Sydney Auction Market Update: Understanding 50% Clearance Rates & Next Steps for Unsold Properties

Auction clearance rates in Sydney are currently running at about 50%. So, what happens to your property if it doesn’t sell?

At the height of the 2021 real estate boom, the auction clearance rates of Sydney properties ran at 90%. Now according to figures published by Domain, auction clearances have reached a paltry 50%. In other words, half of the Sydney properties auctioned failed to sell.

This doesn’t mean that the property won’t sell. Most of them will still be sold sometime not long after the auction.

Why are property auctions so popular in Sydney?

One of the most accepted ways to sell property in Sydney’s eastern suburbs is by auction, and there are good reasons for this.

Property owners enjoy auctions because they create hype about the property. They typically start with a short, pointed promotion, creating competition between buyers. These buyers may offer their best price because they have grown an emotional attachment to the property and don’t want to lose it to other bidders.

And it’s not just the sellers who enjoy auctions, buyers like the transparency and openness of the process. At an auction, buyers know what others are prepared to pay for the property. Anyone who wants the property badly enough must be prepared to pay more and meet the seller’s reserve so they know there is little risk that they will pay too much for the property.

For an auction to work, there must be more than one interested buyer, or there can be no competitive bidding. Buyers must also be willing to bid in the public arena. Not everyone has the self-confidence to do this, which is why it is often difficult to get the auction going. Once the first buyer makes a bid, most auctions will take off, with more bids quick to follow.

Why don’t all properties sell at auction?

There are several reasons why properties fail to sell, most are unrelated to the quality of the property.

Here are some of the reasons

• Not enough buyers – you only need one interested buyer to sell your home. Still, a successful auction needs more than one. Some top-end and distinctive properties just don’t have a big enough buyer pool to support an auction. These types of properties are better sold by private treaty off a listing.
• Lack of confidence – many people prefer not to bid on a public auction. Slowing property markets have resulted in auctions that are less well-attended, meaning fewer bidders and less robust bidding. This can sometimes prevent people from making a public offer.
• Recalibration of the market – the Sydney property market is currently busy recalibrating. When property prices were on the rise in 2021, people didn’t worry too much about paying a little too much for a property. They knew that they could recoup their funds in the future. As prices level out, people become a lot more cautious about paying too much for a property.
• Unrealistic expectations – the seller determines the reserve price before the auction even starts. If the reserve isn’t reached, the property remains unsold. Some buyers have an exaggerated idea of the value of their property. This may work in a market where prices are rising, but not so much in a slower market where prices are on the decline.
• Buyer strategy – some buyers prefer not to bid at the auction, believing that they will get a better price if they negotiate with the seller after the auction. Though they may be mistaken.

What happens to the unsold property after the auction?

If there have been bidders at the auction, the real estate agent usually has to negotiate with the person who made the highest bid before allowing other interested parties to make an offer. The agent is free to negotiate with anyone if there have been no bids or just a single bid.

A good real estate professional will continue in their attempts to sell your property. Many properties sell at a good price not long after the auction.

Over the medium term

If your property doesn’t sell after the auction, you may have to relist it and then sell it by private treaty. The property is then remarketed to the public via agent databases and websites.

The bottom line

Though current property market conditions may not be the best environment for selling properties at auction, you may still have a successful campaign. Even if your home doesn’t sell at auction, it may well sell after the auction for a very good price.