Uninhabitable rotting 'shack' in Sydney sells for an eye-watering price in what real estate agents are calling the 'craziest auction ever'

An uninhabitable, rotting three-bedroom 'shack' in Sydney's inner-west has sold for $2.41 million, as house prices continue to surge across the country.

The home in Enfield, which requires over $500,000 in repairs to become livable, went under the hammer on Saturday in front of 300 people with 25 registered bidders.

Agent Matthew Blackmore of Richards Matthews Real Estate said he didn't expect the property to reach anywhere near $2m because of the work needed.

'It's probably the craziest auction I have ever seen in real estate,' he said.

He said there were 'endless possibilities' for the next owner of the 570 square metre block of land.

'There are holes in the ceiling, the floor is very old timbers, and you have to be careful where you walk,' he said before the auction.

But Mr Blackmore said the significant damage deterred none of the bidders.

'Some of the people calling about it told me they had seen the house many times and had always thought to themselves they'd buy it if it came on the market,' he said.

Mr Blackmore said the house was located on The Parade, the best street in Enfield, and because there were mostly established homes in the area, there were not many land value opportunities for buyers.

Mr Blackmore also sold a house across the street that reached $200,000 above reserve, but it was a double-brick liveable home and the buyers moved straight in.

'For a house that you can't move straight into to only sell for a few hundred thousand dollars less is crazy,' he said.

Some people at the auction were hoping to pick up the home for the bargain price of $1.5m, but Mr Blackmore said about half the bidders were bidding more than $2m.

It is understood that most of the interested parties wanted to knock it down and rebuild a house, which would likely be worth $3.9m given the location.

Because there is no supply in the current market, Mr Blackmore did not expect property prices to come down anytime soon.

'If there were another 10 houses like that they would be sold tomorrow,' he said.

'Good land in good suburbs are doing really well.'

The median cost of a home in Australia grew by $59,000 to $794,000 in 12 months, according to CoreLogic's July report.

The continued growth since February means average dwelling prices increased by eight per cent in the financial year 2023-2024.

Housing sales also showed a strong recovery with an increase of 8.6 per cent on year-end figures, with Perth recording a historic 29 per cent increase in sales on its five-year average.

CoreLogic's research director Tim Lawless said the national index had 'found a groove', rising between 0.5 per cent to 0.8 per cent month on month since February.

'The persistent growth comes despite an array of downside risks including high rates, cost-of-living pressures, affordability challenges and tight credit policy,' he said.

However, chronic housing shortages across most of the country continue to plague those trying to buy their first home, with listings stalling in most states.