Sellers who have taken their homes to auctions in spring have been scoring results well above the median prices for their respective cities.
Analysis from Domain showed the median price for properties sold at auction in Sydney on Saturday was $1,177,500. The amount is in stark contrast with Sydney’s median home price of $805,424 (CoreLogic).
The same happened in Melbourne, where the average price out of the weekend’s auction was $852,500. Again, the auction results were much higher than the Victorian capital’s median of $634,913.
The increase was less pronounced in Brisbane with a median sale of $675,000 for auctioned properties, but still above the $647,500 city median.
So, this raises the question – do auctions work best for top-end properties?
I argue, no.
Auctions are not price point sensitive, even though many agents think so. But, first, let’s look at what’s driving market activity.
Low volume of listings, low interest, high clearance rate
According to CoreLogic, the volume of listings in September was:
17.7% lower in Sydney compared to the same month last year;
18.6% lower in Melbourne;
17% lower in Brisbane.
Sellers are holding out during the spring selling season despite the queue of buyers.
Despite the big banks making token responses to the RBA’s three rate cuts in the last year – a total of a 0.75% drop – there are still opportunities for borrowers to fixed term interest rates with a ‘2’ in front of it. We’ve never seen anything like that before.
It’s the perfect storm: traditionally low levels of listings, record low interest rates and APRA enabling greater levels of lending have all combined for a massive spike in auction clearance rates.
Sydney and Melbourne, recorded Saturday clearance rates of 78% and 75%. At the same time last year, the gavel fell for 43% and 46% of properties, respectively.
In Brisbane, the clearance rate was 55% – double the result of the same time last year. Obviously, property agents are getting strong results in the upper quartile of the market, bringing together eager bidders who want to upgrade whilst green shoots emerge.
But, it’s not simply the top end, according to the Australian Bureau of Statistics, where interest has been recorded at the entry point to the market.
Increase in First Home Buyers
According the the latest lending data, First Home Buyers (FHBs) account for 29.8% of all loans for residential purchases. A year ago, it was 26.6%.
With record-low interest rates, APRA and a lowering of the debt serviceability buffer, FHBs have never had a better opportunity to get into the market.
FHBs typically target entry the bottom and mid quartiles, seeking affordability.
So, if the average auction results in Sydney and Melbourne are so much higher than the median, there must be a shortage of affordable stock going under the gavel.
And I ask: Why?
Auctions get premium results for sellers
Auctions are the most effective way to get a premium result for sellers, in the shortest time, through either before auction, on the day, or in post auction negotiations. Whether it’s in the dress circle or the outskirts of town, auctions work.
If bidders have been engaged, have done their research, and believe the property offers opportunity, they will keenly take up the paddle.