Auctions reveal a stand-off between nervous buyers and reluctant sellers
People continue to turn up at auctions but the observers are far outnumbering the bidders, as buyers sit on the sidelines and fewer properties hit the market.
Buyers and sellers have entered into a standoff at auctions around Australia, with the former nervously holding off as property prices continue to decline while sellers waiting for the market to recover continue to impact the number of listings.
In what would normally be the peak time for properties to go under the auction gavel, the number of properties hitting the market has dried up.
There were 1,921 homes taken to auction across the combined capital cities last week, down from 2,169 over the previous week and 3,546 this time last year. CoreLogic is expecting to see a similar amount of combined capital city auction activity this week with 1,941 homes currently scheduled for auction.
In a sign of just how reluctant sellers are to offload property unless under extreme duress, auction activity is 43.9 per cent lower than the same week last year.
The picture is the same in Sydney.
There are 743 auctions scheduled in the Harbour city this week, down 1.1 per cent from the previous week when 751 auctions were held, and 40.0 per cent lower than this time last year when 1,239 homes were taken to auction.
Across the smaller capitals, Adelaide’s auction listings are down 32.3 per cent on this time last year, while Brisbane (and -50.6 per cent), Canberra (-30.9 per cent) from last week (162) and -17.6 per cent lower than the same week last year (136).
Clearance rates are also down on last year, although an uptick this week could yet prove to be a turnaround or an aberration.
This week's preliminary clearance rate of 63.7 per cent is above last week’s rate of 58.8 per cent but about ten percentage points below the rate recorded this time last year when 73.0 per cent of auctions were successful.
Spring’s not sprung
Nationally, October was the slowest spring for new listings since October 2012, when the market was also in decline.
SQM Research founder Louis Christopher said sellers don’t like going to market during downturns.
“They’re only doing it if they need to – if there’s been a death, divorce, or they’re desperate to sell because they’ve lost their job.”
Apollo Auctions Director, Justin Nickerson, said a common theme from auctioneers around the country was the lower supply of properties coming to the market in the middle of the spring selling season.
“It is clear the seven cash rate increases in seven months are starting to impact buyer and seller sentiment,” he said.
The notion that buyers are looking on nervously is underpinned by the fact many are turning up to auctions but fewer are actually bidding.
“Sydney’s auction market recorded a drop in the number of active bidders and in its clearance rate in October, however, the average number of attendees as well as registered bidders were stable over the month,” Mr Nickerson said.
“Our four capital cities recorded similar average attendance figures and registered bidders over the month, showing there remains robust demand from buyers with, perhaps, sellers’ expectations still needing to moderate more to meet the market so more properties can sell under the hammer.
He said the standout cities in October continued to be Brisbane and Perth, with auction clearance rates of 66 per cent and 75 per cent respectively.
“The affordability of both cities continues to assist in producing some stellar results for vendors.”
According to Perth auctioneer, Richard Kerr, low supply and media sentiment continue to be the predominant drivers of the market.
He said this month saw a rise in the inability of some buyers to obtain finance when they had been previously pre-approved or even approved to purchase property.
“Sellers in the west are speaking of their preference for an auction campaign in the current climate, as while the volume of unconditional bidders may be slightly lower than their conditional rivals, they prefer the certainty of an unconditional bidder,” Mr Nickerson said.
Tim McKibbin, CEO, Real Estate Institute of NSW, said the impacts of successive rate rises are beginning to snowball and the latest hike will only compound the pressure.
“The traditional selling season has been impacted by broader economic uncertainty,” he said.
“Borrowing limits are reducing.
“Purchasers in competition set the market for properties and the ability for them to compete for available stock at the moment is compromised.”
“This is especially true for first -home buyers who have no equity to draw upon.
“Vendors currently fall into two categories - there are those who have accepted what the market is telling them, that buyers have reduced means when submitting their best offer, and then there are those who view the current uncertainty as warranting a wait-and-see approach.”
Mr McKibbin said the overall effect of the Reserve Bank’s decisions has been to subdue market activity.
“This was predictable and consistent with previous rate rise cycles, however, some impressive recent results at the top end of the market, for instance, demonstrate that certain cohorts are still willing and eager to transact.”