Are you stuck trying to decide exactly when and where to invest in property? Vendor Discounting statistics may be your answer.
Don’t worry, you're not alone in trying to pick the best locations from over 15,000 suburbs countrywide. There are countless stories of property buyers finding their property market research overly time consuming and (after fighting off the biased property spruikers) they buy on emotion, only to regret this later as their portfolio stalls on one or two properties and costs them each month in negative gearing.
But there is a different way to pick the best areas for your budget using a proven method that relies on hard facts and very smart data-driven research technology.
It all starts with 9 powerful property market indicators that, together, calculate the gap in supply and demand (and therefore capital growth potential in every suburb) for you so you can get back to spending time with your friends and family knowing your property investment portfolio is working hard for you and not the other way around.
Let’s examine one of these 8 powerful property market indicators… Vendor Discounting.
(You can read the whole blog series by using the links in the '9 Supply-Demand Indicators' block)
9 CAPITAL GROWTH INDICATORS
What is Vendor Discounting?
Vendor Discounting is the percentage difference between the original listed asking price of a property and the eventual sale price of that same property.
For example, if a property is listed for $650,000 and it eventually sells for $600,000, then the Vendor Discount is $50,000. Expressed as a percentage, this is the Vendor Discount of $50,000 divided by the asking price of $650,000 x 100 = 7.69%.
The Vendor Discounting indicator is important as it indicates how hard the sellers in a particular area need to negotiate to sell. If sellers are struggling to sell they will lower the asking price, offering a discount… and this generally lowers property prices in the area. If the area is popular and prices are increasing then sellers won’t need to discount and buyers will need to complete, often raising asking prices, to get the property they want.
NEGATIVE Vendor Discount Percentage
Vendor Discounting is the percentage difference between the advertised price and eventual sale price. Where the vendor achieves a higher price than the original listing price then, counterintuitively, the vendor discount is a negative percentage and is indicative of a very hot market.
Vendor discounting is averaged over a rolling 12 months which means when the market begins to cool, a negative percentage may persist but will noticeably move towards a positive percentage over the ensuing months.
Where can you get Vendor Discounting stats?
Unfortunately, Vendor Discounting data is not freely available in the public or online domain and would have to be calculated by monitoring all property listings and their eventual sale price for at least a month to work out the average Vendor Discounting rate for a particular suburb. That’s a massive task even for a data guru! And then you would have to collate and compare this data for 15,000 suburbs - a challenge even for the Excel spreadsheet data scientist in all of us.
Of course, we have made this easy for you with our suburb research tool, Boomscore! Check the Vendor Discounting stats for 15,000+ suburbs split by units and houses in Boomscore’s Suburb Profiler. Who knows, if all the other indicators support a low Vendor Discounting figure, then you may be the first to spot a suburb set to Boom.
BOOMSCORE - BIG DATA & ARTIFICIAL INTELLIGENCE (AI)
Big data and AI capability makes it possible for the Boomscore capital growth calculator to crunch the data for each of the 15,000 Australian property markets. A task few could do manually even if they knew how. Boomscore simply means you can now find safer locations where prices are most likely to increase faster. Over the past 10 years, Boomscore’s data algorithms have outperformed the ‘hotspot’ picks of some of the more recognised property market research gurus. In fact my (then) 6 year old daughter showed them how easily it’s done using just a few clicks on Boomscore (read how).
Boomscore rates every suburb (by house or unit) out of 100 based on how they perform across the 8 supply-demand indicators in this series. The higher the Boomscore, the more demand exceeds supply, which greatly increases the probability of property value rises in that location for that property type. Get Boomscore.
But be careful when it comes to Vendor Discounting ...
Sometimes the discount reflected in the data might not be accurate, and I’ll explain why.
Many of us have been there before … We’ve gone with a real estate agent because they promise us an appealing selling price on our home, only to have to eventually reduce the sale price in order to sell. This usually happens in a thinly traded market, where there is not much stock for sale and huge competition between real estate agents. A market with upwards of six sales per month is more likely to have a reliable reflection of Vendor Discounting. Make sure you check the trends in the data over several months to get an accurate picture of what is happening.
In closing ...
Property prices, and therefore capital growth potential, are influenced by a number of factors. If you understand these factors and how to work with the capital growth indicators available to you, then there is no reason why you can't find the best investment locations to suit your strategy.
There are 15,000 suburbs in Australia - that’s 30,000 property markets (if you take into account the Unit and House markets in each suburb). Despite what the macro property market is doing, there are always viable micro markets out there… and it may come down to one particular street in one particular suburb. In order to find these nugget suburbs you need to compare the data for all 15,000 suburbs (and 30,000 markets) against one another to rank order them and let the cream of the crop float to the surface. And to crunch the numbers you need to have a good understanding of the importance of the data and how to work with it to find or track your chosen suburbs.
If any of our blogs on the subject have peaked your interest, you can download our Free Essential Guide to Property Market Research, or attend our in-depth (but affordably priced) online property research training course (check back as it is coming soon). And we encourage you to use Boomscore, our tried and tested suburb ranking tool to get you started.
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