"Buyers are spooked by higher interest rates and this demonstrates how confidence can really impact a market," Dr Wilson said.

"This is despite a lot of the underlying factors for the housing market still very positive. NSW is still Australia's strongest economy and there will continue to be price growth in Sydney."

Ray White NSW chief auctioneer Scott Smith it was important to look at different regions. Mr Smith had four auctions scheduled in Sydney's northern beaches on Saturday, where clearance rates have still been above 70 per cent.

Mr Smith said of his four properties, two sold prior and the other two sold on the day. More than 50 people attended one his auctions for a three-bedroom waterfront apartment in Abbotsford. The unit at 51/12-16 Walton Crescent, which had sweeping 180 degree views of Abbotsford Bay, had four registered bidders and sold for $1.23 million, $30,000 over the reserve.

"There may be fewer bidders at auctions now but the results are not changing. Nothing I have taken to auction has not sold. Population growth is still high, there is limited supply and people need to remember the market is still good. The 90 per cent clearance rates we saw earlier in the year were not sustainable," Mr Smith said.

An artist impression of the Ryvita site in Camberdown. Supplied

Affluent suburbs experience slowdown

But even the affluent northern suburbs are still experiencing a slowdown, with a two-bedroom apartment in Kirribilli with views of the Opera House receiving no bids at the weekend. The 73/22 Waruda Street property was being offered through Laing + Simmons North Sydney.


Meanwhile in the outer suburbs in areas such as Epping and Baulkham Hills, where over the last couple years there have been huge price increases, clearance rates are now dropping into the 30 per cent range, which is pulling down Sydney's overall rate.

Off-the-plan sales are no longer selling out on the day either, though developers are still seeing strong interest. Ausin Group sold 80 of the 130 properties released to the market in Camperdown at the former Ryvita Biscuit Site on Barr Street Saturday. Sales for the final stage of the project, known as Urban, were valued at over $85 million with one- and two-bedroom apartments proving to be the most popular. Prices for apartments start at $659,000 for one bedroom; two bedrooms start at $1.138 million.

Melbourne buyers hold fire

Buyers were holding fire and sitting on their hands in Melbourne as well, although the city posted an auction clearance rate of 70 per cent, compared with 66 the week before. A two-bedroom property in Kingsville at 1 Dickson Street, taken to market via Compton Green, was passed at $825,000 after failing to meet the vendors' reserve price.

At the top end of town a five-bedroom home in Toorak sold for more than $1 million over reserve. The 10 Maple Grove Tree house sold for $8.35 million through RT Edgar.

David Morrell, who represented one of the unsuccessful bidders said the Maple Grove home was in a good position and was always going to go well.

"It was a very strong result but these sort of outcomes can cause angst because everyone else then thinks their property is worth $1 million more too. But buyers are becoming picky and a lot of vendors have not recalibrated their expectations off the back of that," Mr Morrell said.

For instance a townhouse, also located in Toorak at 2/13 Monomeath Avenue, was passed in on Saturday after one vendor bid of $1 million.