Aussie housing buyer demand falls off cliff

The Australian housing market continues to deflate following the Reserve Bank of Australia’s (RBA) decision last week to hike interest rates by 0.25%.

As noted this morning, the preliminary auction clearance rate hit its lowest level of the year this weekend, led by sharp falls across Sydney and to a lesser extent Melbourne.

Mortgage demand had also weakened sharply prior to the rate rise, which historically has portended falling house prices:

Mortgage demand and house prices

Falling mortgage growth usually means softer house prices.

SQM Research managing director, Louis Christopher, has become increasing bearish, now forecasting a 7% to 8% fall in Sydney and Melbourne house prices this year amid a sharp drop-off in buyer demand amid soaring mortgage costs:

“Fewer buyers would enter the market as it becomes more difficult to qualify and service a big mortgage”.

“The overall hurdle rate to test home loan applicants will go up and disqualify an increasing number of would-be home buyers and investors, and this in large part is what is going to drag the market down for the rest of 2022 and perhaps beyond.”

Tim Lawless, Director of Research at CoreLogic, also believes that rising mortgage rates are causing buyers to “pull back” from the market, which is being reflected in falling auction clearance rates:

“The interest rate decision has put further pressure on the housing market, which was already slowing prior to the rate rise”…

“Rising interest rates and high inflation are eroding household balance sheets, which is causing buyers to pull back”.

“The correlation between clearance rates and the pace of value growth is really strong, so the falling auction clearance rates portend declines in prices, particularly in Sydney and Melbourne.”

Meanwhile, Sydney auctioneer, Clarence White, noted that fewer buyers are bidding at auction amid falling confidence:

“I’ve really noticed that when there are only a small number of bidders, like what we’re seeing now, people back away very quickly and they hesitate to bid”.

“Buyers’ confidence is very low at the moment.”

With most economists tipping the RBA to lift interest rates by at least 200 basis points, mortgage repayments could soar by one-third or more. Accordingly, buyer demand will collapse further, driving a deeper correction in Australian housing values.

The impacts will be greatest in Australia’s largest and most expensive housing markets, Sydney and Melbourne, where buyers are most over-stretched and sensitive to rate rises.

Unconventional Economist
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  1. HixtarMEMBER

    Contagion seems to be making its way to regional markets as well. In Port Macquarie, Prices haven’t fallen, but properties are taking much longer to sell. You don’t hear much about properties being bought sight-unseen anymore.

    The shift to WFH has put a certain floor under the gains over the last year – our house is up 40% according to Domain – but I’d be willing to bet that there will be a -10%+ correction in the next 12 months.

    • Camden HavenMEMBER

      I had the feeling that the hyperinflation scaremongering excited investors to believe that their debts would disappear, inflated away.


  2. @UE, seems you have succumbed to becoming more like main stream media with click bait headlines.
    “Aussie housing buyer demand falls off cliff”
    So dramatic, world is ending – bull—s-hit.
    It is a normal correction to bring the system back to some sort of normality.
    I appreciate your analysis, but do not become the same as other main stream reporting channels, just report the truth, again I say this as MB is a fantastic platform of knowledge and insight, but of the last 24months, the volume of traffic for the domain has reduced and the participation rate has also reduced. Might have something to do, that you have become mainstream and are doing what all mainstream platforms do, project fear.

  3. Goldstandard1MEMBER

    A group of fish is a ‘school’. A group of crows is a ‘murder’. A group of cows is a ‘herd’.

    What is a big group of deers in headlights called?

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