Price of Sydney homes selling at auction drops 9 per cent

The price of Sydney homes selling at auction plummeted 9.1 per cent over July, new figures from Domain Group indicate.

The price drops came as auction clearance rates trended down over the past month, with the previous two Saturdays the weakest of the year.

Domain Group senior economist Dr Andrew Wilson said the market was clearly on the turn and anticipation of banks tightening the rules for investors could be one reason for the drop.

“More than 60 per cent of the Sydney market are investors and we have seen a record number of properties auctioned in July, and that’s going to continue,” Dr Wilson said.

“And 800 homes are going under the hammer this Saturday – that’s unheard of [in August].

“Are vendors rushing to the market?”

Dr Wilson said news of Sydney’s million-dollar median house price may have made Sydney homeowners over-ambitious with their reserve prices.

“Clearance rates are now 10 per cent lower than what they were in May,” he added.

With 500 of the 644 results reported by Saturday evening, Domain Group put the clearance rate at 79.5 per cent. This was slightly weaker than the previous week’s 79.7 per cent.

The most expensive property reported sold at auction at the weekend was a four-bedroom unit at 1/46 Drummoyne Avenue, Drummoyne, which sold for $3.57 million through Ward Partners.

Some regions still recorded extraordinarily high clearance rates, with a 90.9 per cent on the upper north shore.

Next best was the inner west with 87.3 per cent followed by the lower north with 87 per cent, Canterbury Bankstown 82.4 per cent, the city and east 81.4 per cent, the northern beaches 76.7 per cent, the south 75 per cent, the west 73.5 per cent. The north west was 64.5 per cent, the south west 63.4 per cent and the central coast 57.1 per cent.

The Reserve Bank meets to discuss interest rates this week, though it’s expected to leave rates on hold for the third consecutive month.

Despite Domain Group’s figures showing auction prices dropping in July, another researcher CoreLogic RP Data released figures on Monday showing Sydney dwelling values jumped 3.3 per cent over the month.

The data firm’s head of research, Tim Lawless, said he expected declining yields and the impact of higher interest rates for landlords would discourage investors in the months ahead.

“With value growth once again accelerating across Sydney and Melbourne, the market evolution in mortgage lending policies will provide a timely test for housing demand, particularly from investors,” Mr Lawless said.

“Add to this the growing concern about the Sydney and Melbourne housing markets being overheated and the record low rental yields and the outlook being painted for investment is likely to be one of diminishing demand,” he said.

The firm said Sydney apartment prices grew 3.2 per cent over the month.

Switzer Financial News / August 10, 2015