The type of Sydney homes that are passing in at auction

Not all homes being offered at auction this season are selling equally well, say agents, with certain property types particularly likely to be passed in.

Sydney’s auction clearance rate slipped to 58 per cent last weekend, below the level of 60 per cent that analysts consider to be an indicator of a balanced market, after last week’s interest rate rise and amid uncertainty about the global economy.

Buyers’ agent Michelle May said generic apartments in high-density areas were dragging down the clearance rate.

“Certainly, apartments are harder to sell than houses right now, and it’s those investment-grade apartments that are least likely to sell.”

‘Investment grade’ is a term for dwellings that are typically bought by investors and rented out.

May said she had noticed a large volume of investment-grade apartments being offered at auction so far this year.

She said factors including interest-rate uncertainty and geopolitical strife were giving investors pause.

“It’s a real ‘hold your breath’ kind of moment. Investors are perhaps a little more conservative.”

May said more first home buyers were active in the market this year thanks to government help, but that those buyers were bidding selectively.

“Partly, it’s because they are becoming savvier about issues around strata living. If there’s water ingress to a unit, or a dispute between strata and the developer, they are more likely to walk away.”

May also said some sellers were pricing homes unrealistically.

“It’s going to be interesting to see how selling agents handle their vendors’ potentially unrealistic expectations [this autumn], now that there’s not so much of a rush on.”

In February, May bid on a two-bedroom apartment in Camperdown on behalf of a client. The unit was in a well-regarded 25-year-old complex with city views.

May and her client were the highest bidders but didn’t hit the seller’s reserve price.

“So, we had to negotiate, which resulted in the buyer lowering their price,” she said. “We bought it in the end.”

May said houses were generally selling well, but those in inferior locations – on a busy road, for example – were often passing in at auction and selling later that day.

“Buyers are pushing back a little on vendor expectations for those.”

Properties that are passed in but then sell privately are treated as unsold when calculating the auction clearance rate.

Dan Bramley, a buyers’ agent at Cohen Handler, said properties in less-than-pristine condition were faring particularly poorly this season.

“Buyers are very conscious of the time and expenditure required to renovate at the moment. Often, it feels like too much of an undertaking.”

Earlier this month, Bramley attended an auction for a fixer-upper in leafy Northbridge with a $4.5 million guide.

“It ticked all the boxes,” he said: “quiet street, rear northerly aspect, and located in a popular part of the North Shore where homes can sell for up to $10 million.”

The house received a single bid and was passed in.

“The seller dropped the guide a couple of times during the campaign, but it wasn’t enough,” Bramley said.

“The registered bidder they’d hoped would bid aggressively didn’t show up to the auction at all.”

Bramley said he’d noticed other auctions being rescheduled or cancelled entirely, presumably to avoid those properties passing in.

He said affordability is top of mind for prospective buyers at all levels, and that the expectations of sellers and buyers were misaligned.

“The gap between the prices vendors want and where the market sees value is far too big at the moment.”

Lorinda Mansfield, an agent at Raine & Horne Neutral Bay, characterised this year’s auction results as patchy.

“While some properties are achieving above expectations, others are getting stuck,” she said.

Ex-rentals, properties on main roads and apartments in buildings with problems were all struggling to sell at auction, Mansfield said.

Properties valued between $1.5 million and $3 million were also achieving lacklustre results in some instances, she said.

“What my colleagues and I are hearing a lot from people at that price point is that they’ve decided to rent for another year or 18 months while the economic uncertainty plays out.”

Due to the conditions, Mansfield said some agents were encouraging vendors to sell prior to auction if they received even a single offer.

But she thought the market overall was in good health.

“People have to remember that properties can sell before, at or after auction. It’s all part of the selling process.”

May, the buyers’ agent, said she recently went to an auction where she had to compete with 14 other registered bidders.

“It’s still competitive for A-grade properties, but I think people are being more discerning in terms of what they are prepared to push themselves for.”