As the unprecedented housing boom continues across most of Australia’s capital cities, in Melbourne and Sydney, auction campaigns are closing quicker and at higher prices than ever before.
Many real estate agents in Melbourne have taken to cutting auction campaign lengths down to just one or two weeks from the usual four-week period in response to the recent trend of buyers looking to close on properties as quickly as possible.
This is primarily because prices continue to climb while the number of available listings remains low, leading many prospective buyers to jump on their desired properties early with high offers to avoid a drawn-out and high stakes auction.
According to real estate agent Luke Saville from The Agency Boroondara, buyers’ fear of missing out (FOMO) is the driving force behind the shorter auction periods, with some homes being on the market for less than a week.
“Buyers are just so keen to put in an offer straight after they see a property. So, what we’re finding is that we’ll have a first open and get three or four offers immediately. So we’ll bring the auction forward,” Saville shared.
“Again, it’s pure FOMO where buyers are thinking, ‘We’re going to get blown out of the water at auction so let’s just do this now. In a way, it’s smart because they are beating another five or 10 buyers before they even get a chance to see it.”
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CoreLogic’s latest Auction Market Review further shows how popular auctions have become, with 31,605 homes taken to auction across the combined capital cities in the June quarter, resulting in the busiest period since the December 2017 quarter.
These numbers should drop over the next quarter due to rolling COVID-19 lockdowns in the Sydney market, where the number of new homes listed is on the decline.
The number of properties coming to auction in Sydney at the end of July went from 800 one week down to 515 the next, a new six-month low.
Ray White’s chief economist Nerida Conisbee has seen that the total number of listings are back down to levels from 2019 and 2020, with many properties selling before going to auction.
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“Buyers are still there, though, but they’re now struggling with lack of stock until we open up again,” Ms. Conisbee explained.
“What is interesting is that average active bidders are high at the moment; this week, it was 4.4, when the average for the past 12 months is 3.3.”
The high-stakes environment for prospective buyers in Sydney and Melbourne likely won’t calm down any time soon, with experts predicting that property prices will continue to rise by more than 20% by the end of 2022.
Chief economist Alan Oster of National Australia Bank has projected that despite the ongoing lockdowns in Sydney, property prices will continue to climb as high as 21.6% for the year, driving the median property value up by over $220,000.
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Similarly, Melbourne is expected to end up with a 17.6% property value increase, raising the median home price by nearly $150,000.
While forecasters during the beginning of the COVID-19 pandemic incorrectly predicted significant price falls out of fear of the negative impacts of lockdowns and unemployment, Dr. Oster believes the property value boom could start to recede in 2022.
“The better than expected recovery in the economy and labour market alongside very low interest rates has supported the strong rebound in the property market,” he said.
“Affordability constraints will likely begin to [be felt] over the year and see a slowing in price growth as the impact of lower rates fades.”
Words by Rimas Veselis
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