In falling markets like Sydney and Melbourne, today’s buyers have much more wiggle room when it comes to negotiating price. But how much exactly?

We all know that median house prices in both cities are down 10-15% but buyers shouldn’t automatically apply this to asking prices. The wiggle room is less than this and I’ll explain why.

Most vendors have now accepted that the market has dropped and they have adjusted their price expectations accordingly, which means some of that 10-15% has already been factored in when a property hits the market with an initial asking price or auction guide.

A recent report from CoreLogic gives a clearer picture of the wiggle room available for buyers.

The report covers the median vendor discount in every capital city. The vendor discount is the percentage difference between the initial asking or advertised price and the actual sale price.

In Sydney, the median vendor discount over the three months to January was -7.5%.  Very generally speaking, this is how much vendors are willing to negotiate with to get a sale.

This figure provides a clear demonstration of the negotiating power of buyers, with today’s discount actually larger than was recorded during the GFC. Just a year ago, vendor discounting was much lower at -4.8%.

In Melbourne, the median vendor discount is -7%. That’s twice what it was 12 months ago and the highest vendor discount ever recorded for the city.

There’s less wiggle room in other capital cities but those that are weakening (i.e. those with increasing vendor discounts) are doing so much more slowly than Sydney and Melbourne. 

·       Brisbane has a median vendor discount of -5.3% compared to -4.4% a year ago

·       Adelaide has a median vendor discount of -5.3% compared to -4.8% a year ago

·       Perth has a median vendor discount of -6.4% compared to -6.5% a year ago

·       Hobart has a median vendor discount of -4.2% compared to -3.8% a year ago

·       Canberra has a median vendor discount of -2.9% compared to -2.3% a year ago

Source: CoreLogic. Darwin excluded due to very low sale volumes

Market conditions in many regional areas have weakened in 2019, with home prices falling over recent months. This has led to larger vendor discounts everywhere except regional Tasmania.

·       Regional NSW has a median vendor discount of -4.9% compared to -4% a year ago.

·       Regional VIC has a median vendor discount of -4.3% compared to -3.8% a year ago (although higher over the past year, today’s discount is actually much lower than in recent years).

·       Regional QLD has a median vendor discount of -6.7% compared to -5.3% a year ago.

·       Regional SA has a median vendor discount of -6.8% compared to -6% a year ago.

·       Regional WA has a median vendor discount of -8.2% compared to -7.7% a year ago.

·       Regional TAS has a median vendor discount of -4.4% compared to -4.6% a year ago.

CoreLogic says housing markets across the country are continuing to deteriorate but all at a different pace. There are fewer buyers but more homes for sale, so vendor discounting might increase further over coming months.

In softer markets, vendors need to listen to their agents and pay attention to comparable sale prices.

The temptation to start your campaign with a ‘dream’ asking price will backfire in these market conditions. Your property will be seen as an ‘old listing’ the longer it is advertised, which reduces its appeal to both current and new buyers in the marketplace. You need to start with a realistic price.

During the campaign, buyer feedback will provide the best indication of whether further price adjustments are needed to achieve a sale.

Good agents will always communicate buyer feedback to their vendors openly and honestly. This is the most important and reliable way of determining a likely ballpark sale price.

If vendors are realistic, flexible and responsive to feedback, agents have a better chance of generating enough buyer competition to flush out the best price possible for their clients.