Auction clearances remain fully mental

Just when you thought the Great Australian Housing Bubble was running out of steam, the national auction clearance rate delivered another frothy result, driven again by strong demand in Sydney and Melbourne.

The preliminary national clearance rate was a hot 77.1%, just a smidgen under last week’s 77.7% and comfortably above the 74.2% recorded at the same time last year.

ScreenHunter_6265 Mar. 01 18.01

Sydney’s clearance rate fell 5.0% to 82.8%, whereas Melbourne’s rose by 1.6% to 76.5%. Clearances in Brisbane, which typically only has a small number of auctions, fall sharply to 54.6% from 68.9% last weekend. Overall auction volumes were massive (3,132) and up strongly on last weekend’s 2,248.

ScreenHunter_6266 Mar. 01 18.01

The Real Estate Institute of Victoria reported a preliminary clearance rate of 79% on 1,275 reported auctions, which was up from the 76% clearance rate on 826 auctions reported last weekend.

For Sydney, Domain (formerly APM) reported a preliminary clearance rate of 85% on 585 reported auctions, which was the same as the 85% clearance rate on 514 auctions reported last weekend.


    • ceteris paribus

      Yes, I think Harbourside Sydney has an unlimited global future. It’s beauty is its biggest resource.

      • The blogs on macro business will long be remembered after THE correction event in Australia, or should it be aptly named the collapse.

        As this post is rightly titled Australian speculators have now reached the insane asylum. They will need to be housed in one after THE event.

        As for the future of the Sydney Harbourside, no suburb will be left unscathed and the real estate industry politco complex will be forever consigend to the scrapheap of Australian political has- beens but will not be forgotten as the damage inflicted on our great country is going to felt by all for many decades to come.

        This blog should elaborate more on the claimed 50-60 suburbs that have succumbed to the insane speculative mania in Sydney.

        Evidence has shown that no domestic factor such as unemployment or government will impact on this market, it is international capital flows and finance institutional money that are the drivers……..when they are pincered it is all over red rover and we see signs of this now in early 2015, it is just not been spoken about.

        My call is the same as made in 2013….late 2015. Macrobusiness made the call to sell ….a good put but we are at the whim of global monetary forces and the result will not be decided domestically or politically.

      • ceteris paribus

        Sure, people will get stomped badly in any pullback. But the world will have another two billion people to house in another 35 years. And Asia will boom economically despite pullbacks.

        It depends largely on your timeframe. And your interim risk management of leverage.

      • Population saturation did not help Japan, Ireland or others in their city centres (do we really need to list them). This is a financial problem that will require a financial solution. We can see the Iceland approach being optimal for an independent country such as Australia however the British crown (city of London financial capital) and Wall Street banks still pulls the levers here with their majority ownership of our TBTF banks and who knows how much they will make us suffer.

        The supply / demand paradigm of houses in Australia argument has been done to death with no empirical evidence to support the argument of a shortage of supply of real estate here, only fashionable suburbs of boasting quality.

        You are smart enough to know what a financial solution will be depending on the severity of impact based on the quality of your previous blogs.

        I disagree about the China and Asian Tigers miracle, their race are the greatest speculators on the planet equaled to none. One must understand their culture and business acumen to understand just how bad the ‘problem’ is for Australia. The Japanese are honorable to deal with and stick to a sound business acumen. The Indians will run a business into the ground to extract every last bit of wealth from it.

        There is no saviour for our lucky country……we must work our way out of it somehow.

      • ceteris paribus

        What? Ireland has only about three million people. It exports its people and attracts no foreign hard cash from global settlers to its shores. Japan keeps out foreign settlers with global foreign cash. Hardly comparisons with Sydney past, present and future. That is as far as I got.

  1. ceteris paribus

    in Australia, all this leveraged buying is hugely risky but doesn’t appear to be accompanied by U.S. property phenomena like “flipping” and the “make me an offer to make me move” marketing.

    I am not saying the absence of these phenomena will save the Oz property market- but perhaps there is more stability here for this run to continue a little longer than we suspect.

  2. I don’t understand why you all think the bubble will magically end for no reason, without massive job losses.

    I was in the US during 08 GFC. Every day another major company announced tens of thousands of layoffs. Just like that. Construction stopped on a dime. Professional jobs vaporized. Banks collapsed.

    THAT is why the outer suburbs built in the booms of CA, NV, AZ, FL etc vaporized into foreclosure.

    This hasn’t happened anywhere in VIC or NSW.

    Do you think Aussies are economists? They follow metrics and make their home buying decisions that way?

    For f* sake, of course not. They want a home. They want an investment property.

    They will keep buying them as long as they have income and they have access to leverage.

    Until there is a genuine SHOCK which is unlikely to happen without a global SHOCK, don’t expect the bubble to just stop for no reason.

    • I was there, too, and it didn’t happen that way as I remember. The real trouble happened earlier than 2008.

      That Credit Suisse chart explains it – the resets of the teaser loans. Teaser loans triggered defaults in mortgages. It spread to securities derived from the loans. Liquidity crisis ensued as well as the IBs having to eat the most toxic of their mortgage securities portfolio.

      Job losses fed the feedback loop, but they weren’t the trigger.

      • Torchwood1979

        Bingo. In 2006 low unemployment was used as an argument for why the US market would hold up despite the teaser rates resetting. The shortage argument also failed to take the feedback loops into account.

    • “They will keep buying them as long as they have income and they have access to leverage.”
      +1. Lowest interest rates on record, likely prospect of further slashes, no reasonable limits on debt/debt growth… The list goes on.

    • They will keep buying them as long as they have income and they have access to leverage.

      Atleast one of that is on a downtrend. Just speaking to a close friend who is an engineer in oil and gas. He works for what might be a termed a junior. His firm has had probably two thirds of their workforce gutted in the last 18 months and will most likely wind down by the end of the year.

      All his mates he has spoken to who lost their jobs late last year are still unemployed. Average wage of these guys was > 150K + super. Many are leveraged, some heavily so.

    • We wont require a big shock to burst this bubble as it is based on consumer confidence not fact. Once confidence starts to swing and people start to smell the fear in the air they will start selling, especially those who are relying solely on capital gains (interest only loans). This is gonna be one big pop when it goes !!

    • Until there is a genuine SHOCK which is unlikely to happen without a global SHOCK, don’t expect the bubble to just stop for no reason.

      BTW, if you are looking for a shock, read the post today on the China rate cut.

    • I don’t understand why you all think the bubble will magically end for no reason, without massive job losses.

      I don’t think anyone here believes the bubble will end without all hell breaking loose…

  3. Charles Ponzi

    The Australian economy is teetering with emergency low interest rates. Massive job losses are coming.

  4. TheRedEconomist


    Phenomena like “flipping” and the “make me an offer to Make me move” are alive and well in the Hills district.

    I know of people who bought in 2008/9 for around 600K … spent $100k on it and have the place on the market and are fielding offers for $1m. They will move for $1.1m+.

    Also this place sold in Dec 2014 for just under $1m. They have gutted inside and some outside reno’s like painting and fence replacement.

    I saw a trade out front when they first started asked if they were doing it up, then lease it out. He replied they will probably look to sell it once the renovation are complete.

    Based on recent sale nearby, $1.2m is chance if it went to Auction.

    • Castle Hill is just insane now, it is strongly in demand by Asian buyers and with the train line being built, it is just going ballistic.

      Goodbye the quiet and peaceful suburb of my childhood. It just a greedfest there now.

      • TheRedEconomist

        Agreed Powermonger…

        Yes Asian buyers (Selective High school nearby at Baulko) and new train line are drivers

        But you also have other factors like

        – Flippers and investors forgetting about yield and only thinking Capital gain on the back of low rates and increased borrowing capacity.

        – Younger inner city families (upgraders) looking for more space. They can sell their Terrace for about a $1m and buy a 3-4 bedda out in the Hills and still be under 1 hour from the CBD

        – Younger northern Suburbs and beaches families who have been price out of where they grew up, With the help of Mum & Dad Bank they can get a place not to far away from there folks,

        – Local Families with a decent deposit…. taking every cent the bank will lend them due to aforementioned competition… And hoping they continue full employment for the next 25 years. (Me)

        I hope this madness ends.. As I do not think I have the room for my kids and their young families moving in with me in 20 years time.

      • In the last 15 years I’ve seen a lot of pigs slapped with some lipstick in the Hills area and then demanded high prices. All the apartment buildings built around Baulkham Hills and Castle Hill over the last 15 years are some of the most poorly constructed places I have seen.

    • When things fall apart, people playing this game will be seriously hurting.

      $750k for a house, $100k on renos, then suddenly similar places in the neighbourhood are struggling to sell for $500k.

  5. “Just when you thought the Great Australian Housing Bubble was running out of steam”… Really, you thought that? LOL LOL LOL! !!! Property investors don’t give a sh1t about you economic theories but they do love your incessant calls to lower teh interest rates. Again… LOLZ!!!!!

    • GS opened the morning paper today, saw this result and smiled, thinking “I did this, me”, and soon after a barrage of text messages from his PI colleagues, friends and government contacts arrive to thank him for doing Gods work.

      • I wonder whether he was leveraging up around the same time he was delivering his famous Sunrise warning to property investors?

      • @paulF great visual

        @jimbo wouldn’t surprise me in the slightest if this type of insider trading occurred

  6. The Patrician

    Record high clearance rates
    Record high prices
    Record high mortgage debt
    Record low interest rates for 18mnths straight
    NG still on existing dwellings
    FIRB still approving foreign purchases of existing dwellings
    Still no 80% cap on LVRs

    Yep this would be a very prudent time to cut rates
    There is no slow melt
    There is no crash
    This is your bubble Glenn

    • No Glenn has handballed responsibility to APRA.

      The last two RBA minutes have clearly shown a deft sidestep.

      APRA – time to stop monitoring – time to start doing!

      • GS tried to handball with words, but the facts still very much point to this being his bubble. He chose slash, slash and more slash prior to any prudential regulation adjustments, so it is his bubble.

      • APRA – time to stop monitoring – time to start doing!


  7. Grattan Institute have released a report entitled “City Limits: Why Australia’s cities are broken and how we can fix them”

    There are Melbourne and Sydney public book launches this Wednesday and Thursday.

    Interestingly the guest speaker at the Sydney event is the wife of our next PM – It would be interesting to see her thoughts and whether she is able to influence her husband to embrace the report’s findings which call for simpler housing laws, better access to public transport in far-flung suburbs and for an end to demand-side stimulants in the housing market, such as tax concessions for investors, discounted capital gains tax and negative gearing.

    • A BIT sceptical.

      The housing clearance rate, like almost ALL stats in the Australian economy relating to real estate (that includes unemployment and inflation) are predetermined.

      They are absolutely rigged. I could not give on stuff what anyone claims.

      I have spent some time looking at clearance rates and they are unmitigated bullshit.

      Unemployment needs no explanation as to how totally ridiculous it is as a stat and inflation is worse.

      • +10 Bit like the Turkish inflation rate that always came out at about 77.65%, or thereabouts, in the 90s…… when the real rate was 100%+….

        Too many are statistically ignorant to see the numerical and definition gymnastics used to produce higher median prices e.g. spruiking Toorak, Mosman etc., ignoring the lower end, and lots of wiggle room including pre auction sales (surely private?), PI etc. disappearing from stats etc..

        Go to the suburbs and regions to find property already 20-40% off, and high un/underemployment…..

    • listened to it all the way through…..and the last line
      “and it only cost 100 million dollars to build”!!

  8. Yeah I can’t see a slow down until the interest rates start going up.

    Even if there was a small drop in prices, housing is so horrifically expensive for the average punter that it would not make housing any more affordable.

    I think the tulip mania is here to stay.

    • What’s to say we wont reach the stratospheric levels of the Hong Kong market (twice if not three times more unaffordable than Oz)? All driven by Chinese funny money.

      • >Hong Kong market (twice if not three times more unaffordable than Oz

        Sydney has the least affordable housing on earth.

      • @jimbo

        Hong Kong has been there and back before many times, the last being in 1997-2003 and in all likely hood in the near future.

        Their house prices dropped by upto 70% between 97-03.

        Are Australians prepared for half that?

    • The last mining boom in Australia was worse – MUCH MUCH WORSE after the Victorian Gold Rush – it took 70 years for prices to recover – thats 70 years.

      This one will be worse.

      • @paulF

        Really ? So property prices insanely inflated by mining or other resource booms have then crashed in 100% of instances, but now – this is no longer the case – because the date has changed.

        Good to know your infallible reasoning. Will go and reconsider other concrete absolutes like PI based on the date changing.

    • Keen would say all it has to do is to stop growing and the exponential nature of the debt will do the work.

      • When the bubble bursts and the Oz property market resembles a smoking ruin, we’d do well to remember that Steve Keen called it before anyone else did. His vision was way ahead of the pack.

      • Steve Keen? lol How much did he lose selling his Sydney house all those years ago? Loser crashnik.

        Debt Jubilee Steve? yeah great that’ll fix it. Debt stupidity.

  9. As a university worker, its obvious to me that spike in auction clearances has to do with 1st semester starting again and kids being sent from China to start their degrees and buy a house for the student to live in, and to get an Aussie property for the family.

    I’ve heard countless anecdotes from other staff and direct from the students themselves, where Chinese students are sent to Australia to the best universities they can get into and a huge bank account (I’ve heard up to $4M from students) to get a house.

    • Education? To do what? Become a doctor, work 100 hours a week, back of the clock for 20 years before a decent income, on which they’ll lose half of it in tax. Or they can stay at home, learn from mum and dad about being on the take and make more per day than said doctor makes here a month. Talk about warped strategies.

      • Well this is what I find a bit sad about the whole situation, a large number of students are here just here to get a degree from a prestigious international university to improve their marriage prospects, a lot of the international students have no intention of ever working as a doctor/engineer/etc. And quite often the student didn’t get to pick the field of the degree either, the parents do.

  10. I suspect (and fear) its no more more ‘mental’ than the current great sharemarket bubble….it will be intriguing to see which collapses first/hardest….