Sydney auctions: game of ‘cat and mouse’ ahead of next expected rate rise

Anticipation of another interest rate rise in February has sparked unusual activity in the Sydney auction market. See replays of how recent auctions have gone down

February auction volumes are down. Picture: Tim Hunter.

A hush has descended on the Sydney property market ahead of another anticipated interest rate rise in February, with few agents scheduling auctions and buyers biding their time before making offers.

The weekend after Australia Day normally sees the first round of significant auction activity each year, but activity this year has been more subdued.

There will be just 180-odd auctions across Sydney, roughly one eighth fewer than over the same weekend last year.

Auction volumes for the first week of February will be about 40 per cent lower than over the same week in 2022, PropTrack data showed.

Agents reported a game of cat and mouse was underway between buyers and sellers and neither wanted to make the first move until there was more certainty about the health of the market.

It’s meant few property listings and – despite attendance at open for inspections soaring in recent weeks – bidder numbers at many auctions remain low while transaction activity has been slower than in previous years.

Mortgage Choice broker James Algar said many would-be participants in the market were holding back awaiting the outcome of expected rate rises in February and March.

This would determine their budget for home purchases. And for some sellers, rates would determine whether their plans to upsize would even be feasible.

“There’s a bit of uncertainty. There’s been an uptick in people looking for a home, which is normal for this time of the year, but I’d say many are hesitant,” Mr Algar said.

“The real acid test for the market will be what happens after the next rate rise and we could see more people buying after that.”

Another reason for the sluggish buyer activity was the shortage of “quality” listings, according to Avenue Auctions director Andrew Cooley.

With new listings down 49 per cent compared to a year ago, many of the properties that have been coming up for sale have been those with significant drawbacks such as a position on a main road or opposite a train line.

Many of their owners were reported to be investors who couldn’t afford the higher interest rate payments.

Avenue auctions director Andrew Cooley said would-be sellers were hanging on the outcome of the next rate decision. Pic: Simon Bullard.

Owners of homes that “ticked all the boxes” were often in a position where they had room to time their sale and had adopted a wait-and-see approach.

“When there has been a true A-grade property come up for sale, it sells well because it’s what everyone wants,” said Avenue Auctions director Andrew Cooley.

This climate would continue for some time, he added. “Last year was a very busy February, but this year it is going to very quiet,” Mr Cooley said.

My Housing Market economist Andrew Wilson said the next Reserve Bank meeting on February 7 could be a key turning point for the market that will set the scene for buyers and sellers over the coming months.

“If rates hold or it’s a small increase, people will just get on with. If it’s a rise of half a per cent, it will be a real negative for the market going forward.”