Panic as half of Sydney homes fail to sell at auction

Barely half of properties in Sydney are selling at auction amid fears Australia's real estate market is heading into uncertain territory.

Preliminary data from 527 of the 796 auctions held in Sydney last week showed just 50.7 per cent were successful, but the final clearance rate is estimated to drop closer to 45 per cent when the remaining results come in because of slower reporting of unsuccessful sales.

That would mark the fifth consecutive week that more than half the homes going to auction failed to sell and the 14th week in a row where the clearance rate has flopped below 55 per cent.

Two years ago, more than 80 per cent of auctions were successful, while during last year’s spring the clearance rate was about 65 per cent, according to research group CoreLogic.

The 796 homes that went under the hammer in Sydney last week was an unusually low number for this far into spring and fewer than half the number of auctions in Melbourne, where there are a similar number of homes.

Sellers’ hesitancy has also spilt into the private treaty market: nearly 13 per cent fewer homeowners listed their properties for sale this month than they did in October last year.

CoreLogic auctions expert Kevin Brogan said lacklustre auction activity over the winter months may have spooked homeowners from listing this spring.

Only 50.8 per cent of the homes that went under the hammer in June, July and August sold and many of the homes that passed in during the period have yet to sell.

This explained why, despite the October drop in new listings, total listing volumes remained well up on previous years, he said.

The nearly 30,000 homes currently for sale across Sydney is 20 per cent higher than the number available at this time last year and 42 per cent higher than over the same period in 2016.

“It’s great for buyers,” Mr Brogan said. “There’s no pressure to offer high prices because if you don’t get the house you want, there will be others around the corner. But that obviously makes selling difficult.”

Cooley Auctions director and auctioneer Damien Cooley said many of the homes passing in at auctions were those that “failed to tick buyer boxes”.

“They might face the wrong way or there was a renovation that wasn’t up to standard. The best homes still sell very well,” he said.

The difference between the owners of quality and second-rate homes was that those with the best homes seldom needed to sell in a hurry, Mr Cooley added.

“If you’ve got a great home in a great location there probably won’t be much reason to sell now,” he said.

“Most of these vendors are waiting for 2019, some even for the election, until the market is more certain. Most (current) sellers are those who have to move.”

Bayleys national residential manager Daniel Coulson says the fact that Auckland's clearance rate is lower than Sydney's should not be a cause for concern.

According to OneRoof figures, a total of 65 properties from 226 scheduled auctions sold under the hammer in Auckland last week, with the clearance rate dropping from 34 percent the previous week to 30 percent. The figures do not record post-auction sales.

Mr Coulson said: "Auctions in Australia are reported like sports results. New Zealanders like to think they are property obsessed but Australians take it to whole new level.

"The percentage of properties in Sydney and Melbourne that go to auction is much higher than in New Zealand. During the height of the market in New Zealand, Auckland was on par with Melbourne and Sydney but now auctions make up about 25 percent of property sales in the city."

Mr Coulson said that clearance rates in New Zealand often depended on the location and quality of properties on offer, but they also varied according to the agencies running them, with some more fast-paced than others.

He added: "Many of the properties that fail to sell under the hammer in New Zealand are sold shortly after, with the auction process helping push along negotiations. Clearance rates in New Zealand also don't reflect the fact that many vendors decide to hold onto their properties even though there has been strong bidding in the room and they've been presented with a market value price.

"Although there are similarities between New Zealand and Australian property markets, they behave independently of each other and there are different dynamics at play in Australia that don't apply here in New Zealand, such as the fallout from the royal commission into banking practices."