SOARING demand for affordable residential real estate is prompting buyers to pay tens of thousands of dollars more than the advertised price on websites and has even sparked a punch-up at an auction in Sydney’s Parramatta.

Turnover in the middle to lower end of the market has doubled for many real estate agencies in recent weeks, compared with last year.

Agencies previously focused on more highly priced property have expanded into the mortgage belts in Sydney and Melbourne’s west to cash in on the demand, as sales in the top end slowed during the global financial crisis.

Kristy and Tim Burness have profited from the market, having sold their home at Tempe in inner Sydney last month for $565,000 before its auction. They had set a reserve of $525,000.

“We purchased the property for $474,000 and that was 3 1/2 years ago,” Mrs Burness said.

“We only had our house on the market for a couple of weeks.”

Ray White chairman Brian White said about 20 per cent of its branches had reported one of their best years.

“Campbelltown (in Sydney’s southwest) has had an exceptional year,” he said.

Referring to branches in the more moderately priced locations, he added: “It is unusual these offices are now running tight on stock.

“The stock shortages are as acute as any of us can remember. It has changed to a vendors’ market, which was unthinkable six months ago.”

He said one auction at Parramatta two weeks ago had 19 bidders, and a fight erupted between buyers for a property worth about $550,000.

“I have never had that before,” he said.

The panic in the low-price range is fuelled by the boosted first-home buyer’s grant being relaxed in October, with fear interest rates will increase next month.

Salvi Galati, state chief executive for Raine & Horne Victoria, said Melbourne’s western suburbs were running red-hot.

But he said many of the offers being made before auction were collapsing because the banks would not finance a purchase over the property’s valuation.

“The vendor is happy and the purchaser has been happy to pay for it, but the bank won’t give the loan,” he said.

“From the vendor’s perspective, it has actually been quite encouraging because the prices seem to be moving upwards.”

In the past week, a two-bedroom unit for auction in Sydney’s inner-west suburb of Dulwich Hill was initially advertised at about $325,000, but agents lifted the price when offers came in over $340,000.

John McGrath’s McGrath Real Estate is one firm with its roots planted firmly in Sydney’s upper- to middle-income areas, such as the eastern and north shore suburbs, that is branching out with new offices in more downmarket locations.

“We were looking for locations with a lot of growth,” Mr McGrath said. “We found the bottom end of the market has been the strongest.”

Raine & Horne chief executive Angus Raine said there were three to four times as many parties inspecting properties in Sydney compared with the same time last year in the lower to middle end, but the fear of unemployment meant householders were not willing to sell.

“Last year, some of those offices had 10 to 15 sales a month. Now they are selling about 30 a month,” he said. The Perth-based Real Estate Institute of Australia president David Airey said the latest trends were Sydney and Melbourne phenomena and were not evident in WA.

There had been more than 110,000 first-home buyer sales since the government lifted the grant for first-home owners in October last year (from $7000 to $14,000 for existing stock).

Melbourne’s clearance rates for auctions had averaged more than 80 per cent in the past three months, he said.

“We suddenly have this exceptionally strong market and they are not all first-home buyers; they are second and third buyers and people who have been looking to upgrade,” Mr Airey said.

He said while agents used to selling in the top end might be making their money out of the lower end, most had not adjusted their images or lifestyles with a new sort of clientele.

“I haven’t seen any stories of agents having to find a Commodore,” he said.