Record number of auction barely scratches surface of buyer demand
Australia’s surging real estate market cleared another hurdle at the weekend, recording sky high clearance rates in the major capital cities despite a record number of properties going under the hammer.
Sydney and Melbourne’s strong clearance rates were put to the test on Saturday when more than 1000 properties went under the hammer in each city — the biggest auction day for both capitals in three years.
With such a high volume of listings — 1180 for Sydney and 1560 for Melbourne — the Super Saturday of auctions had been touted as a “true test” of the market that would reveal whether the clearance rates could hold strong with the higher auction numbers.
Both cities passed the test with flying colours: Sydney recorded a preliminary clearance rate of 88 per cent, while Melbourne cleared 81 per cent as the market continued to defy expectations.
Properties continued to smashed their reserves by a million dollars or more in some instances, while others recorded gains of more than half a million dollars compared to neighbouring properties in the space of mere weeks.
“The market is hot by any measure or any metric. Most of us have not seen anything like this by almost a generation.”
Stu Benson, Benson Auctions
The strong results meant the market was on track to perform strongly for some time unless there was an increase in listings or interest rates, according to Domain’s senior research analyst Nicola Powell.
“It was a real test for the appetite of the market. It shows that competition was still fierce,” Dr Powell said.
Sydney has maintained its clearance rate above 80 per cent for eight weekends in a row now, a real sign that the market was heated and is accelerating, according to Dr Powell.
“Until we see a real substantial lift in new listings we’re likely to see these heated auction conditions particularly in Sydney, Melbourne and Canberra.”
In Sydney, many buyers were going back to the bank borrowing more just to keep up, according to Benson Auctions director Stu Benson, who said one couple ended up securing a property after borrowing an extra $300,000.
“The market is hot by any measure or any metric. Most of us have not seen anything like this by almost a generation,” Mr Benson said.
Other buyers who have missed out are compromising on location or quality of property just to secure something, according to Arch Staver, director of Nelson Alexander in Melbourne.
“There’s a fair bit of FOMO in Melbourne at the moment,” Ms Staver said. “You get some of the drift of the buyers who are missing out on the A-grade properties going onto B-grade property.
“The longer they remain in the market the more they are willing to compromise on the non-negotiables.”
But as long as money remains cheap, the market would continue to “chug along” in such fashion, Mr Staver said, with many sellers becoming bullish about price expectations based on a handful of outlying results.
“It is a moving feast with both clearance rates, prices, vendor expectations, buyer tolerance,” he said.
“Contrary to what people think we don’t necessarily love working in this market. There is a fair amount of angst and we don’t like seeing other buyers blown out of the water.”
Sydney and Melbourne were not alone in strong performances at the weekend as rock-bottom interest rates activated buyers in all price points across different property markets in Australia.
Canberra recorded a preliminary clearance rate of 88 per cent and Adelaide had 80 per cent.
Brisbane, which has not traditionally been a market favouring auctions, ran its own Super Saturday due to the sheer demand from buyers. It recorded a clearance rate of 75 per cent, compared with 23 per cent from the same time last year — and almost $17 million in real estate was transacted with the average home selling for $1,247,500, the highest recorded median price in the past six months of weekend auctions.
Fear of missing out has reached the Queensland capital, according to Justin Nickerson, director of Apollo Auctions, with strong competition in different pockets of the city.
“All the hype out there is reality. It’s the most incredible period in terms of real estate with the depth of buyers and level of competition,” he said.
A six-bedroom, 10-car acreage estate that had drawn record crowds to its open homes went under the hammer in Gumdale, in Brisbane’s east, on Saturday. It sold under the hammer in for a massive $5.05 million.
“There are so many factors pushing competition expats, low interest rates, the rental squeeze and for the first time FOMO … creating that perfect storm,” Mr Nickerson said.
Ref: TAWAR RAZAGHI | JOURNALIST (on 30 Mar 2021). Record number of auction barely scratches surface of buyer demand . Retrieved from https://www.domain.com.au/news/record-number-of-auctions-barely-scratches-surface-of-buyer-demand-1040300/.
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