A True Story: A Day in the Life of a Sydney Auction

The three-bedroom, single level house in Sydney’s Seaforth was nice, but it was 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.house sell buy auction3

There was no garage or even a carport.

Just a small spot in the open for a car.

There were no views.

Importantly parts of the house had been renovated PRIOR to the existing vendors who only bought less than 12 months back.

They had bought it in June 2014 for $1,350,000.

From a professional basis I was very curious.

Just what would a property that sold just less than 12 months ago, with no capital improvements added under the current owner, sell for today?

Mainly 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 settle in with 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 the Sydney property market.

I gave my good friend everything I had

We went through the current SQM valuation and most recent leading indicators.

sydney-harbourAll up, the current local market evidence for Seaforth suggested a move higher of somewhere around 15% for this property since last year.

To start with, things were ominous – for the last four weeks, Sydney’s auction clearance rates had been at 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, which would place this property at absolutely no more than $1,620,000 and more likely around $1,550,000.

Most certainly, the advertised ‘price guide’ of $1,350,000 (which represented last year’s sold price) was WAY below the mark. Most who turned up to the auction that day knew it.

Bidding started off at $1.4m and rose fairly quickly in $10K to $20K increments.

There were five active bidders

A Caucasian looking couple, a buyer’s agent with his female client. 

And three separate Asian groups, who appeared to be of Chinese descent.

One of them was Australian Chinese going by the accent. Plus, my friend.

My friend took the strategy advised to wait and not bid 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 bastard 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 buyer’s agent who initially took the correct strategy of showing no weakness, faltered in the end, though it wasn’t his fault.

Bidding had gone beyond the current market.

His client walked away in disgust and loathing at what was taking place, even before the end was out.

In the end it was 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 had exceeded the vendor’s 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

house growthThe woman of Chinese descent, who spoke in broken English, would not have been more than 30 years old.

She was bidding alone.

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 sold for only last year.

And that was it

The crowd gasped.

The unsuccessful bidders, saddened and angry, walked away, wondering what their future was now.

There were some claps, presuming from the neighbours; happy to know they too now are nearly multi-millionaires.

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??

There, of course, could be a host of reasons.

Maybe she has worked very hard in this country and her local business has done well.Chinese currency china

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 to 15% price gains, up from the original 8 to12%, now is looking very conservative.

The action now suggests movements of greater than 20% p.a. at least for houses.

This is dangerous stuff.

Want more of this type of information?

Louis Christopher


Louis is recognised as one of Australia’s most respected and impartial research property analyst. He has extensive knowledge and experience of property and is regularly quoted in the media on his insights and is director of SQM Research.
Visit www.SQMResearch.com.au

'A True Story: A Day in the Life of a Sydney Auction' have 1 comment

  1. June 8, 2015 @ 11:22 pm Phil

    Hhmmm let’s go with the 3rd one you mention (it is the most likely one). Even then, how did the parents back in China get the funds to drop 1.7million+ into a house in Australia? That house would only rent for what, $800-$900pw? How do the offshore investors afford such losses? Oh, there is no mortgage, thats why. Why is there no mortgage? Because the property is bought in cash. But doesn’t China only allow $50K maximum per person, to be taken out of China? Yes. So how did said 30yo woman on student visa (hypotethically, of course, as we dont know for sure…) Get $1.7million in cash, into Australia??? Seriously!?!? When her bag went through customs, surely the airport security guy would call the AFP if there was the $1.7+million required to buy this house, sitting there in her fracking suitcase!?!? None of this adds up. Maybe some dodgy cargo containers down in Botany Bay are arriving with teddy bears stuffed with CNY currency notes in them…. :/


Would you like to share your thoughts?

Your email address will not be published.



Michael's Daily Insights

Join Michael Yardney's inner circle of daily subscribers.

NOTE: this daily service is a different subscription to our weekly newsletter so...