Sydney: 2 reasons housing auction clearance rates are dropping

As the Sydney property market gets set for its big litmus test this weekend with around 1450 auctions one veteran industry professional thinks sellers will be heading back toward private treaty.

Douglas Driscoll, CEO of Starr Partners, told Business Insider that over the last couple of years in Sydney agents haven’t sold properties, people have bought them. But that is changing.

Driscoll said clearance rates are dropping for two main reasons, “the reduction of investors and unrealistic expectations.” He added that, “vendor expectations are currently anywhere between three to six months behind the market.”

That means sellers will start to shy away from the auction process with falling clearance rates. “In a strong market, vendors are very prepared to follow the auction path but when things soften or when clearance rates fall, we can expect a semi-abandonment of the auction process,” Driscoll said.

It’s the transparency that the sellers like on the way up, the competitive bidding that they hate when it disappears and auctions fizzle he said.

That’s not to say Driscoll is in any way concerned about the state of the Sydney property market.

“Sydney has some of the most favourable market conditions in the world. Right now, the market is coming out of ‘the perfect storm’ but it is still exceptional. In my opinion, it’s absolutely not heading into a slump, rather returning to a realistic level,” he said.

But it’s also fair to say that his characterisation of the transition that Sydney property is under taking will catch some vendors by surprise. Indeed it sounds a lot like the uncomfortable transition the Australain economy has had over the past few years.

“When you compare to 10-15 year data, you can see that it’s still a healthy market. All that’s changing is that we’re transitioning from not just a once-in-a-generation, but potentially a once-in-a-lifetime market to one that is more closely aligned to the norm,” Driscoll said.

For now though that still sounds very much like a warning that clearance rates will continue to fall taking prices with them.

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