The lowball tactics home buyers are using to try to nab a bargain

Buyers are making lowball first bids at auction and behaving in a more reserved manner amid caution over rising interest rates and the cost of living, auctioneers say.

Some register to bid at auction and don’t make offers as they feel they can wait for the next property if they miss out. Others buy homes before auction, or avoid homes they do not think are well priced.

Sydney’s preliminary auction clearance rate was 55 per cent last week, while Melbourne’s was 59 per cent, on Domain data. The results for each city are below the key 60 per cent threshold that is considered a balanced market, and are likely to be revised lower as more results are collected.

Last weekend was a key test for the market, given the high volume of auctions scheduled in the week before the Easter long weekend. Clearance rates below 60 per cent suggest prices are likely to fall.

Sydney auctioneer and Cooley Auctions founder Damien Cooley called the market mixed – many properties were attracting between zero and three potential buyers; others drew two to four; and one of his auctions last weekend almost achieved a suburb record.

“It has been a challenge to get the opening bid,” Cooley said. “There has been a lot of scenarios where we have taken an opening bid a lot less than where we would like to have started.

“Once they have to get started, the buyers have been really confident.”

He said there was no fear of missing out, with buyers who didn’t need to purchase immediately sometimes opting to wait and see what would come in a month or two’s time.

He noted the effect of price guides on whether buyers would even turn up.

“An unpopular conversation right now is: where you are guiding at what the owner wants, you will have no one at the auction,” he said. Some agents were having tough conversations with sellers about the need to drop their guide, he added.

“It is a transitioning market, the market is not as good as it was.”

Cooley also said that more affordable properties were performing well, propped up by interest from first home buyers. But some homes that passed in at auction could sell the next week to a new buyer.

Clarence White, auctioneer at Menck White Auctioneers, said that, in slow markets, buyers deployed tactics such as a reluctance to bid, or waiting for others to go first, starting at lower prices and offering smaller increments. It’s a trend that has become “even worse lately”, he said.

“We have already had a degree of price caution in the market for a while,” White said. “These people are more reluctant to bid – lower starts, even tighter increments.

“The mindset today is: ‘If I don’t buy this, I might wait, buy another for a better price in two weeks’ time.’”

He said buyers were more interested in well-priced homes, and some preferred to purchase before auction.

“Buyers are cautious,” White said. “A lot of them are in wait-and-see mode.

“They are not bidding … People that have registered to bid, they are not bidding.”

By contrast, he said parties who do raise their hands can buy well now, citing a recent young couple who thought they were out of the race and placed an opening bid $300,000 below the guide, then, after a little bidding, purchased the home.

In Melbourne, Marshall White group sales director John Bongiorno thought the market was balanced and consistent but acknowledged buyers were slightly more reserved.

“It is still price sensitive,” Bongiorno said. “Properties are transacting.

“There is no doubt that, in this market, buyers have certainly had the upper hand in this quarter and recently. Buyers are a smidge more reserved; you have got to work harder; agents have got to work harder. Vendors have got to be more nimble.

“If you don’t meet the market on the day, you start chasing the market down.”

He warned vendors that comparable sales from late last year may no longer be relevant.

“The market has shifted, in my opinion, slightly down, and vendors have got to be aware of the changes.”

Westpac senior economist Matthew Hassan said the weekend’s auction clearance rates were soft and buyers were pulling back, especially in Sydney and Melbourne.

“Below 60 per cent is consistent with price slippage,” he said.

He noted uncertainty in the Australian economy amid the fuel price shock and hit to consumer confidence. On Monday, Westpac lifted its forecast for the peak cash rate to 4.85 per cent.

“I expect the remainder of this year to be similar for these markets,” Hassan said. “There is an enormous amount of uncertainty around the Middle East conflict … At the same time you will have domestic inflation putting pressure on the RBA.”