Cooley Auctions has just released their Cooley Index for August 2018 for the residential - Sydney Metro, showing auction volumes, clearance rates and average home prices are all down compared to the same time last year.
Cooley Auctions has 15 per cent of the Sydney market, and the company’s results show there were 230 auctions in August 2018 compared to 356 in the same time last year.
Damien Cooley of Cooley Auctions told WILLIAMS MEDIA in 2017 the market was a lot stronger than it currently is.
“People were looking to take advantage of the market and cash out and sell, in what they perceived was a better time," said Mr Cooley.
“The press now around the market not being as good - which it isn’t - has certainly had an impact on those vendors coming to market.
“People feel in some cases they have missed the boat, so instead will hang on until the next cycle.”
Mr Cooley said a lot of people can afford to hang on to their properties, however the people who do have to sell will find market conditions more challenging now than in 2017.
Malcolm Gunning, president of the Real Estate Institute of Australia said during winter the amount of auctions have been down, because people have been coming to terms with new reduced price points for property.
“What is also quite clear is in Sydney there are multiple markets,” Mr Gunning told WILLIAMS MEDIA.
“The decline in price or auction numbers varies from region to region.
“Each area in Sydney, and the dynamics, are a little different."
Mr Gunning said the Sydney market is impacted by employment opportunities and new infrastructure, and these are what support prices.
41/56a Sydney Wharf, Pyrmont for sale by Robert Alfeldi of CBRE, as seen on Luxury List
According to the Cooley Index, clearance rates in August 2018 were 52 per cent and 68 per cent in August 2017.
Mr Gunning agrees that the clearance rates are much lower.
“Rates at the moment are hovering around slightly above 50 per cent.
“The clearance rates of 80 per cent in the 2015/16 period were abnormal - historically high - while currently they are below normal but not significantly.”
Mr Gunning said 50 per cent is deemed about normal.
“It’s important to know we have been in an abnormal market for the last five years,” said Mr Cooley.
“Right now it is a normal real estate and auction market compared to what we had from 2014-2017.
“The other day the front page of the newspaper had an article about a record auction volume of 756 auctions in Sydney in 2014.
“If you look at where we are now it is a normal marketplace, compared to the boom back in 2014,” Mr Cooley continued.
Related reading: Sydney's most tightly-held suburbs
“We aren't averaging as many bidders showing up, and there aren’t as many buyers as there were in the boom.”
Mr Cooley said this is largely driven by investors retreating from the market, feeling like the market is top heavy on price.
“A lot of investors who were buying through the boom to take advantage of off the plan sales have retreated, or are happy with what they have bought and will hold.”
Cooley Index for August 2018 for the residential - Sydney Metro. Source: Cooley Auctions
The total value sold under the hammer in Sydney’s metro in August this year by Cooley Auctions was $99,898,300 million, compared to $206,125,000 million at the same time last year.
Mr Cooley said the average sale price is fairly indicative of market.
“Prices are fairly higher than they were five years ago.
“Spring will be a big test of the market as more property will hit the market.
“We are noticing premium areas like the eastern suburbs are holding up better than many other areas, however even those areas are starting to feel market shift and change in the market.”
According to the Cooley Index, the average over reserve was -$28 this year and $59,291 last year.
Related reading: Sydney, Melbourne and Brisbane in top 20 for global prime residential price growth
“We have now moved into a negative territory where properties are on average selling less than reserve price,” said Mr Cooley.
“In a boom market the numbers look very strong and properties sell well above what owners expect.
“Reserve prices are being used as a negotiation tool now - agents are advising owners to set reserve above what they want to sell properties for."
Mr Cooley said this year owners are being a lot more strategic about where they set their reserve, so they have the ability to negotiate with buyers if necessary.
“More often now we are getting into a negotiation situation with the buyer.
“The average over reserve number will fluctuate, in September we might go back to positive figures which would tell me vendors have adjusted to the market, and the gap between what a vendor expects and what a buyers wants to pay has reduced.”
Mr Gunning said it is more to do with hope, rather than vendors setting reserve prices high for negotiation.
“I don’t think the market is that sophisticated.
“I’m of the opinion that agents are giving reasonably accurate price indications, but vendors are hopeful and setting higher reserves.
“That is one of reasons properties aren't selling. There is great reluctance for sellers to come to terms at this stage with the current market.”
Related reading:
Unit market outperformed houses in weekend auction