On Saturday, a St Peters designer house lined with shrubs sold for slightly less than the record price paid in the suburb for a house in the booming 2021 market.

The Crown Street house sold at auction for $2.88 million - $20,000 below the record $2.9 million - at a time when interest rates were at an all-time low and buyer demand was much higher, spurred on by the pandemic.

The price was $338,000 above the reserve price of $2.5 million. It only took a few seconds for the opening bid to come in. And it was on the reserve price.

Competition for the home, known as the 'Treehouse Sanctuary', was fierce - 21 bidders registered for the auction and groups of more than 200 buyers visited the property before the sale.

This was well above the normal Sydney market at the end of last year when agents typically had two or three bidders at auction and many properties did not attract any bidders.

Brad Gillespie, sales agent at The Agency, said the air at the auction seemed to have changed.

People have stopped talking about interest rates," he said. It's been talked about for a year, and now it feels like they're just continuing to talk about it," he said.

"There's also been a lack of (housing) inventory since January. Homebuyers are crying out for more."

Real estate records show that there are currently about 40 per cent fewer new homes on the market than this time last year.

Damien Cooley, director of auction house Cooley, said it was evident at the auctions that buyer confidence was improving.

"The shortage of properties," he said, "means there is more interest in those that are on the market." Sellers don't have much competition in some areas and there are often no other homes like theirs for sale."

There were more than 20 bidders for the four-bedroom Crown Street property opposite Sydney Park, with just $2,500 separating the final price from the lower bidder's highest offer.

Mr Cooley and Mr Gillespie were also involved in the sale of a terrace on Bourke St in Redfern, which sold for $1.86 million, $360,000 above the reserve price. There were 11 registered bidders and between them they made 89 bids.

"This property was more popular than voting", Mr Cooley said at the auction, referring to the state election.

Nearly 700 auctions were held in Sydney this week and initial indicators show that around 70 per cent were successful, in line with the results of previous weeks.

My housing market economist Andrew Wilson noted that the Sydney market was "bottoming out" after a year of falling prices.

He notes that auction clearances have been steadily increasing despite rising interest rates and that low unemployment means buyer demand is strong.