Australia's Housing Market Is Crazy Too – Home Goes Up For Auction And Sells For $1 Million Over Expected Price

When you hear the words "housing affordability crisis," the first place that comes to mind is probably the United States. That makes sense, especially considering it takes nearly $1 million to buy a starter home in many American cities. However, misery loves company and America's housing affordability crisis has gone international. The latest example is a real estate auction in Australia, where a relatively modest home sold for $1 million over its expected price. 

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Many real estate observers have described America's housing market as broken and offer several pieces of evidence to support their conclusion. First, there is a lack of inventory, especially affordable inventory, which only drives prices higher on the properties that hit the market. This leads to a vicious cycle of desperate buyers outbidding each other because they fear prices going even higher in the future.

It's a great deal for sellers but a nightmare for buyers, many of whom have horror stories about writing dozens of offers and being outbid every time. According to the Daily Mail, this is the situation in Sydney, Australia, where a four-bedroom home went to auction with an expected price of $1.9 million. Even at that high price, Sydney's housing market is so tight that there was no shortage of bids. 

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Many bidders expected the home's final sale price would exceed the $1.9 million listed in the auction guide and they were not wrong. The first bid was $2.35 million and the price kept rising until the final winning bid of $2.9 million. The buyer was so desperate to complete the deal that he purchased the property despite spending only 30 minutes inspecting it before the auction. 

Losing bidders were as crestfallen about their loss as they were about who won the auction. The winner was a wealthy man buying a home for his daughter, who presumably would have been just as frozen out as the losing bidders if not for the good fortune of being born into a wealthy family. That scenario, where wealthy parents step up to buy homes for their children, has become commonplace in "broken" housing markets worldwide. 

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The losing bidders took issue with the entire process, including the auction price guide, which suggested the $1.9 million valuation. One complained to the Daily Mail, saying, "This seems like an example of an extreme unethical approach with unrealistic guides. I can understand them setting the guide 10-30 percent under what they think it’ll go for, but this is wild." 

Ironically, the lower price guidance in the auction listings only attracts more bidders. This usually pushes the price past a point where no one who isn't independently wealthy can afford the home. That raises the question of how young Australians can build wealth if they can't afford to buy starter homes and benefit from the appreciation. 

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It's leading to the same frustration in Australia that would-be homebuyers feel in America. Before the auction, the Sydney home last sold for $625,000 in 2007, meaning the buyer made a 400% profit. This is the kind of wealth-building opportunity that an entire generation of would-be homebuyers in Australia and America is missing out on because the housing market is broken in both countries.

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