Where home buyers can score the biggest bargains now

House sellers are slashing their prices by hundreds of thousands of dollars as fresh listings rise before spring.

Source: Financial Review

House sellers in some of the country’s most prestigious areas are slashing their prices by up to $345,000 to lure cautious buyers as listings pile up before the spring selling season, data from CoreLogic shows.

The earlier than usual flood of fresh stock on the market, along with softer demand in Sydney and Melbourne, is giving buyers who can get finance the sort of bargaining power not seen in years, experts say.

Melbourne investor Kit Gunasekara is among those aiming to take advantage of the buying opportunities in the city. He plans to snag two properties to add to his growing portfolio.

He is in the process of getting his mortgage pre-approved so he can pounce when the right deal comes along.

“I think everything is lining up in the favour of buyers, particularly in Melbourne,” he says.

“Listings are through the roof and there’s less demand because people are still a little bit cautious getting into this market due to the tax and regulatory changes in Victoria.

“For me this represents a perfect buying window to get in early before the market starts rising again.”

CoreLogic head of research Eliza Owen says sharp price reductions and an influx of listings in the upper end reflect the weaker economic conditions and high interest rate environment.

“The high end of the market is the most impacted [by rates] because there’s less demand for the more expensive properties,” she says.

“For those who can afford it, it might be advantageous to pivot your attention back to that top-end segment where price growth has slowed most substantially or fallen in some cases.”

Owen is referring to the upper 25 per cent of the housing market by value. In Sydney, that is houses priced from $2.2 million and in Melbourne $1.3 million as at July.

This could be a bit of a wake-up call for prospective buyers who have been waiting for more favourable buying conditions.

— Eliza Owen, CoreLogic

AMP chief economist Shane Oliver says the hefty discounting could indicate some distress among home owners.

“Some people in the affluent suburbs have probably found themselves in a bit of financial difficulty given the sharp rise in mortgage repayments, so they’re more inclined to get out now and buy something cheaper,” he says.

“I think talk of interest rates not falling until the middle of next year are triggering some people to sell up if they feel they can’t hold on that long.”

Fresh listings climbed 12.5 per cent in Sydney over the past four weeks to August 18, while Melbourne listings rose 6.8 per cent.

New stock is sitting 17.7 per cent and 44.7 per cent above the five-year average respectively, according to CoreLogic.

Owen says the surge in new listings is turning some of the more expensive suburbs in the country into buyers’ markets.

“This could be a bit of a wake-up call for prospective buyers who have been waiting for more favourable buying conditions to get into those areas,” she says. “Given the large increase in stock, this could force sellers in those markets to discount even further if they want to get the deal done this spring.”

Where sellers are slashing prices

Sydney

In Sydney, the sharpest discounting is occurring in the Dural-Wisemans Ferry area, where house sellers are cutting their prices by 7.6 per cent or the equivalent of $218,000.

Vendors in the northern section of Sydney’s eastern suburbs, where the median price is $4.8 million, are dropping their prices by 6.7 per cent, equating to $345,338. That is the largest in the country in dollar terms.

Sellers in the Chatswood-Lane Cove area are also chopping their prices by 6.7 per cent, equivalent to a reduction of $251,548.

Buyers can score a 5 per cent discount amounting to $232,360 for an average house in the North Sydney-Mosman area, and knock off 7 per cent, or $190,297, in Pittwater.

In Ku-ring-gai, sellers are cutting 5.3 per cent, or $187,505, off their prices, and in the Strathfield-Burwood-Ashfield area, they are reducing by 5 per cent, or $127,512.

Amanda Gould, a buyer’s agent with HighSpec Properties, says some vendors are becoming desperate to sell as interest rates stay high for longer.

“I think people have been really wary of high interest rates, and we’ve seen a lot of forced sales with large price reductions,” she says.

“When we look at those properties, the sellers have bought around three years ago so obviously higher interest rates are impacting some people.

“There’s not as many buyers in the market right now. A lot of auctions will only have one or two people and more properties fail to sell.”

Thomas McGlynn, chief executive of Sydney real estate agency BresicWhitney, says demand has softened as buyer sentiment soured in the past three months.

“Buyers are becoming more hesitant to pursue properties and those who are active are steadfast on their limits,” he says.

“That’s why you’re starting to see sellers, if they want to sell, they have to reduce their asking prices.

“This is becoming more prevalent in the blue chip areas where vendors are cutting their reserves to meet the market because there are fewer buyers competing for those properties.”

Separate analysis by Kent Lardner, founder of property data analytics firm Suburbtrends, shows Killara on the upper north shore and Little Bay in the eastern suburbs are also becoming more favourable for buyers.

Killara’s inventory level of 4.23 months is slightly below the threshold for a buyer’s market. However, the sharp increase of 83 per cent in listings over the past three months signals a potential shift in market conditions, Lardner says.

“With more properties entering the market, buyers may begin to see more favourable terms, though sellers are likely still holding some control given the suburb’s high price point,” he says.

Little Bay is also edging into a buyer’s market with an inventory level of 4.44 months’ worth of stock as listings in the suburb nearly tripled with a lift of 180 per cent in the past three months, according to Lardner.

“This dramatic influx of properties may start to tilt the balance in favour of buyers, particularly if the trend continues and days on market begin to lengthen,” he says.

Melbourne

In Melbourne, buyers could bag a discount of up to 5.8 per cent, equalling $131,200, when buying a house in western part of Stonnington, according to CoreLogic.

They can also pick up discounts amounting to $141,482, or 5.5 per cent, in Stonnington East and a 5 per cent, or a $118,404, reduction in Bayside.

Sellers are chopping 4.2 per cent, or $104,292, in Boroondara, shaving their prices by 4.9 per cent, or $79,648, in Essendon and lowering by 4.4 per cent, or $72,452, in Yarra.

Buyer’s agent Cate Bakos, of Cate Bakos Property, says owners of expensive sites offering renovation or development opportunities are among the most motivated sellers.

“Those who are land banking sites are finding that the interest bills are tougher than anticipated so they’re forced to sell,” she says.

“Vendors who are experiencing low cash flows and high outgoings are also more likely to offer discounts.”

Suburbtrends’ Lardner says buyers can also drive a hard bargain in Burnside, Officer and Manor Lakes amid surging listings in those suburbs.

Burnside’s inventory level exceeds 12 months, suggesting buyers have a significant leverage in negotiation, he says.

“Sellers may need to adjust their pricing strategies to attract interest in a market that is clearly favouring buyers.”

Lardner says Officer also stands out as a strong buyer’s market as inventory level swells to 9.45 months’ worth of stock.

Listings in the suburb jumped 44 per cent in the past three months. When combined with high inventory, that gives buyers a significant advantage to drive a deep discount, he says.

Manor Lakes’ inventory level has blown out to 10 months’ worth of stock as listings climbed by 9 per cent in the past three months.

This may force sellers to reduce their prices to compete with other vendors, Lardner says.

For investors, Arjun Paliwal, head of research at buyer’s agency InvestorKit, is also tipping Melbourne’s Tullamarine-Broadmeadows, Melton-Bacchus Marsh, Cardinia, Wyndham and Brimbank as areas offering bargains.

Inventory levels in those areas are sitting between 3.4 and 4.7 months’ worth of stock as listings jumped by as much as 34.2 per cent in the past 12 months.

Though buyers in Brisbane, Adelaide and Perth can pick up some discounts in some areas, the tight listings in those markets remain favourable for sellers.

Experts’ top tips for spring buyers

Arjun Paliwal, InvestorKit

• Don’t rush. What may feel like a good deal could get even better as sellers have more desire to reduce as the property sits on the market for longer.

• Attend auctions. They can be a great place to get a good deal with fewer buyers attending them, making sellers more open to negotiate.

• Look for renovator properties. They can be ideal to buy during these cycles because on top of a weak market, many sellers don’t want to put in further funds to renovate. But at the same time, many buyers get put off.

Cate Bakos, Cate Bakos Property

• Don’t assume it will sell above the quoted range.

• Be prepared to put in an unconditional offer after due diligence.

• Be credit-ready. It’s more powerful.

• If you can buy in the inner ring, consider doing so. Scarcity is significant in the inner ring.

Scott Kuru, Freedom Property Investors

• Don’t waste your time looking for “bargains”. They should come to you. High interest rates, high rents and the cost of living have either forced or scared many potential buyers out of the market, meaning that if you can afford a property now, there is less competition for quality properties.

• If you find a house you like or a great investment-grade property, make a silly offer and work up from there. You may find a vendor might accept a low-ball offer because they are terrified there are suddenly lots of competing properties on the market when there were only a couple in winter.

• Exploit the lack of competition now to get a good deal on a property because you will most likely be priced out of the market when rates come down and everyone sitting on the sidelines gets FOMO and floods back, further fuelling price growth.

• Make the most of the spring market. A lot of potential buyers will be sitting on the sidelines because they’re either worried about high interest rates or they mistakenly think prices will come down.