Sydney auctions selling 15.3% above price guides since September

Sydney auction homes are selling for 15.3% above their price guides, according to a September through November analysis by property advisory firm Intelligent Property Services Group.

This is up from August when they were selling for 12.19% above price guides and in 2012 auctions were being bid up to 8.95% above price guides.

ISPG’s Ramon Mitchell says the increase comes as a direct result of a rapid market upswing in market sentiment with increasing numbers of buyers competing for a limited amount of quality housing stock.

“Whether intentionally or not, agents are habitually underestimating the final sales price of their home – particularly in auction “hotspots” such as the inner east and inner west,” Mitchell says.

But he says it may not be a case of deliberate underquoting with many sale prices grossly above their reserves.

One of most extreme cases seen by ISPG was a three-bedroom Darlington terrace at 59 Cleveland Street (pictured below) which sold for 33.33% above its price guide in late October.

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It had a pre-auction price guide of $700,000 but it sold for $1.05 million.

A three bedroom Kirribilli terrace at 73 Broughton Street (pictured below) sold for 24% above its price guide of $900,000.

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Mitchell says it was an investment property bought in 2002 for $750,000 and was one of the cheapest torrens title properties available for sale in Kirribilli.

“I was at the auction bidding for a client, after having made a strong pre-auction offer of $975,000 which, interestingly since it was in the absence of any other offers and at $75,000 over guide, was declined. We were, however advised that our offer ‘will buy it on the day’,” Mitchell says.

“We had a robust $1.1 million max bid authority on the day and felt we were in a strong position. Clearly, the market had other ideas.”

There were 23 registered bidders at the auction, at least seven of which were bidding above $1.1 million.

It eventually sold for $1.189 million – $289 above the price guide.

A four-bedroom Redfern terrace at 111 Marriott Street (pictured below) sold in late October for 27.03% above price guide.

It was advertised at $875,000 but eventually sold for $1.208 million – $332,500 more than the price guide.

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And a three-bedroom St Peters terrace at 51 Lackey Street (pictured below) sold for 27.03% more than the price guide.

It was advertised at $675,000 but sold for $925,000 – $250,000 more than the price guide.

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Mitchell says many buyers are pushing the limits on gearing and says when they overdo it at auction they will probably only find out the bad news on subsequent valuation, particularly affecting investors.

“Overpaying and suffering paltry yields as a result is not an ideal starting point for the investment,” Mitchell says.

He says banks tend to be more accepting of over-the-odds prices when they sell under the hammer rather than pre-auction.

“When people are paying similarly inflated prices pre-auction, we’ve seen quite a few fall-overs as a result of bank valuations coming in short.  It seems to be a rather fine “comfort level” line between the two scenarios.”