As last week’s RP Data-Rismark Monthly Home Value Indices release detailed, all sectors of the market are now beginning to recover and now may be the time to look to reinvest in top end property.
Across the country the most affordable 20% of properties, the middle of the market and the top 20% of properties are now all recording increases in their values. After bottoming in the March quarter of 2009, the top end of the market has now begun to improve. The median value of Australia’s premium property market is still 8.1% below the March 2008 peak but early evidence suggests the top end is following the broader market into a recovery.
For those people that have the financial ability it now appears to be a good time to purchase more expensive properties at competitive prices. The prestige market has suffered due to few active buyers and a higher than normal amount of stock on the market which has led to price falls and reductions in the asking price of many homes that are being advertised for sale.
Our analysis this week focuses on the ‘discounting’ within Australia’s most expensive suburbs. The ‘discount’ refers to the average difference between the original asking price of a home and the ultimate selling price of a home. Nationally, the average rate of vendor discounting stands at about 5.6% for houses and 4.6% for units.
Of Australia's top 20% of most expensive suburbs which recorded 10 sales or more over the last 12 months, many have recorded much larger discount levels.
An interesting trend to note is that all of the suburbs detailed with the greatest average discounts for houses are situated adjacent to water. Western Australia clearly dominates the list with half of the suburbs detailed with nine of these being situated in Perth. Outside of Perth, Queensland has four suburbs listed with all of them located in either Brisbane or the Gold Coast. New South Wales also has four suburbs on the list with only Byron Bay outside of Sydney. Melbourne is the only other region included on the list with two entries.
When looking at the percentage of total stock listed for sale over the last 12 months you can see that these suburbs have also generally had a high level of stock available. Nationally the average percentage of total stock listed for houses sits at 7.8%. Across the 20 suburbs with the largest average discount 13 of these suburbs have had a greater than average amount of stock advertised for sale over the last 12 months. The most extreme examples are two of the Gold Coast’s suburbs: Paradise Point has had 15.1% of its total stock advertised for sales and Surfers Paradise has seen 14.7% of that suburbs stock listed in the last year.
Throughout the unit market there is also some significant levels of discounting however, the average levels are much smaller than those recorded for houses.
Like the results for houses, the vast majority of suburbs sit adjacent to water with Balmoral, Doncaster and Mount Waverley the exceptions. Queensland suburbs dominate the list of units with the greatest discount accounting for half of the suburbs, all of which are found in Brisbane, the Gold Coast or the Sunshine Coast. New South Wales has the second greatest supply with five of the 20 suburbs detailed, all of which are in Sydney whilst Melbourne has three entries and Perth has two.
On average, suburbs with 10 or more unit sales during the year have recorded 8.0% of their total stock advertised for sale during the last year. Across the 20 suburbs detailed, their average level of stock listed for sale is 8.5% however, only six of the 20 suburbs have had more than 8.0% of their total stock listed for sale. Like the results across the housing market, coastal areas of Queensland have recorded some of the largest levels of stock on the market with Twin Waters seeing 27.0% of its total unit stock put up for sale last year and Hope Island recording 21.0%
The clear trend throughout both lists is that suburbs located adjacent to water are the ones which have been hampered by the greatest level of discounting whilst they have also seen above average levels of stock come to the market during the last year. With the upper end of the market showing the first signs of improvement, but with prices still well below peak and potential buyers remaining thin on the ground, now is clearly the best opportunity to get a competitive price on a high quality property before buyers become more active.
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