For prospective home buyers, as well as those looking to sell, understanding the balance between buyers and sellers in your local market is an important facet of deciding whether now is a good time to buy or sell in the housing market.
In simple terms, when demand is outweighing supply, selling conditions are generally very favourable towards the seller; however, when the opposite is true and supply is high while demand is lower, buyers generally hold the upper hand and can drive a harder bargain at the negotiation table.
There are a few ways to measure the fit between buyers and sellers. One is to examine advertised stock levels in the market. If total listings numbers are rising, it’s a good sign that homes are taking longer to sell and buyers may be empowered. If total listing numbers are low, this could imply short supply and sellers won’t have to budge too much on their prices.
Advertised stock levels are very different from city to city and region to region around Australia. Across our capital cities combined, listing numbers are trending higher, with listing counts through to the middle of June 2016 tracking 12% higher than a year ago. Despite the higher advertised stock levels, listing numbers remain almost 25% lower than the highs seen during late 2011 when the housing market was moving through a correction. The only capital cities where listing numbers have trended lower are Canberra (-10% from a year ago) and Hobart (-29% compared with last year).
As stock levels move higher, buyers will have more properties to choose from and sellers will need to compete more fiercely with other homes on the market which implies that home vendors may be forced to discount their prices by a larger amount in order to make a sale.
The effect of higher stock levels can already be seen in other measurements. The typical selling time has started to rise, moving from an average of 36 days to sell a home across the combined capitals cities in November last year to 43 days by the end of April this year. The longest capital city average selling times can be found in the weakest markets where listing numbers have moved substantially higher. Homes in Darwin are averaging 97 days to sell and Perth homes are averaging 62 days. The fastest selling times are still in Sydney and
at 39 and 36 days respectively, however the average numbers of days to sell are edging higher in these cities as well.
The rate of vendor discounting is also affected by higher stock levels. Vendor discounting is calculated as the percentage difference between the original listing price of a property and the ultimate contract or sale price. Discounting measures provide an indication about how much sellers needs to reduce their prices in order to make a sale and also give some insight about how much buyers can potentially negotiate on price. Across the capital cities, the average level of vendor discounting is holding reasonably firm, with vendors reducing their asking prices by 5.8% which is the same amount as a year ago.
Once again, the cities where stock levels have moved substantially higher are showing larger rates of discounting from vendors. Darwin vendors are discounting their asking prices by an average of 9% and Perth vendors are applying an average discount of 7.3%; however in both cities, the rate of vendor discounting appears to have peaked after reducing over recent months.
The smallest vendor discounts are being applied in Canberra (4.1%), Melbourne (4.6%) and Sydney (5.1%), indicating the vendors may still hold the upper hand at the negotiating table in these markets.
It’s clear that buying and selling conditions vary substantially across different cities and regions, and will vary even more across individual suburbs and property types. The key thing for buyers and sellers is to make sure you research stock levels in your local market to assess the competition and balance between buyers and sellers.
It might also be worth sellers’ employing some clever styling strategies to make your home stand out in a buyer’s market.
Are you planning to buy or sell? What are the market conditions like in your area?