Pandemic property boom losing momentum as seller and buyer expectations widen

Sydney and Melbourne’s pandemic property boom is losing momentum as the gap widens between vendor expectations and what buyers are willing to pay.

There has been a noticeable shift on the ground, agents are reporting, with fewer buyers at inspections and auctions every week thanks to an influx of new listings added to the market.

The country’s two largest capital cities held their first Super Saturdays in months last weekend but the results fell short of the hype, with both cities reporting a continued slide in auction clearance rates.

In Sydney, the auction clearance rate slipped to 73.4 per cent on Saturday, down from 75 per cent from the week prior, and in Melbourne it fell to 69.9 per cent from the 73 per cent recorded the week before.

In addition, the number of properties attracting double-digit registrations and smashing auction reserve prices is shrinking. A growing proportion of homes are selling before auction. More than four in 10 homes in Sydney sold prior to auction day on Saturday, while almost a third of properties sold prior in Melbourne.

In Melbourne, the market has softened despite being tipped to grow off the back of pent-up demand after the last extensive lockdown.

“There has been a shift, there is no question about that,” said Nelson Alexander director Arch Staver. “The insatiable appetite which buyers have had for the last three months – we were transacting quite aggressively – has dissipated.”

In one instance, Mr Staver said he passed in a property at $1.1 million last Saturday when no buyers turned up to the auction. It was posted for sale for $1.25 million and sold shortly after.

He said the changes in the lending serviceability buffer and an influx of new listings had dampened what had previously been frenzied bidding.

“We’re all acutely aware that there is more stock available … If  [properties] are not perceived as good value for money in the marketplace, then it can be quite unforgiving.”

Buyers were no longer willing to compromise on their property search, meaning vendors had to “temper their ambition” when it came to price expectations.

“If you have someone who is willing to pay a fair and reasonable price, take that bird in the hand,” Mr Staver said. “We’ve gone into an auction on a weekend where we thought we’ve had three buyers to learn all three buyers have bought elsewhere. That’s how quickly things have continued to happen.”

Melbourne buyer’s agent Cate Bakos, of Cate Bakos Property, said many sellers needed to “face the music” that the market has shifted already.

“Vendors are always the last to catch on. They’re still living in September,  October. We’re still seeing a lot of greedy – or hopeful – vendor behaviour,” Ms Bakos said. “A lot of vendors aren’t reading the signs and accepting that they might not be getting six or seven buyers on auction day.”

She said while it was not a buyer’s market just yet, many were benefitting from a late spring rush that would go through to Christmas. “If buyers have had a hard time in 2021, then now is the time to get a bit of reprieve.”

Sydney’s high rate of sold-priors was also a telltale sign that vendors may not achieve a strong result on auction day, said Oasis Skeen senior buyer’s agent Paul Wilcox.

“There’s more sold-priors and generally one or two decent buyers at an auction,” he said. “Agents are more flexible to sell prior [because of that].

“Six months ago there might [have been] six or five buyers on a property [but now] buyers are a bit more discerning about what they buy and won’t buy.

“The agents know that their picnic days are finished. It’s heading back to a more stable and normal market.”

The peak of the market was about six to eight weeks ago, said Alex Pattaro, Ray White NSW chief auctioneer.

“There has been a significant difference in the market. The change is ultimately around price expectations – price expectations from sellers are too high,” Mr Pattaro said.

While he did not expect it to turn into a buyer’s market by Christmas time, B-grade properties that did not tick all the boxes were no longer smashing reserves and expectations.

“On the weekend we were only seeing one or two buyers on those B-grade properties. The shift has been rather interesting,” he said.

A property in Kyeema was passed in at $2.5 million on the weekend after the vendors shifted their expectations upwards during the campaign, despite getting buyer feedback at $2.4 million.

“Ninety per cent of the good properties that are passing in are simply because sellers are wanting too much,” Mr Pattaro said, adding that the property sold in the end for $2.52 million.