Testing the waters: Where buyers have the upper hand

The latest auction results from Australia’s biggest capitals suggest rising buyer interest and stronger competition, but not all buyers have a spring in their step.

Industry professionals say caution remains as the usually bustling selling season gets into full swing this month.

Clearance rates in the auction capitals of Sydney and Melbourne have been gradually rising throughout the year on the back of three interest rate cuts. But Sydney-based buyer’s agent Dan Sofo says there are many markets, within markets, across the city, and that’s a key distinction to make.

“There are pockets of the inner west that are absolutely running so hot that some properties don’t even make it to auction,” Mr Sofo said. “But there are other pockets such as the eastern suburbs that are sluggish with a lot of nervous buyers and sellers.

“Then there are suburbs in the middle ring that have been running red hot, especially with houses around the median, that’s $1.2m to $1.5m.”

Sydney auctioneer from Menck White Auctioneers, Clarence White, says he’s seeing a moderate uptick in buyer confidence and activity but it’s more gradual than explosive.

“Overall the market remains price cautious and price sensitive,” Mr White said.

“Assuming anticipated further rate cuts do eventuate, we would expect a gradually strengthening market.”

Investors capitalise on Melbourne’s underperformance

Auction clearance rates in Melbourne are sitting at a two year high as confidence builds that the city’s underperforming housing market has turned a corner.

Enquiry activity on realestate.com.au shows buyer demand in Melbourne has strengthened across more than 90% of its suburbs, with enquiries up on average 23%. 

Melbourne is now the third most affordable capital city for housing, ahead of only Darwin and Hobart, following years of lagging price growth.

Melbourne buyers agent Carly Susic says she’s seen more interstate investors lately trying to capitalise on the city’s slower pace.

“We’ve come out of a pretty low speed market and it’s patchy,” Ms Susic said.

“I wouldn’t say it’s a strong market at this stage – it feels like a recovery mode,” she said. “Buyers are still being a bit picky. They’re out there and looking but to some degree the confidence hasn’t returned.

“We’re seeing more than one buyer but there’s still that gap between the vendor’s expectations against where the buyer is sitting.”

But opportunistic buyers are seeing the market bottom-out in Melbourne.

While homebuyer sentiment dipped slightly in September according to the latest Westpac consumer sentiment survey, the state breakdown show homebuyer sentiment is outright positive in Victoria.

Buyers are much more pessimistic in Queensland, Western Australia and South Australia – where property prices have experienced rapid growth in recent years. NSW buyers are neutral on whether it’s a good time to buy a home.

A lack of new supply in Melbourne could also turn the tide.

“We haven’t seen the volume [in Melbourne] we were hoping to see. So we might have a late run but last week was very slow just four weeks out from the grand final. So we hope it’ll pick up,” Ms Susic said.

Ms Susic says up to $1.2m or $1.3m there’s good competition and first-home buyers are at least active at that mark.

“Not enough stock” driving competition

Forward looking demand data signals some of the previously underperforming capital cities are now experiencing a resurgence in enquiries.

REA Group senior economist Eleanor Creagh says this matters because expectations can be self-fulfilling, when households anticipate rising prices, urgency builds and demand is brought forward. This can reinforce the very price momentum that’s expected, she says.

“Markets are not only about fundamentals but also about expectations,” Ms Creagh said. “Lower mortgage rates are central to this shift. Recent interest rate cuts have boosted borrowing capacity and reduced monthly repayments, giving buyers greater confidence to stretch budgets.”

Packed Saturday auctions can also be a motivating force, especially when there’s not enough properties to bid on.

Stock is constrained nationally, according to REA Group’s latest listings report.

For example, new listings in July were down 8% year on year nationally, with broadly consistent declines in metro and regional markets.

Furthermore, new listings were lower in all capital cities relative to the prior year, with Melbourne down 9% and Sydney 5% lower. Brisbane’s total stock has also slumped 8% on year.

Chief auctioneer at Holmes and Co., David Holmes says it’s been busy in Brisbane of late and he expects further uplift this spring.

“I think Brisbane is leading the charge when it comes to momentum at the moment,” Holmes said. “Our auction numbers are very solid. Last week we had a limited number of auctions at around 143 on the weekend, due to a dip in stock at the moment.

“Auctions are proving very popular again and it’s very hard to price things in a rising market. But we just can’t get our hands on enough stock at the moment, that’s the issue.”

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