A day in the life of a sydney auction
A TRUE STORY FROM SATURDAY MAY 30, 2015
The 3 bedroom, single-level house in Sydney’s Seaforth was nice, but nothing special. Set on just 550sqm, it is below the average size for a free- standing house in Sydney. The rooms were bordering on the small side. The bathrooms were small. There was no garage or even a car port. Just a small spot in the open for a car. There were no views.
Importantly parts of house had been renovated PRIOR to the existing vendors who only bought less than 12 months ago. They bought it June 2014 for $1,350,000.
From a professional basis I was curious. Just what would a property that only sold less than 12 months ago, with no additional capital improvements, sell for today?
Mainly, however, I was there to help my friend. With a new family and a good business, he is doing well in life and now is the time to buy a home. Nevertheless, even with all the good things going for him and his partner, they had been struggling for some time to buy into this Sydney market.
I gave my friend everything I had. We went through the current SQM Research valuation and the recent leading indicators. All up, the current local market evidence Seaforth suggested had moved up somewhere around 15% for this property since last year.
But things were ominous – the last four weeks’ Sydney auction clearance rates had been close to record highs. Worse, listings in Seaforth fell to their all-time lows in April – just 20 houses listed. So after taking that into account, I thought the market might be bordering on a 20% rise, at its absolute highest mark. It would place this property at no more than $1,620,000 and more likely $1,550,000.
Most certainly the advertised ‘price guide’ of $1,350,000 which only represented last year’s sold price was WAY below the mark. It was an obvious underquote. Most who turned up to the auction that day, knew it.
Bidding started off at $1.4m and was rising fairly quickly at $10K to $20K bids. There were five active bidders. A Caucasian looking couple, a buyers’ agent with his female client. And three separate Asian groups of what appeared to be Chinese decent. One of them was Australian-Chinese going by the accent. Plus, my friend.
My friend took the strategy of waiting and not bidding until the last two bidders had weakened and virtually knocked each other out. Then go HARD.. right up to his limit. His limit was $1.6m.
The poor bloke didn’t get a bid in.
After just some moments, the bids arrived at $1,550,000. At that point, the bidding briefly stalled. A question from the crowd was thrown at the auctioneer. “Had the property reached the RESERVE?” The agent did not show his hand. He only responded that he would ask the vendor at the right time. Bidding resumed.
In a space of another minute we were at my friend’s limit..then over. The buyers’ agent who initially took the correct strategy of showing no weakness, faltered in the end. But it wasn’t his fault. Bidding had gone beyond the current market. His client, walked away in disgust and loathing at was taking place; even before the event was over.
In the end it came down to two bidders. The Australian-born Chinese husband and wife.. and a young woman, who also seemed to be of Chinese decent. They kept each other in the game, stalling and lobbying in $1K and $5k increments.
Auction bidding stalled again at $1,620,000 , at which point the agent declared the property was selling as it exceeded the vendors’ reserve. Once that happened bidding started again and it kept going..and going. Until finally the young looking Chinese woman won out…at… $1,720,000.
A full 27% price rise from its selling point not more than 12 month ago.
The woman of Chinese descent, who spoke in broken English, would not have been more than 30 years old. It was just her. She was never on the phone; and, from what I could see, there was no one else there supporting her..other than the agent egging her on!
You could tell even at this price she was agitated. She had bought over her budget or at least the top range of what she wanted to pay. SHE HAD PAID 27% OVER WHAT IT WAS SOLD FOR LAST YEAR.
And that was it.
The crowd gasped. The unsuccessful bidders, saddened and angry, walked away, wondering what their future is now. There were some claps, presuming from the neighbours; happy to know they too now are nearly multimillionaires.
And for my mate. What could I do for him? Easy done, we went for a couple of Saturday afternoon drinks to reminisce and, eventually laugh it off.
$1.7m for a box? They can have it!
While I have taken a line in the past that the fear of the Chinese pushing up our housing market is just that – fear; when it comes to the heat of the moment it is easy to see why suspicions arise. How does such a person of young age have the money to spend $1.7 million on a house??
Of course, there could be a host of reasons. Maybe she has worked very hard in this country and her local business has done well. Maybe she has recently won the lottery…and then ..maybe she is a Chinese student with her parents back at home; using her residency to buy Australian property on their behalf. We will never know.
What I do know is this: The Sydney housing market is now as strong as I have ever seen it. It’s like a wild bushfire – out of control and setting alight everything in its path. Our revised forecasts of 11-15% – up from the original 8-12% made back in September, now are looking very conservative.
The action now suggests movements of greater than 20%pa at least for houses.
This is dangerous stuff.
Louis Christopher is a respected property analyst. He is the Managing Director of SQM Research.