Sydney’s weekly auction clearance rates have fallen this year and are now pretty consistently in the 60% band. This is happening because the market is plateauing, with more stock for sale and therefore a dilution of buyer interest per property.

According to SQM Research, total listings for sale in Sydney has increased to its highest level since late 2011 (pre-boom). There’s a few reasons why we’re seeing more stock on the market:

  1. There is a consensus that the boom is over, so home owners who have been waiting for full value growth for their homes during the boom are putting out the For Sale board now, in an effort to beat the market slow down  
  2. Stock was very tight last year, with many would-be sellers holding off listing out of fear of not being able to buy back in. Today, every new listing is encouraging more new listings because home owners are finally feeling confident that they’ll be able to find a new home
  3. Some investors are cashing in on their boom time growth. Part of their motivation to sell is the banks’ decision to increase interest rates on investor loans, particularly those on interest only terms which is the preferred loan type for investors
  4. The property boom initiated a construction boom, with thousands of new apartments still in the pipeline or rolling out onto the market now

While it’s clear the market is cooling, on the ground we are seeing patches of strength and weakness.

Desirable properties in sought-after and tightly-held suburbs close to the city and beaches are still selling very well and often above reserve. Softening market conditions don’t tend to hurt these types of A grade roperties at auction. For the rest of the market, things do change.

I asked Kon Stathopoulos, Head of Sales for McGrath’s company owned offices to give us a snapshot of what he is seeing on the ground.

Kon says: “Many people are realising that it’s a great time to buy, especially buyers who have been looking for 12-18 months and have been forced to compete at auctions with double digit registration numbers.

“There is more choice for buyers in certain price and geographical sectors of the Sydney market, however it is not across the board as specific pockets are still tightly-held. 

“Where increased stock levels exist, open home numbers are lower and therefore auction registration numbers are somewhat diluted. 

“New supply is more of an issue in the apartment market. There is noticeably more choice for apartment buyers around the $1M mark but the volume of house listings is still pretty low in many areas of the city, which creates scarcity and competition.

“A further tightening in lending practices has resulted in many buyers (mainly investors) struggling to achieve formal finance approval by the auction date. Lenders are requesting additional documentation and the approval process is taking longer.

“This is creating frustration for buyers and many only receive notification literally the evening prior to the auction. If they don’t get it in time, they can’t bid and this reduces competition and can impact the likelihood of a sale, especially on properties with only a few interested parties.” 

With more stock available, buyers have got a bit of power back and this has made them more discerning. The urgency has been removed from the market and some buyers are avoiding auctions altogether.  

So, I asked Kon the question that is on many buyers’ minds. Why should they still compete at auction when there is plenty of other stock to choose from? 

“Auction is the most effective and efficient method to secure a property for a buyer,” Kon says.

“On the day of the auction, there is full transparency around who is bidding and at what price. Buyers usually don’t enjoy this luxury on campaigns marketed via expressions of interest, private treaty or pre-auction tender. 

“The other big advantage is that contracts are signed immediately.”

As always, I encourage buyers and sellers to take a big picture view of their next move in real estate. 

Property is an outstanding investment over the long term. In Sydney, the market is cooling and buyers have a bit more time and leverage, so it’s easier to make smart decisions. 

Regardless of market conditions, the best time to buy is always when you can comfortably afford a good quality property in a good location. Plan to hold on to it for the long term and don’t panic if prices fall or stagnate.

It’s very easy to make great money in real estate if you follow these few simple steps. Don’t let market conditions sway you too much.