Buyer demand collapses across Australia’s housing market

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CoreLogic’s preliminary auction results suggest that buyer demand is collapsing following consecutive interest rate hikes by the Reserve Bank of Australia (RBA).

The nation’s preliminary auction clearance rate plunged to only 58.5% over the weekend, with Sydney, Melbourne, Brisbane and Canberra each recording their lowest clearances of 2022:

Preliminary auction results

The result was significantly down from the prior weekend, which recorded a preliminary clearance rate of 62.3%, which was later revised down to 58.2% on final results and was until now the year’s lowest clearance rate.

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According to CoreLogic:

The final clearance rate has held below 60 per cent for the last two weeks and this week will likely be no different as the remaining results are collected…

Of the 366 results collected so far, 57.4 per cent have been successful [across Melbourne], down from the previous week’s preliminary clearance rate of 61.2 per cent, which revised down to 58.8 per cent at final figures…

Of the 465 results collected so far, 58.1 per cent were successful [across Sydney], down from the previous week’s preliminary clearance rate of 59.0 per cent, which revised down to 53.3 per cent at final figures, the lowest final clearance rate Sydney has seen since April 2020…

[This weekend’s] preliminary clearance rates are the lowest over the year to date for most of the capital cities, including Sydney, Melbourne, Brisbane and Canberra, reflecting more challenging selling conditions for vendors. We will see these conditions tested further next week as auction volumes rebound to around 2,600 across the combined capitals.

Auction clearances has historically shown a strong correlation with house price growth:

Auction clearances versus prices
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Thus, the collapse in auction clearances is pointing to steepening house price falls over the near term.

Given the RBA is forecast to hike interest rates aggressively over the next six months, a major housing price correction looks ‘baked in’. Whether it turns into a full blown price crash will depend on the aggressiveness of the RBA’s monetary tightening.

About the author
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.