Price cuts on the rise as vendors move to sell during coronavirus pandemic

Sydney sellers are revising property prices more frequently and dropping them further than their Melbourne counterparts during the coronavirus pandemic, new figures show.

Sellers across the country are adjusting price expectations in a bid to sell, but Australia’s biggest markets – Sydney and Melbourne – are likely to bear the brunt, with their market rebounds stopped in their tracks.

About 14.1 per cent of Sydney properties for sale in March had their prices revised, Domain data shows, with changes a little less likely in Melbourne – where about 12.6 per cent of property prices changed – as the threat of coronavirus ramped up in Australia.

Sydney and Melbourne properties had more price changes in March than at any point in the market downturn, according to Domain senior research analyst Nicola Powell. However, the size of the price cuts was more subdued.

“The downturn happened over a period of time, whereas this had been a [complete] switch that happened in March, the government switched off business, they switched off the economy … and that’s going to quickly stop [the] level of transactions,” Dr Powell said.

Sydney prices dropped an average of 4.36 per cent, a price cut of close to $51,000 for a vendor expecting the city’s median house price, which was $1,168,806 in the March quarter, according to the latest Domain House Price Report. Melbourne listings dropped an average of 4.07 per cent, or about $37,380 on the city’s median of $918,350.

“This has probably been the quickest vendors have moved in any downturn that I’ve seen,” said Sydney agent Matthew King of McGrath, who felt sale prices in his market had already dropped 10 per cent.

While there were some vendors in denial, Mr King said, most had accepted the need to adjust prices and were acting swiftly due to concerns of further falls. Downsizers had adapted surprisingly quickly, he added, with many willing to take a hit on their sale as they could also purchase for less.

With house prices in both markets recording double-digit percentage growth over the past year and an increase in listings, Dr Powell said a pivot in asking prices was to be expected when the economic impacts of COVID-19 and market restrictions hit.

“What this shows is that more vendors out there are concerned about what lies ahead – they’re adjusting their prices to get that timely sale,” Dr Powell said.

Domain data shows those who got sales across the line last month dropped prices even further. While the discounting rate was lower year-on-year, it was likely to track higher in the coming months, Dr Powell said, noting market restrictions began in late March.

Sydneysiders offered discounts of an average of 5.91 per cent to sell a house and 5.37 per cent to sell a unit. The discounting rate for houses was slightly lower in Melbourne at 5.78 per cent, but higher for units at 6.06 per cent.

Perth had the highest discounting rate for both houses and units, at 8.38 and 8.93 per cent respectively, but Dr Powell said Sydney and Melbourne markets would likely be more affected by the pandemic, as their housing demand was more reliant on migration and their economies could be harder hit.

Dr Powell added Sydney tended to lead price falls and rebounds, with steeper losses and recoveries. She felt Sydney agents, prior to coronavirus, may have been more bullish with expectations due to the market’s sharper recovery, while legislation around selling prices in Victoria could result in less price revisions from Melbourne agents.

Steven Abbott, managing director of Jellis Craig, said Melbourne property prices had fallen between 5 and 10 per cent across the city. He felt the lower rate of price revisions could be due to the city’s more tempered recovery in the previous months.

“I think the next phase will be greatly influenced by the [level of] economic impacts that are to come through, particularly once government benefits and bank and rent deferments all start to wane down in six months’ time,” he said.

Mr Abbott said sellers meeting the new market were typically getting multiple private inspections a week, off the back of 10 to 15 inquiries. He noted while about 30 per cent of vendors who hit the market in March and April had decided to withdraw or hold off selling, others were pushing ahead with their plans.

Buyers’ agent Peter Kelaher said the Sydney vendors who were happy to negotiate were those who had only recently come onto the market.

“The vendors with a March campaign, they were vendors who were told a price before coronavirus really hit and they’re not ready to actually get out of home and try find another home unless they get the price that they want,” Mr Kelaher said. “They’re being unreasonable, they’ll just come off the market and the new market will start in May.”

He expected prices across Sydney could drop by 10 per cent as home owners looking “to test” what their home was worth disappeared and more serious sellers – with realistic expectations – hit the market in the coming weeks and months. However, he noted the limited number of homes going for sale would cushion the market against more substantial price falls.

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