Sydney and Melbourne auction withdrawals hit record highs as buyers retreat

The number of homes withdrawn at the last minute from auction in Sydney and Melbourne has exploded in recent months, according to new data.

Preliminary auction figures from Domain over the weekend showed 44.1 per cent pulled out in Sydney and 40.5 per cent withdrew in Melbourne. However, those figures are likely to be revised down as clearance rates are finalised throughout the week.

At the beginning of February, the rate of withdrawn auctions was 4.4 per cent in Melbourne and 5.1 per cent in Sydney. Updated data will show those figures have soared by three times that to more than 12 per cent in Melbourne and five to six times that to 29 per cent in Sydney.

The dramatic rise is largely attributed to interest rate increases, the budget’s scrapping of negative gearing on established properties, and an inflation-adjusted capital gains tax (CGT) rate in place of the usual 50 per cent discount, which further erodes buyer confidence.

Domain chief residential economist Dr Nicola Powell said the rate of withdrawals had been rising steadily, reaching a fresh peak on May 30, with Sydney hit hard, as it was very much the heart of Australia’s auction market.

“I think it shows how shaky buyer confidence is at the moment, so the depth of buyers just isn’t there at some of the auctions and you really need at least two people willing to bid on a property for a successful auction,” she said.

“But buyers have been hit by three rate hikes this year, the war in the Middle East, renewed cost of living pressures, inflation, and there was a pretty negative reaction to the budget. At the same time, we’ve got to the point where agents will withdraw from an auction rather than let it look like a failed sales campaign which could create some stigma around a property.”

In Sydney, acting BresicWhitney chief executive Will Gosse said the results were due to a confluence of factors, with the budget changes coming on top of interest rate rises, the broader dire economic climate, and global uncertainty.

“That’s all together causing people to be a little more hesitant,” he said. “But we are seeing more than 50 per cent of our properties sell prior to auction, which is pretty telling, and there is a reasonable level of withdrawals. Although we are seeing, at the moment, people committed to reaching an outcome, and being patient, which does mean an increase in days on market.

“Interestingly, we do see a level of resilience in properties below $2 million and a lot of the slowdown has been at price points north of that. The top quartile has seen the most reduction in price growth.”

In Melbourne, Marshall White director and auctioneer Marcus Chiminello said that too many buyers were adopting a “wait-and-see” approach and sitting on their hands to see how the situation plays out.

“But that’s when opportunities are missed,” he said. “It blows my mind that buyers don’t want to buy when the market is soft, but they’d prefer to wait until the market is hot.

“Now, it’s a field of opportunities out there and represents the best value in five to seven years. Your money is absolutely going further today than it did even 18 months ago.”

Chiminello said that, in his opinion, the Melbourne market was much more resilient than those in other states, having recently weathered several adverse conditions.

“Many things affected our market before the budget came, and we coped with those,” he said. “In addition, a lot of people now don’t want to sell before they buy as they’re worried there won’t be a suitable property for them. That lack of stock is affecting the number of people buying.”

Ray Ellis, chairman of real estate agency Noel Jones, said buyers had definitely been spooked by the war in the Middle East and its effect on the cost of living, petrol prices, holiday costs, interest rates and the budget.

“When punters take all those things into account, they ask themselves if they should really buy now,” Ellis said. “That hesitancy has now crept into the psyche, and while people have no control over the war, rates and taxes, the one thing they can control is whether they’re going to buy or sell.

“This weekend, we really saw the results of that holy trinity. Real estate is all about confidence, and I spoke to a couple of people after one auction and they said they felt they’d be better off waiting a couple of weeks, and then they might be able to buy for less.”