Auction clearance rates have crashed in some of the previously strongest areas for Sydney property, providing the strongest indication yet of a significant shift in sentiment and raising questions over continued price growth.

Rates almost halved in Sydney’s north-west from a high of 91.8 per cent in May to 49.6 per cent in October, and on the upper north shore they’ve plunged from a high of 95.3 per cent in March to 59.3 per cent now.

At the same time, in western Sydney, a growing population hub and major investment heartland, rates have plummeted to a lowly 44.7 per cent.

Domain Group senior economist Andrew Wilson said some parts of the auction market had crashed, with clearance rates almost halving in the north-west “which is remarkable in that the north-west has been traditionally a strong area for buyer demand and price growth.”

“Prices aren’t crashing yet but the big picture is that while prices are steady now, there’s been no growth. So price growth will continue to slow and follow clearance rates downwards.”

Latest Domain Group figures show that the median prices in both the north-west and upper north shore have actually fallen. In the north-west, it dropped from $1.27 million in September to $1,247,000 last month, and on the upper north shore from $1,517,500 to $1.43 million over the same two months.

In the west, the median price is slightly up from September’s $778,000 at $816,000, but down from August’s $827,500.

Those tumbling auction clearance rates are probably due to several factors. Cohen Handler buyers’ agent Riki Tawhara , general manager of the group’s Hills District and western Sydney areas, says the north-west and west have traditionally been markets that sold property by private treaty rather than through auctions.

Although the popularity of auctions soared during the rapidly rising market, many vendors are now returning to sale by private treaty. “Now the market is starting to correct, it’s gone back to its traditional method of sale,” says Tawhara, who’s just bought an apartment for an interstate client on Bridge Road, Westmead, that was set to go to auction on a price guide of $459,000, for a much lower $418,000.

“In addition, the higher interest rates imposed by APRA on investors has eliminated a large portion of buyers, while over spring and summer, there’s a lot more supply of properties on the market.”

Higher interest rates generally have also had an effect, according to Dr Wilson, particularly on the buyers of lower-priced homes. “There’s also probably an affordability factor coming into play in the north-west as we’ve seen price growth of between 30 and 40 per cent and high expectations, particularly around some of those extraordinary results we’ve seen in rezoned areas, as well as the cooling of the Sydney market generally.”

That auction clearance rate slump is also a reflection of a surge in the number of homes for sale coming on to the market, says Ray White Castle Hill director Phil Kelly. “It’s hard to say for certain, and I’m not really one for brazen predictions,” he says.

“Could it be a crash? Absolutely. But I haven’t seen enough evidence to be certain that’s the case. It could also be a seasonal adjustment, and a reflection of market conditions with significantly more stock on the market.”

On the upper north shore, Century 21 Killara’s Jenny Zhang is more pessimistic.

“This time of year is usually the best time, just before Christmas, but the market has crashed,” she says.

“It’s about fears of interest rates going up and the stock market problems and it’s all about buyer confidence. People must have lost confidence. Prices have now been reduced but buyers are still waiting, hoping to get a bargain. There’s a big gap between what vendors want, and what buyers are prepared to pay.”

In the west, that gap is what’s pushing the auction clearance rate down so far, believes Doug Driscoll, the CEO of agency Starr Partners, and the tighter lending requirements imposed on investors by financial regulators haven’t helped. “The reality is that the market has definitely cooled, but in my view, vendors are living in a world three to six months behind the marketplace,” he says.

“We’re still getting energetic and interested buyers but they know the market has cooled and they’re not willing to pay over the odds to vendors who haven’t yet understood and re-aligned their prices accordingly.”

In Baulkham Hills in the north-west, for example, a five-bedroom, three-bathroom house at 15 Morley Court was passed in at auction at $1.22 million with four bidders and is now for sale for offers of the same.

Belle Property agent Justin Lowery says it now represents very good buying. “I think one problem is that the market has been flooded,” he says. “We had an auction recently where there were 13 other homes for sale within a 1-kilometre radius.

“There’s a lot more on the market now than there was three months ago, and there aren’t enough buyers to meet supply. Also, with the talk of interest rates going up, and all the press on the market, it’s making people reconsider whether this is the right time to buy.”

It’s a sentiment affecting all types of property. A four-bedroom, two-bathroom brick house at 50 Spencer Road, Killara, was passed in at auction for $1.81 million and is now for sale at about $1.8 million through Century 21.

Meanwhile, in a new home in the west, a four-bedroom-plus-study, three-bathroom, architect-designed house at 134 Daruga Avenue, Pemulwuy, was passed in at auction last weekend at $1.01 million, and is now for sale for offers over the same price.

Similarly, an old three-bedroom house on a large 714-square-metre development block at 28 Mary Street, Merrylands, didn’t sell at auction for $800,000 and is now inviting offers at the same point, also via Starr Partners.

Driscoll believes this could cut the number of auctions being held in the future, too.

“In a strong market, vendors are very prepared to follow the auction path but when things soften or when clearance rates fall, we can expect a semi-abandonment of the auction process,” he says.

“As properties start proving more difficult to shift, we will see a lot of sellers wanting to save face.”

Latest Domain Group figures show auction clearance rates are also soft in Canterbury-Bankstown at 55.1 per cent and the south-west, at 51.4 per cent, but are holding up a little better in the city and east at 72.8 per cent, the inner west at 70.5 per cent and the lower north shore at 68.1 per cent.