We all knew it would only be a matter of time before Sydney’s Auction Clearance Rate began to decline as we now head into a ‘transition phase’ of the property market. It has been an unforgettable record breaking run for the last 2 years which is unfortunately coming to an end. Last week’s auction clearance rate is the lowest we’ve seen for some time and even though prices are still holding relatively steady, many homeowners are feeling nervous about selling now.
* Source Dr Andrew Wilson
As we head into Winter, the seasonal slowdown combined with an increase in supply, an interest rate rise, high inflation and an increase in the cost to build, is creating caution amongst buyers about how much they are willing to spend and as a result we are now seeing the beginning of an adjustment phase in the property market. This is a time where the gap between what sellers want and what buyers are willing to pay is at it’s widest, hence the decline in auction clearance rates. We expect to see this gap begin to narrow over the coming months as sellers come to terms with this adjustment.
The most common method of establishing what your home is worth is by comparing your property to other properties that have recently sold in the area. This ripple effect or adjustment phase could take anywhere from 3 to 6 months worth of sales evidence for sellers to realise the true value of their home. So for the next few months we expect clearance rates to be down as values begin to plateau as we head into Spring.
It’s important to note that not all suburbs within the Sydney property market are equal. It’s quite common to experience a seller’s market in one part of Sydney and a buyer’s market in another. It all depends on the type of property that is most common in those areas and the level of demand for such properties.
Since the pandemic there has been a shift from smaller to larger homes as people choose to work more from home and desire more green space. For example, an area which is extremely high density and primarily consisting of high rise apartment buildings such as the Sydney CBD, may transition sooner to a buyer’s market due to an over supply and reduced demand for that type of property. Whereas a 2 storey terrace home in the inner city may remain a sellers market due to a limited supply and increase in demand for this type of property.
Whether or not you should sell your home by the Auction method in a transitioning market will really depend upon the type of property you have and the strength of demand at the time. If you own a unit that is pretty stock standard and are competing with lots of similar units on the market at the same time, then it might be best to sell by Private Treaty with an advertised price guide.
If your home has something unique such as a water or city view with rooftop terrace, or is a spacious family home with plenty of yard and swimming pool, then Auction would be the best way to go. These types of properties are highly sought after and more likely to evoke an emotional connection with buyers. They are more difficult to accurately price as an emotional connection can add a significant amount to the market value of the home and may vary dramatically from one buyer to another.
The main benefit of an Auction campaign during a transitioning market is you have 3 opportunities to effect a sale – Before the Auction, At the Auction, or After the Auction. At the start of an Auction campaign, a price guide is sometimes removed leaving it up to the market to provide feedback. If you’re lucky you might find you have a buyer in the first few weeks who is desperate to secure a home and makes an offer that is simply too good to refuse. In this case, the agent will go back to every other buyer who has inspected/enquired on the property to see if anyone is prepared to pay a higher amount. If not, then the property can be sold to this buyer.
If no suitable offers have come through prior, then you proceed to Auction day. If the agent has performed their job well, you should have at least a few buyers turn up to bid for the property. During the recent boom it was common to have 6 or more bidders, however it is now more like 2 or 3.
In the case where the bidding doesn’t reach your ‘realistic’ reserve price, then you can pass the property in and try to negotiate with the highest bidder immediately afterwards. If you still cannot come to some agreement, the property will stay online however this time with a price and the agent will continue to show buyers through until a suitable buyer is found. It should only take a few weeks however if not, you should allow at least another month within which to sell the property.
If after all of the above, you still haven’t secured a sale then you need to take the property off the market and objectively assess why. Is there something about the property that could be improved? Could you do some extra painting, landscaping or property styling to help enhance the appeal of the home? It might be that your expectations are way too high in which case you may need to re-do your figures. If you let your property sit too long on the market, it will become stale not only to the real estate agent but also to the buyers. They will think there must be something wrong with the property and this will de-value it even further.
If you are thinking of selling but not sure which method to use or whether the timing is right for your circumstance, feel free to book in a call with our Vendor Advocates for a no obligation discussion. You can also find out more about how we help sellers achieve the highest possible price with the least amount of stress by visiting our website.