Sellers adjust auction expectations as lower end of the market 'softening up'

Auction selling conditions in popular near-city areas were generally upbeat at the weekend but real estate agents say house prices in Sydney’s struggling outer western suburbs are starting to pull back.

Some blue-chip properties literally flew out of the boxes, fetching strong above-reserve prices before their scheduled auctions.

The highest house sale result reported to the Domain Group was $6.43 million. This was paid for a contemporary four-bedroom home with unobstructed beach views at 144A Hewlett Street, Bronte.

The high-end pad, designed by architect Michael Folk, never made it to its October auction date.

Phillips Pantzer Donnelley partner Alexander Phillips said the house was listed on a Friday and sold on the following Monday in a boardroom auction contested by two $6 million-plus buyers. The reserve was $6.2 million.

Mr Phillips noted that demand for $4 million-plus prestige homes was more bullish than the $2 million to $4 million segment.

“The upper end of the market, anything above $4 million, is very strong,” he said. “Below that, it is softening up.

“It is harder to get money at the lower end, and more people have been able to upgrade to a higher price point because of how much money they have made in their existing property. So that’s forced more buyers above $4 million.”

• Related: Click here for Saturday’s auction results
• Related: Click here for the Market Snapshot
• Related: Randwick house sells $420,000 over reserve

On Saturday, the city’s auction market performed solidly, with the Domain Group posting a clearance rate of 68.4 per cent from 484 reported auctions. Some 54 auctions were withdrawn, and agents failed to report the results of a further 183 scheduled auctions.

Even though clearance rates remain well below those reported between February and May and for much of the 2016 market, some regions continue to bring home strong results for sellers.

The weekend clearance rate of 68.4 per cent level-pegged with last weekend’s 69 per cent but was still well below the 80 per cent reported over the same weekend last year.

Domain Group chief economist Andrew Wilson said the auction disposal rate remained steady despite higher numbers of auctions – 721 homes – listed to go under the hammer on Saturday compared to 676 the previous weekend and 674 auctioned on the same weekend last year.

He said harbour and beachside suburban regions were attracting buyers and delivering strong results overall for sellers.

“The lower north was again a leading performer with a top clearance rate on Saturday of 80.9 per cent,” Dr Wilson said. “This was closely followed by the northern beaches, which was significantly higher this weekend with 80.4 per cent. The city and east reported another consistent top result at 80.0 per cent.”

Other high-end homes that did well at the weekend included a four-bedroom house at 9 Phoebe Street, Balmain. It sold for $4.75 million through Belle Property Balmain, while a five-bedroom property at 24 Willowie Road, Castle Cove, was sold by LJ Hooker Northbridge for $4.5 million. Another spacious family home on the North Shore at 20 Treatts Road, Lindfield, was sold by McConnell Bourn Lindfield for $3.5 million.

The inner to mid-western suburbs also delivered. A six-bedroom house at 94-96 Burlington Road, Homebush, made $4.22 million when offered by Richardson and Wrench Strathfield.

In the east, a four-bedroom house at 4 Riddell Street, Bellevue Hill, sold for $3.62 million through The Agency.

Canterbury Bankstown notched up a regional clearance rate of 77.8 per cent at the weekend, while the inner west was at 70.1 per cent. But the mid and outer western suburbs could only muster a clearance rate of 59.1 per cent. The north west was at 58.6 per cent and the south west was again the worst performing region with a clearance rate of 47.7 per cent.

Sydney’s outer western suburbs are recording the lowest clearance rates of all the suburban regions – and it showed at the Professionals’ auction of a three-bedroom house at 35 Paxton Street, Belmore.

Agency principal Michael Sabongi said the listing attracted no bidding and was now likely to sell privately at a price below the vendor’s expectations.

He said prospective buyers in the west had been “very, very nervous” at weekend auctions after widespread media reporting of new data from the Domain Group, the Bureau of Statistics and other analyst groups showing declines in the rate of Sydney house price growth.

“Buyers are not able to borrow as much and it is affecting the market,” Mr Sabongi said.

“If the vendors want to sell, they have to meet the market or they have to take their property off the market. It is one of two things.”

He said the average house price in Belmore had been sitting at $1.15 million to $1.2 million: “We are now going to pull back to $1 million to $1.1 million or to $1.15 million. You will be able to get a house for that money, whereas you could not get one before.”

Dr Wilson said the fall in Sydney values reported for the September quarter did not appear to heavily affect the weekend clearance rate: “However, perhaps it did focus the attention of sellers who may be a bit more ready to accept offers now.”

Despite the recent softening in auction clearances and in the rate of house price growth, it isn’t clear whether Sydney’s market is going through a cyclical change or catching its breath after a boom-time market that has run since 2012.

Much depends on the direction of official interest rates, the housing market’s key trigger.

Reserve Bank governor Philip Lowe has signalled that the next move in the cash rate is more likely to be up than down, although plenty of real estate analysts predict there could be a rate reduction or at least a sustained period of unchanged rates.

Buyer’s agent Paul Osborne, the founder of Melbourne-based Secret Agent, said the Sydney and Melbourne residential property markets shared similarities with large Canadian cities.

“The Vancouver and Toronto property markets have been impacted as interest rates have headed up,” he said.

“Prices have started to fall quite noticeably in Vancouver and Toronto. It is hard to know whether that is where we are heading or whether we are just going to track sideways for a period of time.”

Mr Osborne suspects that prices for some B and C-grade properties in the inner suburbs of Sydney and Melbourne could pull back by more than 10 per cent in the coming months: “Confidence is a little more fickle than it has been in the past, so you start to see a bit more failure at auction. Then the buyers are looking at these failed auctions and are thinking: ‘Well maybe we need to revisit what we are prepared to pay for a property.’ It is a vicious circle.”