Via Westpac:
Given the intense focus on Australia’s housing markets at the moment and in light of our recent commentary around the best way to interpret auction market results (seehere) we are now putting out short previews each Friday and summary updates the following Monday setting out how results should be viewed.
Preliminary assessment of auction clearance rates, weekend of May 25-26 –
- preliminary ‘unadjusted’ clearance rates: Sydney 69.9%; Melbourne 62.9%
- assumed slippage between preliminary and final estimates: Sydney -5.5pts; Melbourne -1.5pts
- seasonal adjustment: Sydney -0.9ppts; Melbourne -0.8ppts
- ‘withdrawal rate’: Sydney 12.5%; Melbourne 4.1%
- ‘withdrawal rate’ adjustment, difference between observed withdrawal rate and average: Sydney 2ppts; Melbourne -1ppts
- estimated final ‘withdrawal adjusted’ clearance rate: Sydney 65%; Melbourne 59.6%
Auction markets posted their best results since April last year with preliminary clearance rates nearly hitting 70% in Sydney and just under 63% in Melbourne. Withdrawal rates were also again back near ‘normal’. Even allowing for sizeable slippage between preliminary and final estimates, ‘withdrawal adjusted’ clearance rates are almost certain to be clear of the 50-55% range associated with price stability in both markets, and closer to 65% for Sydney. Demand has clearly seen an initial boost from the clearer prospect of interest rate cuts and the removal of uncertainty around housing related tax policy following the Coalition’s re-election. Prospective changes to loan serviceability assessments have likely given support as well.
The extent to which this generates a recovery in housing markets remains unclear. While the initial response is positive, it remains to be seen how ‘follow through’ the move has. It should also be remembered that auction markets are coming from a much weaker starting point than in 2016 – when the RBA’s last round of rate cuts generated a swift upturn in the housing market. Indeed, this week’s result only just gets clearance rates back to the level they were at prior to the 2016 upturn in Sydney, and still a good 8-10pts shy of the 2016 starting point for Melbourne.
Note that all figures are based on preliminary and final auction results provided by CoreLogic.
