Sydney auction market kept hot by ‘sellers’ conundrum’

Sydney’s auction market is back to boomtime conditions and there’s little sign sky high auction clearance rates will fall, experts say.

On Saturday, 84.1 per cent of homes sold under the hammer, setting a new record for an August weekend, Domain Group data shows.

And this is largely because the market has been spurred on by high demand from buyers due to low interest rates and strong economic fundamentals creating confidence from buyers, LJ Hooker head of research Matthew Tiller said.

“Our agents are seeing solid turnouts to open homes and buyers are bidding aggressively at the limited number of auctions being held,” he said.

“We anticipate to see buyers out in force and creates an opportune time for property owners to sell,” he said.

But this increase in buyers ready to pay top dollar hasn’t been met by an increase in sellers. Stock on the market has fallen significantly - just 492 homes went up for sale on the weekend, compared to 724 on the same weekend last year.

So where are all the sellers? The simple answer: they’ve already sold out of the market, AMP Capital chief economist Shane Oliver said.

“You can see the sales volumes are down a lot on a year ago, by about 40 per cent,” Dr Oliver said.

“That could well be because sellers have done their selling. The last few years have seen record levels of sales and people would have taken advantage of that, so even though now they’re getting better deals … they have already done their selling,” he said.

And if this is the case, he doesn’t know what would bring auction clearance rates down “in the short-term” as buyer appetite is still high.

“I suspect if we get a few more weeks of this the RBA will start saying it’s getting too hot for comfort and having discussions with APRA … As we go into September I wouldn’t be surprised if APRA starts doing something.”

But it might also be a wariness of high levels of stamp duty that has some sellers holding off, PK Property Group’s Peter Kelaher said.

“Every second house is getting renovated … They look at the cost plus the stamp duty and say forget about it,” he said.

In particular, this is affecting upgrades who are opting to add extra bedrooms and extensions instead. Stamp duty on a $1 million home is in excess of $40,000.

But it’s also the vicious cycle of buying and selling, the sellers who are “not going to sell because they can’t buy,” he said.

Some of his buyers are holding onto their current properties and using bridging loans to purchase their next home before they sell.

“We’ve got a very strong market moving forward for all of spring. There may be a bit of loosening up in December, but we’ll have strong auction clearance rates until the end of the year now,” he said.

“If we had 30 per cent [more stock] come onto the market it would go flat but there’s a drought of everything right now,” he said.

Most of the stock on the market at the moment is from downsizers or deceased estates, Century 21 Eastern Beaches Maroubra sales director Nick Papas said.

In the aftermath of the property boom that began in 2012, “people are scared that if they sell, there might not be much available or that they might be priced out of the market when looking to purchase their next property,” he said.

“Interest rates are having a positive effect, but I think most people are taking advantage of them to re-finance.”

Lower interest rates are also spurring on other buying groups, including first home buyers, Cohen Handler general manager inner west Natalija Tanevska said.

“Many investors are getting in or able to use equity from another property to leverage. We are also seeing a lot of first home buyers [and] young couples enter the market who have decided not to wait any longer and try jump on the property ladder,” she said.

And as sellers remain absent from the market it’s unlikely there will be change any tim soon, Domain Group chief economist Andrew Wilson said.

“It’s unlikely the weekend’s record result was a once off,” Dr Wilson said.

“It’s the best entry into spring the Sydney market has ever had, in terms of the numbers is looking like it did in 2013/2014,” he said.

“It’s the sellers conundrum - if I sell I then become a buyer and the shoe is on the other foot.”

Aug 22, 2016 / SMH