As investors dominate, Lakemba sale highlights price growth and tightening yields

Sydney's cheapest weekend auction sale was 8/58 MacDonald St, Lakemba, a two bedroom offering at $326,000 sold by John Shalala at Ray White Croydon.

It last sold in 2010 at $245,000, so reflected 7.8% annual growth over the four years.

As Property Observer reported yesterday, Sydney's most expensive property sold at weekend auction was a three-bedroom Beauty Point home with Middle Harbour views.

The house at 12 Euryalus Street, Mosman fetched $3.23 million.

However, Property Observer noted it last sold at $3.1 million in June 2010, so not even 1% price growth during the past four years.

The bungalow property comes with approval to rebuild a three level family home on the elevated, north facing 773 square metre block.

Sydney's 80% weekend auction result was the highest clearance rate reported since early April.

Australian Property Monitors reported the Sydney weekend auction market was in "revival mode" over the past five weekends with the average initial clearance rate over that period rising to 78.3% compared to just 74.1% over the previous five-weekend period.

Auction listings have flattened over recent weekends. The significantly higher volumes this year compared to past years has almost disappeared.

There were 434 auctions scheduled in Sydney on the weekend compared to 404 listed over the same weekend last year, just 7.5% higher.

But prior weekends over the past two months were up on last year by 24%; 52%; 31%; 35%; 54%; 37%; 37%; 32% and 61% on the June long weekend.

Sydney's north-west recorded a 92.3% clearance rate at the weekend and was the best performer of all the Sydney suburban regions.

This was closely followed by the inner west with 90.7%, the south 85.7%, the upper north shore 84.3%, the city and east 81.8%, the northern beaches 81.3% and Canterbury-Bankstown with a clearance rate of 80%.

Next weekend Sydney agents have around 430 auction offerings (about 10% up on last year) and APM's preliminary figures for the 23 August weekend is currently sitting at 410 offerings, which is around the same weekend last year.

The recent rise in volumes - that may have waned - has not been just a Sydney trend. A  review of volumes nationally over the first eight months of the year shows there have been nearly 50,833 capital city auctions in total, or 38% more auctions held when compared to the same period last year, according to RP Data.

Fewer listings with strong buyer demand means the days of 80% clearance rates will return, making it harder to buy without strong competition.

Back to that cheapest weekend sale at 8/58 MacDonald St, Lakemba, a two bedroom offering sold at $326,000 pre-auction.

It was sold by an investor who got around $270 a week on its 2010 purchase to an investor who will be hoping to now secure around $325 a week.

So in the past four years the yield has tightened from 5.7% to a 5.1% yield now.

The 2013-2014 price upswing has triggered this drop in rental yields, into which investors still rush.

Recent RP Data research shows rents have failed to keep pace with prices in all capital cities.

Sydney and Melbourne have the lowest yields of all capital cities, at 3.9% and 3.4% respectively.

Most investors must be chasing capital growth rather than rental return. Be wary when at the currently highly competitive auctions.

Sydney rents rose by 3.7% in the past year, making it the only city where growth outstripped inflation.

By comparison, house prices in the city increased by 16.7% since April 2013.