'Caution in the auction market' as Sydney buyers tread water

As winter winds swept across Sydney at the weekend fewer house-hunters were prepared to bid at auctions. But property market watchers warned that any drop-off in demand wouldn't lead to a fall in prices in popular areas.

In the first half of the year, many auctions of A-grade properties within 20 kilometres of the CBD drew offers from eight or more bidders, a ratio that has now slipped to one to four bidders.

The lower buyer participation rate coupled with sharply reduced auction clearances in the mid and outer western suburbs saw the city's weekend auction clearance rate slip below 70 per cent.

The Domain Group reported a clearance rate of 69.4 per cent from 579 reported auction results. It was the lowest weekend clearance rate since June 10 and well down on the 73.7 per cent recorded last weekend.

Domain Group chief economist Andrew Wilson said Saturday's result was also significantly lower than the 84.1 per cent clearance rate achieved on the same weekend last year. He blamed the below-par result on steeply lower auction clearances in Sydney's mid and outer west.

Properties closer to town fared best.

In Erskineville, a gutted balcony terrace house without a kitchen drew offers from just one bidder before selling for $1.085 million.

About 25 onlookers attended the auction of 12 Clara Street. LJ Hooker agent Nick Moraitis said no vendor bids were placed after two young men piped up with a $1 million bid but negotiations saw the bidder increase the offer to $1.085 million.

The narrow terrace, presently with two bedrooms, has a council development approval for a three-bedroom redevelopment.

"The new owners are actually going to change the DA but having a DA approved certainly helped facilitate a sale," Mr Moraitis said.

Another inner-ring property that sold under subdued bidding conditions was a contemporary terrace at 140/69 Allen Street, Leichhardt.

Callagher's James Burke said two parties interested in the three-bedroom townhouse declined to bid when a foreign investor offered above $1.55 million. He said unusually for an auction property the house was sold subject to a five-day cooling-off period because the buyer's lender had insisted a building and pest inspection be carried out before it would provide finance.

The highest reported auction result on Saturday was a six-bedroom house at 17 Dulwich Road, Chatswood, which Chadwick Real Estate sold for $5,635,000.

Some segments of the market are treading water as buyers wait for the spring market to crank into gear with its traditional surge of new listings.

"At the moment in Sydney, there's a bit of caution in the auction market," said buyer's agent Rich Harvey, from propertybuyer.com.au.

"The auctions we have been to have had a lot less bidders than at previous times. Where you would once have between eight and 10 bidders, now you are seeing three or four, if you're lucky."

Mr Harvey expects a "mood shift" among buyers as new stock comes on in September but says people waiting for dramatic price falls in in-demand areas such as the lower north shore and the inner west are kidding themselves.

"People are hoping that the market is going to stop or go backwards in price growth," he said. "That is a false way of thinking: I think we'll see property prices track inflation or above the inflation rate in the next year.

"The market is like a car driving forward: the foot has come off the accelerator but it hasn't been taken completely off and there is still forward momentum. And in certain high-demand suburbs prices will continue to hold up very well. Demand may drop, but prices aren't dropping, that's for sure."

Dr Wilson said higher-priced, inner-suburban areas attracted clearance rates consistently above 70 per cent.

The city and the east was the best performing region at the weekend with an upbeat clearance rate of 83.3 per cent. It was followed by the lower north with a clearance rate of 78.6 per cent, the upper north shore with 77.8 per cent, the inner west with 74.6 per cent, the northern beaches with 72.4 per cent, the south with 70 per cent, the south west with 64.3 per cent and the north west with 62.5 per cent.

The west was the market straggler with a clearance rate of 57.8 per cent, while the central coast cleared only 42.9 per cent of its auction offerings. And Canterbury Bankstown was well down at the weekend with a gloomy clearance rate of 38.7 per cent.

This story 'Caution in the auction market' as Sydney buyers tread water first appeared on The Sydney Morning Herald.