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House price discounting in Sydney has reached its highest level in almost three years as sellers are forced to slash prices in the declining property market.
Sydney houses sold for an average discount of 6.7 per cent to their original asking price over the three months to July, Domain data for private treaty sales shows. That equates to a discount of almost $104,000 for a house first advertised at the city’s median price of about $1.55 million.
Sydney’s sellers are slashing their price expectations by their highest level in almost three years.Credit:Peter Rae
It was the largest discount across the capital cities, and Sydney’s highest discount since September 2019, when the city was emerging from the previous market downturn.
Apartments sold for an average of 6.4 per cent less than they were initially advertised for, the largest discount since the June quarter of 2020. On a unit first priced at the median of about $791,000, that is a price cut of more than $50,000.
Domain’s chief of research and economics, Dr Nicola Powell, said it was a reversal from the early stages of the pandemic, when houses had smaller discounts than units, as buyers sought more space.
House prices are now declining faster after their greater growth during the market boom, Powell said, forcing house sellers to cut expectations further.
Rising discounting showed buyers that offers below advertised prices were commonly being accepted, Powell said. For sellers, it highlighted the importance of accurate pricing to secure a timely sale in a market where buyer demand and spending power had been reduced by rising interest rates.
“It takes a while for some sellers to embrace the new market … there is an element still of over inflated expectations, but also the market is moving every single month,” Powell said.
The largest discounts were in pockets of the inner west, north shore, eastern suburbs, northern beaches and inner city, where there was more price weakness, Powell said. But she expected more areas to follow suit in the months to come as price declines rippled across the city.
Though some unique homes were still smashing price expectations, they were now the exception, she added.
Vendors are slashing prices by more than 10 per cent in parts of the inner west.Credit:Peter Rae
In Sydney’s inner west, houses sold at an average discount of 11.2 per cent across the Marrickville, Sydenham and Petersham region. Prices dropped more than 8 per cent across suburbs like Ashfield, Strathfield, Leichhardt and Balmain.
Matthew Hayson, director of CobdenHayson, said private treaty house sales were in the minority in his market. Most houses were still listed for auction campaigns.
“I’m seeing auction guides reduced, and I’m seeing 10 per cent, 15 per cent, even 20 per cent drops in some cases,” Hayson said, particularly for B- and C-grade homes.
While some vendors had inflated expectations, it was also challenging to price a property in a rapidly shifting market, he said, as prices continued to fall during a sales campaign.
Buyer’s agent Henny Stier, co-founder of OH Property Group, said price reductions had surged on the north shore.
“We have noticed a huge amount of price reduction emails, they’re flooding my inbox … I have half a dozen from [Monday],” she said.
“Those are from vendors [who were] in 2021 mode, but potentially also agents who have quoted a higher price potentially to win business.”
The asking price for an entry-level Lindfield house recently dropped from $3.5 million to $3 million, after one week, Stier noted. Such a drop had become common, and some properties were recording multiple price cuts.
Fewer sellers are achieving the price that they hoped for, as competition for homes reduces.Credit:Peter Rae
Vendors in the Lane Cove and Chatswood region dropped prices most, with an average discount of 9.5 per cent, the data shows, followed by sellers in the North Sydney and Mosman region (down 8.3 per cent) and the Hornsby region (down 7.9 per cent).
B and C grade homes had the largest reductions, Stier said. However, reduced borrowing power meant many buyers had to make further compromises in their property search.
Seller satisfaction has been declining as prices fall, with a drop in homeowners selling at or above their price expectations last quarter, separate figures from RateMyAgent show.
In Sydney, about 26 per cent of sellers were happy with the price they achieved in the June quarter, down from 38 per cent the previous year, the agent reviews and ratings website found.
RateMyAgent chief executive Michael Davey said the results reflected inflated seller expectations, which were lagging rapid price declines.
“They have looked back at what people were achieving over the past 12 to 18 months when the market was hot, and I think that has driven a level of expectation,” he said.
He expected satisfaction levels would continue to fall in the coming months as the rising cash rate, and a potential spring boost in listings, put more downward pressure on prices.
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