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Sydney home sellers are bracing for a drawn-out sale process this spring, as fewer homes sell under the hammer in the weakening property market and more turn to post-auction negotiations.
When bidders fail to raise their hands at auction, sellers often hope to agree on a deal behind closed doors soon after, and new figures show how many are successful.
Some homes are selling under the hammer and others are selling after auction.Credit:Peter Rae
About one third of properties that fail to sell under auction conditions are exchanging in the eight weeks that follow, with almost half of those trading within the first two weeks.
Sydney recorded an auction clearance rate of 50 per cent in June, Domain figures show. Four weeks later 62.2 per cent of the properties scheduled for auction that month had been sold, and by eight weeks later 67.2 per cent had traded.
That left almost a third of homes still unsold. A similar trend was seen for properties that failed to sell in May.
By comparison, 71.6 per cent of homes sold via auction the previous June.
This July, the clearance rate was 49.2 per cent, and by four weeks later, 59.9 per cent had cleared.
It comes as Sydney property prices decline, as separate figures from CoreLogic this week showed home values fell another 2.3 per cent in August, and are down 5.9 per cent over the quarter.
Westpac senior economist Matthew Hassan said the rising cash rate accelerated price declines, that had first been driven by rising fixed mortgage rates and stretched affordability – which left the market more sensitive to rate changes.
Post-auction sales showed there was still solid buyer demand for properties priced correctly, but this was counterbalanced by the high proportion of properties being withdrawn from auction in Sydney.
“About 25 per cent of auctions are getting withdrawn … in many instances there just aren’t the bidders, and sellers presumably don’t have confidence [to go ahead],” he said.
Hassan believes Sydney is about 40 per cent through its market downturn, and has forecast price declines of 18 per cent. Prices falls would likely continue until the cash rate stabilised, at an expected peak of 3.5 per cent early next year.
The cash rate is tipped to rise for a fifth straight month at next week’s Reserve Bank meeting.
Auctioneer Damien Cooley, of Cooley Auctions, said the key reasons properties passed in were a mismatch between buyer and seller expectations, or less desirable property traits.
“The buyers aren’t prepared to meet the vendor’s expected price … some might say the vendor is overpriced, some might say the buyers don’t see the right value, and both can be correct,” he said.
When auctioneers call for an opening bid, some buyers are reluctant to raise their hands.Credit:Peter Rae
While some sellers needed to drop their asking price to make a post-auction deal, others sold for well above their highest auction offer, Cooley said.
The best chance of a post-auction sale was typically within two weeks, he noted. Interested buyers who thought the property may be beyond their budget would likely return. New buyers were also most likely to show interest in this time frame.
Properties sold eight or nine weeks later had typically been overpriced and had several reductions over the sales campaign, he said.
Selling agent Catherine Murphy, of The Agency North, said interested buyers had been increasingly holding back at auctions, even in instances with multiple bidders.
“If there are other people there who are prepared to put their hand up, they will see social proof and feel comfortable to bid. However, if they don’t … they’re far more likely to wait,” she said.
While sellers and agents could be reluctant to go to auction in a cooler market, Murphy noted the auction process typically resulted in swifter and stronger sales.
Earlier this year she sold the Epping home of Sue Lennox more than six weeks after it passed in on a vendor bid of $1.65 million. There were interested parties in the crowd, but none made offers.
The pair received lower post-auction offers, but eventually sold for $1.71 million to a family interested in the local school catchment.
Epping seller Sue Lennox struck a deal post-auction, after her home failed to sell under the hammer.Credit:Wolter Peeters.
Lennox, who sold to downsize, felt talk of rate hikes deterred interested parties. When her home passed in, she was relieved that she had not already bought elsewhere. Despite the stress of the process, she was pleased with the result.
“I wasn’t locked in to having to sell immediately, I was quite prepared to play the waiting game and to get the best price,” she said.
“When I was interviewing real estate agents [at the start] the price some of them were putting around the property was beyond belief … but as the market changed I thought, look, I had to be reasonable around what my property would potentially attract.”
Her post-auction sale also meant she was able to negotiate a deal with the buyer, where she rented her own home back for several months, while she looked to purchase her new home.
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