Bidder numbers fall below key threshold, lifting buyers’ chances
By Elizabeth Redman & SSB
The average number of bidders at auction has fallen below a key threshold that suggests property price growth is set to level out.
There were at least 3.5 active bidders per auction for much of last winter and spring in Sydney and Melbourne, but bidder numbers have dropped below this level for 2022 in a sign the market is easing, new Ray White figures show.
When there are more than 3.5 bidders per auction, the strong competition tends to push prices and auction clearance rates up.
Scant listings in last year’s lockdowns were highly sought after, as buyers took advantage of low interest rates to look for more spacious homes to work remotely. But more homes have been listed for sale this autumn, giving buyers more choice and reducing their fear of missing out.
“If there is a sustained drop in bidder numbers, there are certainly plenty of auctions where there are no active bidders - there, prices tend to trend downwards,” Ray White data analyst William Clark said.
“If a house has passed in, it tends to go for a lower price.”
A house with one bidder is likely to sell for less than an auction with two bidders, and so on, meaning the level of competition has an immediate effect on prices, he said.
Sydney reached a peak of 4.9 average active bidders per auction last July, its highest level over the past 12 months, but has held below three throughout March.
Melbourne reached 4.6 bidders last August but has held at three or below throughout March.
Canberra, where prices have also boomed during the pandemic, reached a peak of 9 bidders in September 2021 but settled at three or below last month. Adelaide held out above 3.6 through March and Brisbane was tracking between 3.2 and 3.5.
Clark expects the number of active bidders at auction in the largest cities to remain moderate and stable, and prices to track similarly.
“Given it appears as though the days of 3.5 bidders per auction for a lot of those large markets are over for the time being, it looks like it’s returning to a more moderate trend of between 2.5 to 3,” he said.
On the ground, competition is strong for many family homes and first-home buyer properties but can drop off for anything that needs a renovation due to the cost and time involved.
Property values have also stopped booming, edging down 0.2 per cent in Sydney and 0.2 per cent in Melbourne in March, on CoreLogic data.
In Sydney, Cooley Auctions managing director Damien Cooley said while fewer bidders were in the market, the ones still active are keen participants who have missed out at previous auctions and have been looking for some time.
Other buyers who have just got finance approved or just started looking are less likely to show up now, he said.
At one auction last weekend he had five bidders register, which he highlighted as still a very good result, albeit compared with the seven to eight bidders he would often see during the peak of the boom, or 10 to 12 during lockdown.
“We are absolutely seeing less buyers, but still quality,” he said.
“Downsizers and first-home buyers who have mum and dad helping them, they are hard to compete against.”
Benson Auctions director Stu Benson said in the city’s Hills District, bidder numbers were highest for any homes that are rare, outstanding or at the top of the price bracket for their suburb.
By contrast, in the middle of that market in the $1 million to $1.8 million price bracket, buyers have a lot of choice and are not pushing prices as high above reserve, he said.
About two in five auctions are selling prior, as vendors accept a strong early offer rather than run the campaign to auction day, he added.
“Some sellers are thinking a bird in the hand is worth two in the bush,” he said.
In Melbourne, The Agency general manager for Victoria, Peter Kakos, said although family homes and first-home buyer apartments are still highly sought, some homes are passing in at auction for negotiation afterwards as bidders hesitate to raise their hands.
“There is a bit of a trend in people wanting to negotiate post-auction,” he said.
“Those that are willing to put up their hand and show their strength are the ones that end up buying.”
Belle Property Albert Park principal director David Wood said renovated period homes had been popular in his neighbourhood as bidder numbers more broadly eased.
The cost and time involved in sourcing building materials and doing a renovation had shifted demand towards move-in-ready properties, he said. One- and two-bedroom apartments on the city fringe were generally not as popular either.
Early offers could be worth considering in this market, as long as the agents and owners are on the same page.
“If you have got a strong buyer on the property, the chance of them still being around in four weeks is less,” he said.
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