Property sales in Sydney last weekend were down 10 percentage points from the same weekend last year, in yet more evidence the hot air is coming out of Australia’s hottest property market.
The clearance rate over the weekend stood at 70.2 per cent, compared with 81.6 per cent the same weekend last year.
The third weekend of September typically goes gangbusters as families, buyers and sellers try to wrap up deals and find a place to live before the city closes down and the streets empty as the Labour Day weekend (in ACT, NSW and SA) and the school holidays come to town.
More than 800 auctions were listed on Saturday, according to Real Estate website Domain, while next weekend will see only 400 homes go to market.
Yet despite the cooling trend, the median auction value of houses that sold was still $500,000 more than the previous weekend and $50,000 higher than last year.
One sign being pointed to is the falling off of investors in the housing market as lending restrictions begin to bite.
And while Australia’s housing market is the envy of the world’s real estate agents, there are peculiarities that set our markets apart from all the rest – mostly our obsession with going to auction.
Sydney market showing signs of fatigue
Most properties sold last Saturday in Sydney went to auction, just 120 sold prior to auction and 80 passed in.
Revolutionary Real Estate founder David Kaity said most buyers in Sydney and Melbourne, in addition to paying some of the highest property prices in the world, have to shell out thousands more in pest inspections and added costs.
“You could be outlaying thousands and thousands and still not winning the auctions,” he said.
In addition, he said, auctions added extra costs in the marketing around the sale and the agent’s commission on the sale.
“Australians have been conditioned to believe it is the only way to get the highest price,” he said.
“But people lose in the order of tens of thousands.”
Mr Kaity said auctions limited the price home sellers could get and gave investors a better chance at winning.
“You’re limiting your market. It’s very skewed against sellers,” he said.
Mr Kaity said auctions, unlike private offers, allow buyers to know the nearest next bid, allowing investors simply to bid higher than the next highest bidder rather than offer a property seller an offer closer to the maximum end of their budget.
In addition, auctions require buyers to settle their bid almost immediately, which requires buyers to have a deposit on hand. Whereas if sellers sold by offer buyers are given a cooling-off period and extra time to finalise finances.
However, not everywhere and everyone in Australia buys and sells by auction. Many in New South Wales and Victoria who have looked at the holiday home market know that it often works by offer.
Mr Kaity said the same is the case in Brisbane and Queensland where houses seldom go to auction.