What tax changes? Seven investors vie for $1.95 million Sydney house

Seven investors descended on a St Marys auction on Saturday, where a three-bedroom house with two kitchens, several living areas and sheds sold for $1.95 million, or $50,000 below its $2 million reserve.

The deceased estate at 44 King Street did not have a price guide, but buyer feedback had placed it in the range of $1.4 million to $1.5 million.

It was one of 807 properties scheduled to go to auction in Sydney last week, the first test of the market after Treasurer Jim Chalmers unveiled changes in the federal budget to tax concessions on investment properties, along with supply measures, to boost home ownership.

By Saturday evening, Domain Group had recorded a preliminary auction clearance rate of 51 per cent from 445 reported results through the week, while 168 auctions had been withdrawn. Withdrawn auctions are counted as unsold properties when calculating the clearance rate.

The clearance rate is slightly lower than the previous week’s preliminary result of 55 per cent, though both indicate a weakening market as buyers adjust to the three cash rate hikes this year.

Bidding in St Marys opened at $1.4 million, benching five of the seven registered parties, all investors.

Two investors went back and forth in a flurry of $50,000 bids as well as a couple of $100,000 bids until the price rose to $1.9 million, where it stalled. The $2 million reserve was then signed off to sell at $1.9 million, and an extra $50,000 bid brought the hammer down.

Selling agent Amber Boumelhem of Ray White United Group said: “I honestly thought the property was going to get passed in today.”

“I was surprised because … once they announced the budget, I honestly thought [that] King Street, not one single person was coming.”

Boumelhem said interest in the suburb had grown since it was announced as a metro stop for the Western Sydney airport. She estimated a rental return of $800 to $840 a week for the family home.

The buyer was an investor from Wollongong who will rent the property out and land bank it. The underbidder was from western Sydney who drove by on the day and was interested purely based on its location.

In Pyrmont, a three-bedroom apartment at 704/18-20 Allen Street passed in on a vendor bid of $1.45 million, with neither of the two registered owner-occupiers making an offer on the flat that had a guide of $1.45 million to $1.55 million.

LJ Hooker’s John Zheng said: “The new budget and new property rule has made buyers very nervous to get into the market. We also have a number of investors [who] dropped out this week.”

In Putney, a three-bedroom villa at 7/210 Morrison Road sold for $100,000 above its $1.65 million guide, and $50,000 below its $1.8 million reserve, for $1.75 million.

There is no legal requirement for a vendor’s reserve to be in line with their property’s price guide.

With only one buyer registering, negotiations got under way before the auction began, and the buyer was shown the reserve price of $1.8 million. An initial offer of $1.74 million was made before the vendor countered with $1.76 million and both then met in the middle at $1.75 million.

After the auctioneer opened the auction, the offer of $1.75 million was made and called three times before the hammer fell.

Selling agent George Agostino of McGrath Ryde said: “We were expecting three [buyers], but only one showed up.”

“A lot of [investors] since the budget was announced have come to me asking me what my thoughts are on it, and just a lot of confusion out there with how the capital gains tax is actually going to work once it comes into play with indexing and how the formula is going to be worked out, and of course, all asking about negative gearing,” he said.

The buyer is upsizing from Gladesville.

The deceased estate last traded for $775,000 in 2012, records show.

In Glebe, a three-bedroom terrace at 3 Lombard Street sold above its $2.6 million guide and $2.85 million reserve for $2,965,000. The two-storey property had access to two streets and came with parking.

Four parties registered and three made bids on the inner west home.

Bidding began at $2.6 million and climbed in $50,000, $25,000, $10,000, $40,000, $5000 and $15,000 increments.

Selling agent Hanna Kim of BresicWhitney Inner West said: “I was a bit nervous going into it … in case buyers were hesitant with budget and changes, but it happened quite organically, without any encouraging, which was good.”

Kim said the market was now less about price and more about the character of the individual property.

The Glebe buyer will be living between Bowral and Sydney. The vendors are upsizing a few streets away.

The terrace last traded for $1.65 million in 2013, records show.

PRD chief economist Dr Diaswati Mardiasmo said that Domain’s clearance rate of 51 per cent for Sydney was “definitely one of the lowest clearance rates that we’ve seen”.

“This is definitely an impact or a reflection of not only the cash rate hike that happened earlier this month, but also the federal budget being handed down, and some of the changes with capital gains tax and negative gearing.”