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More than one in two homes are failing to sell via auction in some pockets of Sydney, as the city’s clearance rates continue to fall amid cooling buyer demand.
Sellers across the Sutherland Shire, Baulkham Hills, Hawkesbury, Blue Mountains and outer west regions had less than a one in two chance of auction success last month as clearance rates in those areas dropped below 50 per cent.
Sydney’s auction clearance rate has dropped to about 56 per cent. Credit:Domain
The odds of selling under the hammer have pulled back right across the city this year, with Greater Sydney’s clearance rate falling to 55.9 per cent in May, Domain data shows. It’s the lowest level since the early stages of the pandemic, when the rate plummeted to 36.2 per cent in April 2020.
The Northern Beaches and eastern suburbs were among half a dozen other areas where the proportion of successful auctions was below the citywide clearance rate.
“Every single area is dropping. Even in really auction-centric markets like the eastern suburbs, city and inner south and inner west, we are seeing a big drop,” Domain’s chief of research and economics Dr Nicola Powell said.
Declining clearance rates reflected cooling buyer sentiment, Powell said, and a mismatch between seller and buyer price expectation.
The rate was also being weighed down by an increase in properties being withdrawn from auction, which reached about 25 per cent in May, the highest monthly rate since April 2020. The increase showed the nervousness being felt by sellers and agents, Powell said, with auctions typically withdrawn when there was not enough interest to ensure competition on the day.
The North Sydney and Hornsby region was the only area with a clearance rate above 60 per cent last month, a benchmark for further house price inflation, Powell said. Anything below that points to price weakness, and fewer sellers were likely to opt to go to auction as the market downturn continued, particularly in non-traditional auction markets.
The lowest clearance rates were recorded in the outer west and Blue Mountains (22 per cent), Baulkham Hills and Hawkesbury (39.7 per cent) and Sutherland (49.1 per cent) regions, which also recorded some of the largest year-on-year changes.
There had been a sharp shift in these markets, Powell said, but noted that lower auction volumes, particularly in the outer west and Blue Mountains, could result in greater fluctuations in the clearance rate.
She noted the RBA’s decision to lift the cash rate in May, and the expectation for consecutive rate hikes had and would continue to weigh on already cooling buyer demand.
Auctioneer Stu Benson, of Benson Auctions, said the entry-level market in the north-west was still busy but that buyers were spoilt for choice in more established suburbs like Baulkham Hills and Castle Hill, where strong price growth had encouraged more home owners to hit the market. However, he noted A-grade homes were still selling well.
Homes were selling closer to advertised price guides, Benson said, and most sellers hitting the market had reasonable reserve prices. However, more home owners were looking to secure a deal ahead of their scheduled auction, while others had been postponing auctions following rate hikes to give buyers additional time to firm up their financing if needed.
Of those properties going to auction, about four or five out of 10 were now selling under the hammer, Benson said, which he expected would continue for the foreseeable future. He noted this was a more typical market than the high clearance rates seen last year.
Auctioneer Stu Benson, pictured at a busy auction early last year, has seen a big pullback in buyer competition. Credit:Peter Rae
“It’s much more normal than the hot market that we’ve come out of,” he said.
Sutherland Shire buyer’s agent John Soliman, of Shire Buyer, said there had been a clear shift in the market. More choice had reduced buyer urgency and seen a drop in competition for homes, while rising interest rates and the increased cost of living had added to buyer uncertainty.
Most sellers had adjusted their price expectations to the cooling market, he said. However, he was also seeing home owners looking to sell ahead of their scheduled auction, or withdraw the property and list it for sale, fearing they did not have enough competition, despite most having realistic price expectations. He expected fewer properties to go to auction moving forward.
Soliman added that more clients were now putting property searches on hold, believing they could find greater choice and lower prices later this year, particularly if rising rates brought about forced sales, which experts say is unlikely.
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