There is also the possibility of further rate hikes, but after the 12 rate hikes since May last year, it seems that the end is in sight. The market expects one or two more rate hikes.
This combination of high demand and low listings will further reduce the number of listings selling below asking prices, driving home prices higher in the short term.