Where Sydney house prices are under the most downward pressure

Fewer properties are selling at auction in Sydney as more owners list their homes for sale and buyers hold out for interest rate cuts.

Sydney’s auction clearance rate has slipped below the key 60 per cent threshold for the first time this year to hit 58.6 per cent in October, a marked slowdown from earlier in the year, Domain data shows. A clearance rate of around 60 per cent suggests a balanced market.

September’s clearance rate was 60.8 per cent, July was an anomaly at 66.8 per cent, and January to March hovered around 66 per cent to 68 per cent.

Not every region paints the same picture with the eastern suburbs and northern beaches recording the highest clearance rates in October at 67.8 per cent and 65.2 per cent respectively. The outer south-west recorded the lowest clearance rate at 38.6 per cent.

Parramatta and Ryde recorded rates of around 56 per cent, while the inner west and Sutherland recorded figures of 61 per cent and 58.3 per cent respectively.

Domain chief of research and economics Dr Nicola Powell said there hasn’t been enough buyer depth to support a clearance rate in the 60s.

Clearance rates above 60 per cent tend to correlate with rising prices. Powell said a clearance rate below 60 per cent is a key benchmark as it’s where prices are likely to fall.

“You’re edging into that territory where conditions favour buyers, but it depends on location.”

Powell said the northern beaches and eastern suburbs are considered the auction heartland with their coastal location; however, agents know their markets and the types of homes that are more likely to sell at auction.

She said cautious buyers are hoping for interest rate cuts, which some economists predict to come as early as February, while others anticipate May or later.

“Buyers are understanding there are more listings and are probably being cautious with auction bids as they know they can move on to the next home. Some are waiting for interest rate cuts and that clarity,” she said.

Cooley auctioneer Michael Garofolo said there’s the same number of buyers at auction, but they are hesitant. “If it’s the right price, they’ll pull the trigger, and if not, they’ll keep their paddle dry.”

From his experience, the majority of vendors are having to adjust their reserves on auction day.

“We’re not in a market where we are naturally hitting the reserve and surpassing it,” Cooley said. “Vendors are optimistic but on the day they realise they have to come down and meet the market if they want to transact.”

He said the clearance rate comes down to price point and affordability.

“Affluent areas with $3 million guides have seen the clearance rates struggle, whereas guides of around $1.5 million do well.”

McGrath Group sales manager and auctioneer Simon Jaeger said he has noticed less urgency in the market.

“When properties are presented well, promoted strategically and realistically priced, they sell well at auction,” he said. “We’re still seeing a healthy number of bidders, but it depends on the type of property.”

In this market, some owners are choosing different methods of sale instead of auctions. Andrew Lupton and Maria Frutos have listed their Beacon Hill property they purchased 12 years ago as they embark on a new chapter on the Central Coast.

They chose not to go to auction due to the home’s unique layout with two self-contained units on the lower level and its one-of-a-kind interiors.

“This house is quirky so it’s not a commodity,” Maria said. “Three-bedroom, two-bathroom homes with a pool and backyard are common on the northern beaches, so with greater competition, an auction is probably better suited. This house just needs the right person as it’s not going to be for everyone.”

Their agent, Tim Cullen of McGrath Manly, said their property is niche and requires a specific buyer.

“A typical home in the area with a standard layout, backyard and pool, that appeals to young families, lends itself to an auction,” Cullen said. “I guide campaigns based on the property type and what’s best suited.”

ANZ economist Madeline Dunk said Sydney’s clearance rate will likely settle around a lower range with buyers holding out for an interest rate cut, but does not anticipate a dramatic change in prices when a cut does come into effect.

“A rate cut will drive demand and greater listings, but I don’t think it will shift the story significantly,” she said. “The impacts are likely to be confidence-driven rather than a boost in borrowing capacity.”

Dunk was reluctant to say it’s now a buyer’s market but said it’s hovering close. “I do think the tide has turned in terms of the power dynamic in the market.”