The market is picking up, and the worst of the downturn seems to be over.
Buyer demand is also picking up, and with the available stock still low, more properties are selling above the asking price than at the beginning of the year. This is helping to support home values.
When a property sells below the first advertised price, it is referred to as vendor discounting and is one of many measures used to gauge the property market's health.
In June, the share of properties sold for less than the asking price decreased compared to the start of the year. There has also been an increase in the share of sales over the asking price and an increase in the share of sales at the asking price.
If this trend continues, home values will continue to rise.
If more properties are selling below their asking price, it is a sign that demand is lower, and prices would likely be falling.
Discounting happens when the market begins to soften and prices begin to fall.
As vendors and agents price properties based on recent sales, there can be an expectation gap between what buyers see in the market and what vendors believe their home is worth. After all, a property is only worth what a buyer is willing to pay.
In contrast, an increase in the share of properties selling above the asking price suggests that vendors' expectations for what their home is worth are actually underpriced because strong conditions and demand drive up prices quicker than expected. For example, in the lead-up to the pandemic, the share of sales selling below the asking price was high, as the market had been going through a slump.
The share of properties selling below the asking price was just beginning to decrease when Australia went into lockdown, causing an increase.
But, as the property market adjusted to the initial shock of the pandemic and subsequent lockdowns, properties selling for less than their asking price decreased significantly and reached their lowest level in years.
The current data indicates that the market is again at a turning point, with fewer properties selling for less than the asking price and more selling for the asking price.
In October 2021, over 70% of sales were at or above the asking price.
However, talk of impending interest rate rises created uncertainty amongst property seekers, subduing the market. And by the first rate rise in May 2022, the share of properties selling for less than the asking price increased.
Last month, 47.2% of properties sold for less than the asking price. This is still reasonably high; however, it is lower than six months ago and lower than the peak in January 2019, when it reached 69.7%.
All capital cities, except for Hobart, have seen the share of sales below the asking price decrease since the beginning of the year, with a higher share of properties selling for the asking price or above.
Sydney has experienced a significant increase in the share of sales at the asking price or above, the largest rise of all the capital cities. But Perth and Brisbane have both also seen an increase in share from January to June.
The regional areas are taking longer to rebound. Queensland and Western Australia have experienced increased sales at or above the asking price; however, the other states are taking longer to improve.
Metro areas have been performing stronger, with higher rates of sales above the asking price.
Perth home prices have defied the downturn, and home values have still to reach their peak, despite nearly all other cities reaching their highest and lowest points in 2022.
Five of the six SA4 regions that make up Perth Metro have the highest percentage of sales going for more than the asking price.
The other five regions in the top 10 are in Queensland and South Australia, mostly the Brisbane SA4 areas.
Although strong demand is driving up prices in the cities, there is a different story in regional areas.
Areas that boomed during the pandemic are starting to see the froth come out of the market. This is apparent in some “lifestyle” areas such as Richmond - Tweed, home to Byron Bay.
Six of the top ten regional areas with the largest proportion of sales below the asking price are in NSW.
After significant price growth in these areas, we are starting to see some evidence of a rolling back of the regional revival seen during the pandemic in some parts of the country.
Despite fewer properties for sale during the winter months, auction clearance rates are still strong, and sales volumes are higher than in the latter part of 2022.
There may be further interest rate rises, but after 12 increases since May last year, the end is likely in sight. Market expectations are for a further one to two interest rate increases.
With this combination of high demand and low listing volumes, the number of properties selling for less than the asking price will drop further, driving up home prices in the near term.