By Kristy Johnson and Elizabeth Redman
Sydney’s auction clearance rate has reached its highest level in a year as home buyers feel more upbeat due to the recent interest rate cut.
In February, 68 per cent of Sydney homes taken to auction sold under the hammer or sold prior, Domain figures show.
The last time Sydney’s monthly clearance rate was higher was in February 2024, when 68.2 per cent of homes taken to auction sold.
Last spring, the market was weakening because ongoing high interest rates limited how much money potential buyers could borrow and discouraged them from bidding. But buyers have been returning to auctions this year, either to purchase before rate cuts drive up prices again, or after February’s rate cut armed them with bigger budgets.
Some of Sydney’s most expensive areas recorded the strongest auction success, in line with other indicators showing the upper end of the market leading the rebound.
In the eastern suburbs, 72.8 per cent of homes sold last month, while the city and inner south cleared 72.5 per cent and the northern beaches 72.1 per cent. But the inner south west had the highest clearance rate at 73.4 per cent. All of these were higher than this time a year ago.
A clearance rate of 60 per cent is considered a balanced market, while a higher result indicates property prices are likely to be rising. A result of 70 per cent is broadly correlated with 10 per cent annual price growth.
Domain chief of research and economics Dr Nicola Powell said Sydney’s overall clearance rate of 68 per cent was a strong outcome.
She warned that clearance rates do tend to bounce early in the year, when there are fewer homes for sale and buyers who missed out last year turn up focused on buying a home.
But even so, she thought this bounce was stronger than the bounce at the start of 2024.
“There seems to be what appears to be a bit of renewed confidence – the clearance rate is much stronger than what we have seen in the later part of last year,” she said.
Almost one in four home sellers who scheduled auctions decided to withdraw them in October – though some may have switched to a private sale method – but only 18.9 per cent were withdrawn from auction in February, she said.
“The rate cut hasn’t been a massive game changer in borrowing capacity, it’s been a game changer in confidence and sentiment,” she said.
She said the upper end of the market tends to lead price cycles, and some premium locations have moved into a recovery compared with last year.
“Buyers are reacting to perhaps a better pricing environment and trying to purchase now before prices rise.”
The volume of buyer inquiry on homes for sale in February was 4 per cent higher than a year earlier and the highest monthly volume since March 2022, according to separate figures from Domain that measure users of domain.com.au sending a message through the site to the agent on a listing.
Auctioneers report buyer interest picking up to an extent but say bidders are still price-sensitive.
Independent auctioneer Edward Riley said buyers have been more positive since the Reserve Bank cut the cash rate, but he thought it would take more than one cut to have a significant impact.
“It has given buyers confidence, however, in the sense that the worst is probably behind us,” he said.
“There certainly are buyers that don’t want to be left behind. There’s FOMO [fear of missing out], but not to the extent of the past.”
Riley thought the number of registered bidders varied by property as the market was still somewhat patchy. “It’s still a price-sensitive market, where buyers want value. If vendors are too opportunistic, buyers will look elsewhere.”
Ray White Eastern Beaches’ Angus Gorrie said buyers were more positive, which was showing in inquiries and open homes, as well as an increase in registered auction bidders post-rate cut.
“I would say a 20 to 30 per cent increase in registrations,” Gorrie said. “Last weekend, we held two auctions in Bronte and Coogee that had 12 and 8 registered bidders [respectively].
“Without a doubt some buyers are wanting to purchase now. You’ve got leftover buyers from last year thinking, ‘Could I get priced out of the market due to competition?’, as well as investors coming back.
“Sellers want that buyer confidence and know the market is starting to turn off the back of that positivity, and are more open to selling.”