With fixed mortgage rates more than doubling from their pandemic low, and variable rates tipped to follow as the Reserve Bank of Australia (RBA) tightens monetary policy, homes sales are falling.
Mortgage rates are rising.
According to new data released today by CoreLogic, there were 39,790 sales estimated to have settled across Australia in May 2022, down 26.9% year-on-year:
Sales and prices down.
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In fact, monthly sales volumes nationally have trended lower since November last year after fixed mortgage rates began to rise.
CoreLogic’s ‘turnover’ rate, which tracks the national rate of Australian housing stock selling on a rolling, 12-month basis, hit a decade high of 6.2% through the 2021 peak growth period of Australian dwellings. However, it had eased to 6.0% at the end of the March quarter:
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CoreLogic’s auction clearance rate has also collapsed, which according to market analysts reflects crumbling confidence across both sellers and buyers
“I think these reflect falling vendor confidence. Otherwise, we wouldn’t be seeing such a large proportion of auctions being pulled from the market without being rescheduled,” said Tim Lawless, CoreLogic research director…
Sydney-based auctioneer Clarence White of Menck White Auctioneers said there had been a marked decline in buyers’ confidence since interest rates started to rise.
“Buyers are very cautious, and they’re now factoring in further interest rate rises and potential price falls before they bid,” he said.
“They’re basically thinking if the property could be worth $200,000 less in three months’ time, then they’d rather wait…
Louis Christopher, SQM Research managing director, said its own data pointed to an even weaker auction result.
“I expect to see Sydney’s clearance rate fall to low 40s when the final results are in,” he said.
“This indicates that the market conditions continue to weaken in Sydney and Melbourne and sentiment will continue to slide after another rate rise on Tuesday.
“I think there are many disappointed sellers out there who are still wishing they could get their 2021 prices, but they no longer can. And if they want to sell in Sydney or Melbourne, vendors do need to meet the market right now. That’s just the reality. It’s a buyers’ market in both cities.”
This is obviously the ‘tip of the iceberg’. As mortgage rates surge on the back of RBA tightening, sentiment will weaken further.
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At the moment the downturn is confined to Sydney and Melbourne. Soon it will spread nationally.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
