Chapter 1: What signs indicate that auctions are cooling?
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course we are starting to hear that auctions are cooling somewhat so what is happening on the ground inside auctions well shortly we're going to be talking with a leading australian auction company and to damien cooley for his take on what's going on a reminder on friday we've got rich harvey back from property buyer it's all part of the series of let's talk property and part of your real estate breakfast
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Chapter 2: How has the number of active bidders changed recently?
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Well, we are starting to hear about the average number of bidders at auction time has fallen below a key threshold that at the moment is suggesting property price growth is starting to level off.
Chapter 3: What factors influence auction clearance rates?
There were at least 3.5 active bidders per auction for much of last winter and spring in Sydney and Melbourne, but bidders numbers have have dropped below this level for 2022 and a sign that the market is easing. That's according to some new Ray White figures. Auctioneer Damien Cooley has seen bitter numbers ease since the peak of the property market and he is joining us now.
Good morning, Damien. Welcome to the Real Estate Podcast. Good to have you on. Great to be here, Craig.
Chapter 4: How does the current market compare to previous booms?
Thanks very much for having me. Yeah. So in order to have strong competition at auctions, you need to have active bidders. And with that figure that I just mentioned of 3.5 bidders, that helps everything move along. So you're starting to see that that is dropping perhaps for our audience. Just give us a sense of what's been trending lately that you've seen around these active bidder numbers.
Yeah, so markets are driven by a number of things and we collect auction data that really signifies how the market is tracking. One piece of information is what we call auction clearance rates.
Chapter 5: What impact does supply and demand have on property prices?
An auction clearance rate is the percentage of property that sells either before or on the day of the auction compared to what property is actually being listed to go to auction on any given date. Another piece of information that we use is how many buyers are actually registering at auction and how many of those buyers are actively bidding at auction.
So there's a few things that I'll just touch on now that signify change in market. One of those is that auction clearance rates have reduced, come off their highs. We look at a market and we say a normal real estate market has an auction clearance rate between 50 and 60%, a good market between 60 and 70%, a strong market is above 70% to 80%, and a boom market is 80% plus.
We've come out of the back of arguably one of the largest real estate booms in the country's history. We're now just at the moment sitting in what we define as a good market, and that's a clearance rate sort of between 60 and 70%. The average number of bidders in that boom market, we saw even post lockdown periods,
Chapter 6: How are buyer behaviors shifting in the current market?
We were averaging upwards of seven, in some cases 10, not necessarily active, but 10 bidders at every auction. Whereas now we look at even the weekend just gone past, our company had almost 100 auctions on Saturday and we averaged just over four bidders at every auction. There are different markets within markets. So we speak generally, but every market has its own little micro market.
For example, Sydney has different locations like the eastern suburbs, the lower North Shore, the inner West. Each of those markets is generally performing at a lower rate than what it was previously. With the active number of bidders reducing, you can understand now, given that explanation, how
If less people are competing for a property, it means less properties are selling, which means it's harder to sell, which means prices will come back.
Chapter 7: What strategies are auctioneers using in today's market?
Real estate market, I guess, is driven, as I said, by confidence and it's driven by the ability to borrow money. So what we need to look at is what are the factors that are influencing this data now?
Yeah, and talking of the boom, of course, you've kind of got to keep this in perspective, right? Because as you say, I mean, we have gone through one of the biggest booms ever recorded. And yes, we've got the slide starting to happen with active bidders, but it should really be put into the context of what's been happening over the last two years.
Without doubt, Craig. And if you look at what has happened over the last two years, the small pullback in confidence, the small pullback in pricing, and as a result of that, the potential for price growth to be negative over the coming months. We've also got a federal election coming up.
Chapter 8: What insights can we gain about the future of the property market?
We've got the Reserve Bank talking about significant interest rate rises over the I think what is being signaled is that you'd be naive to think that the market is going to continue growing in the short to near term. There is no doubt that the market isn't as good as it was. However, it is still good. So this is the important point.
Good quality properties sell well, regardless of market conditions. And that's because as a society, we need a home to live in. We have the dream of having a lovely home, which gives us security for us and our families. there is something really beautiful about living in a home that is yours. Now, some people don't share that opinion.
Some people prefer to rent and there is an investment strategy around owning investment properties and renting your own home. But the emotion that comes into a residential purchase is very different to what comes into an investment purchase. And if you look at where, if the market comes back,
And if you, for example, draw similarities between the property market and the share market, really what we're talking about as a percentage is not a significant drop. Personally, I have quite an optimistic outlook on prices holding up relatively well through this period.
So lately, there have been more houses, obviously, that have been listed for sale, which is giving buyers a much greater choice. And we're starting to see, if not already gone, the whole FOMO aspect.
And of course, people, I guess they're in that sort of mindset now where they're going, I was thinking maybe in six months time, but now I want to list my property because I'm starting to hear that there are less buyers around.
I think the supply and demand absolutely plays a role in any market and property is no different. If there's more properties on the market in any given suburb and there's only a certain amount of buyers that are looking at purchasing, prices will be affected.
If you look at any suburb and you type in to one of the portals, you type in how many properties come up in all price ranges in any given suburb. And if you look, say, three months ago and you look now, there's more properties. In most suburbs, if not all, there's more properties on the market in those suburbs now than there was.
That signifies change because the buyer pool, I don't believe, is getting stronger at the moment. It's probably getting weaker. This period pre-Easter is always a very busy period. People go away on holidays. They're enjoying their families. I think it's a little bit unique this year also because we've come off the back of a big boom.
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