Sydney's auction clearance rate for July at highest level in years, despite lockdown

Sydney’s auction market is holding strong amid the city’s ongoing lockdown, with a shortage of homes delivering the city’s strongest mid-winter clearance rate in years.

About seven in 10 properties scheduled for auction last month sold, with the city recording its strongest July clearance rate in five years, Domain data shows.

The clearance rate of 70.5 per cent was down slightly from June, and well down from the March peak of 81.4 per cent, but was the strongest July rate seen since the market boom in 2016. Houses continued to outperform units, with respective clearance rates of 72.2 and 66.5 per cent.

It was followed by a preliminary clearance rate of 81.5 per cent, from 410 reported auctions, on the first Saturday of August.

While the number of homes hitting the market has dropped during lockdown, that has only increased competition for those properties listed, said Ray White chief economist Nerida Conisbee.

“It’s a pretty dire situation if you’re looking to buy at the moment,” Ms Conisbee said, noting the number of registered and active bidders per auction sat at a historically high average of 8.8 and 4.4 per cent, respectively, over the past four weeks.

The market was set for its busiest July on record before lockdown hit, but the number of properties scheduled for auction dropped 18.5 per cent over the month to under 3500 auctions, Domain figures show.

“It comes after a really strong start to winter,” Ms Conisbee said. “We were seeing really big price jumps but also seeing a lot of properties coming to market; it did seem like things would calm down a bit because there was a whole lot of stock coming on. Now, obviously, [the number of homes listed] has slowed right down, and [sellers] are holding off

Ms Conisbee said both the auction clearance rate and prices were faring better this lockdown due to the strong state of the market in the lead-up to restrictions. The vaccine rollout, experience with lockdown and the continuation of one-on-one inspections in NSW was giving buyers and sellers greater confidence to transact.

Ongoing low-interest rates and increased savings were also continuing to support buyer demand, she said, adding those in hard-hit industries like tourism and hospitality were more likely to be younger workers not yet looking to buy.

Many of the successful sales last month were made before auction. A record 43.6 per cent of sellers accepted an offer prior to auction – roughly double the decade average.

At the same time, the proportion of properties pulled from auction (23.5 per cent) was smaller than in the previous lockdown, when more than half of auctions were withdrawn – counting as an unsold property when calculating the clearance rate. However, vendors were still keen to avoid selling in lockdown, with postponed auctions hitting a record high of 21.9 per cent in July, peaking at the start of the month, then easing as lockdown progressed.

Of the homes that went through to online auction, almost eight in 10 found a buyer.

Auctioneer Michael Garofolo, of Cooley Auctions, said he had seen a jump in properties selling prior, and more vendors opting to postpone auctions – sometimes multiple times – rather than withdraw from the market.

“The appetite for risk or to roll the dice come auction day is not as strong as pre-lockdown,” he said of the high proportion of vendors selling ahead of auction.

Still, selling conditions were strong, with buyer demand outweighing supply. Cooley Auctions had a clearance rate of 75 per cent last month, with properties drawing an average of 9.3 bidders and selling about $125,000 above reserve on average, down from about $195,0000 in March.

Mr Garofolo said stock levels had tightened up, particularly in the areas facing tougher lockdown restrictions, and would continue to do so as lockdown went on, fuelling strong competition for the available homes.

“There will always be an aspect of the market that needs to transact, but if lockdown continues I can only envision that listings will continue to decline,” he said.  “What we’ve been selling is mostly stock that was already on the market or about to hit the market, which is starting to thin out.”

Auction clearance rates were strongest on the north shore, at about 78 per cent, closely followed by the northern beaches, the Sutherland region and the inner west.

Buyer’s agent Henny Stier, of Oh Property Group, said auctions were clearing well, but homes weren’t going for the ridiculous prices seen in previous months.

“There are properties that have 10 or 12 bidders but it’s still like pulling teeth to get those high prices,” she said. “A property might have one or two very strong buyers … but the depth of buyers isn’t there. Outside of those strongest buyers, there is usually a big gap to the next buyer.”

She noted at one recent auction, a property that drew 12 registered bidders still fell short of its $3 million price guide. Optimistic buyers were registering to bid in the hopes a property would stay well within their budget but were no longer desperate to get in at all costs.