Sydney's auction market is proving resilient, with the clearance rate holding steady last month despite a surge in new listings that have been described as a “test of buyer appetite”.
The latest Domain auction report card, released Wednesday, showed Sydney recorded a clearance rate of 58.2 per cent in July from almost 2200 scheduled auctions,
“We saw an influx of auction listings which tested buyer appetite,” said Domain senior research analyst Nicola Powell.
The clearance rate did fall marginally month-on-month, dropping 0.1 percentage points, but this was off the back of a 14 per cent increase in homes scheduled for auction.
“The fact we've seen clearance rates hold over July indicates stability in the market. Clearance rates have been holding consistently in the high-50s for three months now.”
Auction numbers were up 83 per cent from May and 64 per cent year-on-year, making it the busiest July since 2017.
While some home-owners may be bringing forward plans to sell in spring, Dr Powell said, the busier than usual winter months were largely due to the pause in sales activity earlier this year.
“In July, we've seen those homes that were meant to hit the market in April and May coming on,” she said.
Houses performed stronger than units over the month, with respective clearance rates of 60.2 per cent and 54.5 per cent – the steepest difference favouring houses in more than two decades.
Units typically tended to perform better at auction, Dr Powell said, but houses had been stronger for two consecutive months and the gap appeared to be accelerating, which she attributed to the dominance of owner-occupiers in the market.
Ray White NSW chief auctioneer Alex Pattaro said hesitation from first-home buyers — who were more likely to purchase a unit — was also a factor. Meanwhile, families looking to upsize were less wary of the current economic uncertainty as they were happy to buy and sell in the same market.
Mr Pattaro said buyer confidence was improving, but house hunters needed to see competition in order to pay a premium price. He said about 19 per cent of properties were selling before auction day statewide last month, with roughly another 17 per cent withdrawn and converted to private-treaty campaigns.
“Some vendors' expectations are still slightly above the market, [but] we've got an average of about a 7 per cent difference from the reserve to the end price,” Mr Pattaro said.
Domain figures show about one in five Sydney properties were withdrawn from their scheduled auction in July and another 28 per cent were sold prior. Withdrawn auctions are counted as unsold properties when calculating the clearance rate, while sold priors are included with auction sales.
Dr Powell said both were above the decade average — at 15.7 per cent for the withdrawal rate and 24.5 per cent for sold priors — but were down from peaks seen earlier this year.
Across the city, the inner west, northern beaches and north-west recorded the strongest clearance rates at 65.5 per cent, 64 per cent and 62 per cent.
Meanwhile, the traditionally strong auction foothold of the city and east and the lower north shore had lower clearance rates , which Dr Powell attributed to the weaker unit market.
Mr Pattaro said suburbs within about a 10-15-kilometre radius of the city centre seemed to be performing best at auction, noting he had recently seen strong results in the more affordable St George and Canterbury Bankstown regions.
The inner-west housing market was holding up best, according to Damien Cooley, of Cooley Auctions, but certain pockets of the eastern suburbs were also still doing well.
“It is absolutely fair to say the house market is strong, and the unit market is less competitive [Sydneywide],” he added, but noted quality properties were selling well across the board.
Cooley Auctions had 211 Sydney properties scheduled to go under the hammer in July, up almost 70 per cent from the “horrifically” low volumes seen the same time last year. “We had a really good end to 2019 and a good start to 2020, then numbers fell off a cliff when COVID hit, but things are really starting to improve in Sydney,” Mr Cooley said. “This past Saturday was one of the best we'd had in months, we had a 71 per cent clearance rate, and an average of six bidders per auction'
Over the month they recorded a clearance rate of 63 per cent, with 27 per cent of properties selling before auction, according to the latest Cooley Index.
Those auctions which did go ahead drew an average of 4.4 bidders — down from 5.6 bidders last July — with almost 60 per cent of homes sold over the reserve price, at an average of almost $62,800 above vendors' expectations.
“We have found more owners strategically setting their reserves, putting them a bit higher [than what they'll accept] and then using it as a negotiation tool on auction day,” Mr Cooley said.
The index also showed buyers were more reluctant to start the bidding, with one in five auctions kicked off with a vendor bid – up from 5 per cent of auctions in July 2019.
While buyers were more hesitant to make the opening offer, they were generally competitive once bidding got underway, Mr Cooley said. He said both buyers and sellers were being quite realistic in their price expectations and were keen to strike a deal on auction day.
**Source: Kate Burke: Domain