Home buying hopefuls are facing tougher competition at auction this year than during the last property boom, with new figures showing the number of bidders per home has jumped.
There were 3.6 average active bidders fighting it out for each auction in the last week of June, national data from real estate agency Ray White shows. Each week this year has hovered between 3.2 and 3.8 bidders on average.
It’s stronger than the last time the property market was rising, in late 2019 between the financial services royal commission-linked clampdown on lending and the beginning of the COVID-19 pandemic in early 2020 that closed the real estate market by March.
During the previous boom, the average number of active bidders per auction never passed 2.9, the data shows.
This time, not only are interest rates low, but many buyers are playing catch-up after delaying decisions or not being able to transact during 2020, notwithstanding Sydney’s latest lockdown.
“It just shows the strength of the market, but it also shows the rapid rebound,” Ray White chief economist Nerida Conisbee said.
“People paying very high prices and they’re buoyed by low interest rates and high savings rates and good economic conditions – there was a period of time, around six months, where there was not much happening, and people weren’t able to get into the market.” Competition has eased somewhat since the frantic days of February and March but is still hotter than a regular winter, usually a period when the industry takes a breather, and people travel overseas.
“COVID’s changed selling behaviour,” she said. “We’ve always had these quiet periods … that’s been turned on its head.”
The competition is proving “pretty tricky” for buyers, especially for anyone trying to sell and buy in a fast-moving market, she said.
But as more homes are listed for sale and mortgage rates start to creep up, she said the market could become calmer.
Sydney buyer’s agent Henny Stier said some properties that attracted high numbers of registered bidders did not always see the interest translate into active participation if prices soar past buyers’ budgets.
“Some of the properties are going so high that just within the first one or two bids, people are already priced out,” the OH Property Group principal buyer’s agent said.
She cited an auction with a $2 million price guide where the opening bid was $2.8 million, and only two of the registered bidders made offers.
“Frankly, buyers are fed up,” she said.
“They’re registered at all these auctions not knowing which one they can afford … they would have had the experience of showing up at auction and being blown out of the water on the first bid.”
Some imprecise price guides did not help, but buyers were also ignoring strong comparable sales that “went above market” rather than acknowledging the market had moved, she said.
“Often buyers in a fast-moving market, they can’t get their heads around it. They think that big result is an outlier; an exception rather than the trend,” she said.
In Melbourne, low levels of stock through the cold winter months has meant auctions were being hotly contested with fast-paced bidding, said Tonya Davidson of Davidson Property Advocates.
“In certain pockets, there’s really not much around,” she said.
“The properties I’ve been at are very well contested, and I think it’s underpinned by the lack of supply … There’s a huge amount of buyers at the moment and not enough properties.”
Even in Brisbane, a less traditional auction city, the market was “ridiculously busy”, PropertyZest’s Karen Young said.
“Whether we’re at auction or not, everything is fiercely contested,” she said.
“Virtually everything we offer on is a multiple-offer situation.”
It’s not unusual to see six to eight bidders at an auction, while one home not listed for auction recently attracted 36 offers, she said.
This meant buyers needed to have a realistic and up-to-date idea on pricing, looking at recent comparable sales within the previous three months rather than median price data for a suburb calculated over a longer time frame.
“If you are looking for a bargain, this isn’t the market for it,” she said. “You need to be prepared to pay market price and do it quickly.”