Westpac senior economist Matthew Hassan said the rising cash rate accelerated price declines, that had first been driven by rising fixed mortgage rates and stretched affordability – which left the market more sensitive to rate changes.
Post-auction sales showed there was still solid buyer demand for properties priced correctly, but this was counterbalanced by the high proportion of properties being withdrawn from auction in Sydney.
“About 25 per cent of auctions are getting withdrawn … in many instances there just aren’t the bidders, and sellers presumably don’t have confidence [to go ahead],” he said.
Hassan believes Sydney is about 40 per cent through its market downturn, and has forecast price declines of 18 per cent. Prices falls would likely continue until the cash rate stabilised, at an expected peak of 3.5 per cent early next year.
The cash rate is tipped to rise for a fifth straight month at next week’s Reserve Bank meeting.
Auctioneer Damien Cooley, of Cooley Auctions, said the key reasons properties passed in were a mismatch between buyer and seller expectations, or less desirable property traits.
“The buyers aren’t prepared to meet the vendor’s expected price … some might say the vendor is overpriced, some might say the buyers don’t see the right value, and both can be correct,” he said.
While some sellers needed to drop their asking price to make a post-auction deal, others sold for well above their highest auction offer, Cooley said.
The best chance of a post-auction sale was typically within two weeks, he noted. Interested buyers who thought the property may be beyond their budget would likely return. New buyers were also most likely to show interest in this time frame.
Properties sold eight or nine weeks later had typically been overpriced and had several reductions over the sales campaign, he said.
Selling agent Catherine Murphy, of The Agency North, said interested buyers had been increasingly holding back at auctions, even in instances with multiple bidders.
“If there are other people there who are prepared to put their hand up, they will see social proof and feel comfortable to bid. However, if they don’t … they’re far more likely to wait,” she said.
While sellers and agents could be reluctant to go to auction in a cooler market, Murphy noted the auction process typically resulted in swifter and stronger sales.
Earlier this year she sold the Epping home of Sue Lennox more than six weeks after it passed in on a vendor bid of $1.65 million. There were interested parties in the crowd, but none made offers.
The pair received lower post-auction offers, but eventually sold for $1.71 million to a family interested in the local school catchment.
Lennox, who sold to downsize, felt talk of rate hikes deterred interested parties. When her home passed in, she was relieved that she had not already bought elsewhere. Despite the stress of the process, she was pleased with the result.
“I wasn’t locked in to having to sell immediately, I was quite prepared to play the waiting game and to get the best price,” she said.
“When I was interviewing real estate agents [at the start] the price some of them were putting around the property was beyond belief … but as the market changed I thought, look, I had to be reasonable around what my property would potentially attract.”
Her post-auction sale also meant she was able to negotiate a deal with the buyer, where she rented her own home back for several months, while she looked to purchase her new home.