Starr Partners chief executive Douglas Driscoll said just as more Sydney vendors embraced auctions as the market heated up, now fewer vendors will use it as the market cools down.
Mr Driscoll said more properties are now being passed in at auction, which will lead to sellers losing faith in the process.
One reason for the decline in clearance rates is unrealistic vendor expectations, which are three to six months behind the market, according to Mr Driscoll.
“One of the biggest advantages of the auction process is that it’s public, open and transparent, but this can sometimes be a disadvantage too. As properties start proving more difficult to shift, we will see a lot of sellers wanting to save face,” he said.
“As agents, we sometimes overlook that vendors want to avoid potential embarrassment among their friends and neighbours if their property is passed in.”
Mr Driscoll said Sydney isn’t heading into a slump, but merely returning to a more realistic level.
“When you compare to 10 to 15-year data, you can see that it’s still a healthy market,” he said.
“All that’s changing is that we’re transitioning from not just a once-in-a-generation, but potentially a once-in-a-lifetime market to one that is more closely aligned to the norm.”