The second week of October auctions in Sydney has left vendors upset, with auction clearance rates touching a three-year low. The auction market downturn was the result of Westpac hiking up its interest rates and a glut of spring property on the market.

The weekend’s auctions clearance rate dropped from 70 percent to 65.1 percent, the lowest in three years. Domain Group senior economist Andrew Wilson said that the interest rate hike was a catalyst in bringing the clearance rate down. “It’s the lowest rate since the spring season of 2012. That was a pretty soft market then,” he added.

In addition, auction listings dropped from 1,020 to 874 listings recorded in the last weekend. The auction rate was calculated taking 530 results from the scheduled listings. “I am disappointed, I can’t deny that,” said one of the vendors who auctioned his house at AU$3.2 million.

Meanwhile, some vendors have even dropped their reserve prices to see their houses auctioned. Some, however, have recorded impressive results. For instance, two properties in Sydney’s lower north shore sold for AU$4,255,000. One of the selling agents, Brent Courtney of McGrath Lane Cove, auctioned his property at AU$355,000 over the reserve.

Will Hampson of My Auctioneer also managed to sell six out of 10 homes listed, saying that the fall in the auction rate could help the market from a skyrocketing price record.

“There is no need for doom and gloom, the media and analysts are talking the market down, but [60 percent clearance] is a respectable figure and the marketplace is a healthy one at the moment,” he said.

The news of the low auction rate came just after Westpac raised its interest rate to bolster its capital reserves to protect against future financial crises, as experts warn that Australia could be headed towards another recession.

Analysts at Morgan Stanley cautioned that this downturn increases the need for newer economic reforms from the government’s side. “We expect WBC's [Westpac's] repricing is likely to have a disproportionate impact on housing sentiment, given it affects the entire back book, comes without the cover of an RBA rate cut, and takes effect right ahead of two 'super-weekends' of elevated auction volumes,” analysts added, according to the ABC.

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