Sydney and Melbourne passed-in auctions rise as greedy vendors test the market

The number of properties failing to sell at auction is rising in Sydney and Melbourne, new data shows, as “greedy vendors” test out how far they can take the booming property market.

The booming market in both capitals, fuelled by record-low interest rates and more competition for fewer homes for sale, has seen house prices skyrocket and vendors expectations rise higher than ever.

A recent surge in listings following the easing of restrictions that allowed one-on-one inspections to resume has given buyers more choice, seeing some properties now pass-in, rather than sell for an unrealistic price, experts say.

Melbourne-based buyers advocate Cate Bakos said vendors with “slapdash renovations” or houses for which buyers would have to compromise would need to rethink their pricing.

“It’s early days but the greedy vendors are starting to get singed, or their knuckles rapped,” Ms Bakos said.

Domain figures show the number of listings has jumped dramatically – by 118.5 per cent in Melbourne over the month to October 17 and 31.8 per cent in Sydney.

Sydney held its first weekend of on-street auctions for the first time in three-and-a-half months on Saturday, while Melbourne will welcome back public auctions – the first in 11 weeks – this weekend.

While the number of listings is increasing, auction pass-ins have also ticked up.

Between August and September, the number of pass-ins in Melbourne rose by 2.7 percentage points, from 4.9 per cent to 7.6 per cent. 

In Sydney, they rose by 1.9 percentage points from 6.9 per cent to 8.8 per cent over the same period.

That compared to the pre-COVID-19 market in 2019, when the number of auction pass-ins dropped by 2 percentage points in Melbourne in August and September, down from 26.2 per cent to 24.2 per cent as the busy spring market kicked into gear.  While Melbourne’s changed, Sydney’s pass-ins rose by 2 percentage points over August and September in 2019, falling later in the year as the market strengthened, the data showed.

Domain chief of economics and research Nicola Powell said while the number of pass-ins was growing, overall they had been trending down since July last year, as the worst of the pandemic took hold.

“Pass-ins are at a multiyear low and I think that speaks to what sellers are choosing to do – they’re opting to delay selling until the market reopens,” Dr Powell said.

“That means we could start to see pass-in rates edge higher as more listings hit the market. Especially when you come into the realm of greedy sellers who are expecting [huge] price rises to continue.”

In Sydney, Ray White NSW chief auctioneer Alex Pattaro said most vendors were being realistic and pricing their properties according to what buyers were willing to pay.

“If a property is not selling when there’s lots of competition at auction then it has been priced too high,” Mr Pattaro said. “Buyers are prepared to stretch, but they think ‘I’ve already gone so far over [the sale price] I’m not going to go that extra little bit’.”

Melbourne-based Kay & Burton South Yarra partner and auctioneer Michael Armstrong said the main reason properties were passing in at auction was the desire among vendors for a higher sale price.

“I feel like the only reason things aren’t selling in this market is because of vendor expectations,” Mr Armstrong said. “They’re pushing harder but they can only stretch the rubber band so far before it snaps back.”

Mr Armstrong said vendors would have to get used to a change in the market and price to compete with other homes that come up for auction.

Cooley Auctions partner and auctioneer Michael Garofolo said he believed pass-ins would rise with the number of auctions coming to the market.

“I think since the sort of year we’ve had, vendors have been running with the market or ahead of it,” Mr Garofolo said. “You can’t really blame them for getting carried away.”

The good news was, that even if vendors got less than what they expected, they were still in front of where they would have been just 18 months ago, he said.

Sydney’s house prices rose by $1200 a day over the three months to June, Domain figures show, reaching a record median of $1,410,133. Melbourne’s median also soared past $1 million to a record $1,022,927.

“They may feel like they may have missed it, but where they’ve come from they are still far ahead,” Mr Garofolo said.