February 21, 2024 by Dymphna

Why this property came in $300K over reserve

This was a great result, built on a property’s ‘potential’.

So the auction market is clearly pumping so far this year. It’s had a cracker of a start and suggests that price growth should remain strong through the year ahead.

The data on clearance rates is positively bullish.

Eager buyers are keeping pace with the expanding supply of homes listed for sale, snapping up around three-quarters of the 2044 homes auctioned at the weekend and last week, the highest volume to go under the hammer so far this year.

The national clearance rate hit 75.4 per cent, down just slightly from the previous week’s result of 76.2 per cent.

By contrast, the preliminary clearance rate was hitting the mid-60 per cent range at the end of last year, with finalised rates in the mid-50 per cent range, CoreLogic research director Tim Lawless said.

“With the preliminary clearance rate holding above 73 per cent for the past three weeks, it’s probably fair to say the stronger auctions results are attributable to more than early year seasonality,” he said.

“Some confidence has returned to the auction markets amid falling inflation and a growing expectation that lower interest rates later this year could see housing price growth accelerate.”

Yeah, that’s my sense too. A lot of buyers were put off by uncertainty in the market. Were prices going to fall further? Where rates going to go higher?

No that the market is offering us clear momentum – now that it’s clear that prices are not going to fall further and that rates are probably going to start falling sometime this year, there’s no reason to be sitting on the sidelines anymore.

It’s time to get involved.

But there was one result in last week’s auction pool that caught my eye.

And it was just because the result came in over $300,000 over reserve!

A five-bedroom home at 8 Richards Avenue, Eastwood, in Sydney’s north-west, sold for $3.27 million – above its initial guide of $2.9 million and its $3.15 million reserve.

Its sellers had lived in the home for 35 years, while its new owner had seen it for only the first time on the morning of Saturday’s auction, on his way to the shops.

(Lol. He went out for milk. Came home with a property worth $3.3m. That’d be an interesting conversation to have with the missus.)

Strong bidding for the property – McGrath Epping’s Betty Okerlander and David Middleton were the selling agents– was spurred not only by its proximity to schools and the local train station, but also the scope one day to add a second dwelling to the large 739-square-metre block.

The NSW Minns government’s push to increase density and ease the housing crisis, with more duplexes, walk-up flats and semis to be allowed throughout suburban Sydney, has brought more competition to auctions, said McGrath’s national sales manager, Troy Malcolm.

“There are a lot of people who are looking for that as a future value-add as well. [The Richards Avenue property] has a 50-foot frontage, which ticks the box for that future requirement,” Mr Malcolm, who auctioned the house, told The Australian Financial Review.

“It’s another reason why there was a high interest in the property.”

Yep. With Australia’s population growing strongly and with the housing shortage in place for the foreseeable future, this isn’t a trend that’s going away.

And I think this is a factor that’s often forgotten, but is responsible for a lot of price growth over the longer run.

The nature of land changes. The government changes the zoning, and suddenly things are worth a lot more than what they were.

I wouldn’t be buying purely on the speculation that zoning might change within your investment time-horzion.

But it will change at some point.

So that’s a nice little upside.