After last week recording the weakest final auction clearance rate since early May 2020, this weekend’s preliminary auction clearance rate fell another 0.3% to just 56.1%.
It was the seventh consecutive week that the nation’s clearance rate has held below 60%, with all capital cities other than Adelaide recording clearances below this threshold:
Broad weakness at Saturday’s auctions.
Commenting on Domain’s separate auction results, AMP Capital’s chief economist, Shane Oliver, noted that “after a brief stabilisation, Sydney clearances appear to have resumed their downswing”. Oliver added that “further falls are likely in both cities [Sydney and Melbourne] as rapidly rising mortgage rates impact”:
If true, this spells bad news for Australian house prices given auction clearance rates have traditionally been a strong leading indicator, especially for Sydney and Melbourne:
Auction market leads house prices down.
In his weekly auctions wrap, “Australasia’s #1 real estate coach and trainer”, Tom Panos, was more optimistic after seven of his 11 Sydney auctions sold:
“We might be getting the settling of the market. And the settling of the market says to me this: an acceptance of a new level of pricing of the market where there’s enough transactions that have taken place and people say ‘oh that’s the new values’…
“The biggest problem at the moment is the stock that’s been on the market for a while. Those vendors have not accepted the new market… The new vendors coming in, they’re already educated at the time of listing”…
Panos’ observation would ring true if the Reserve Bank of Australia (RBA) was to stop increasing interest rates. However, with further aggressive rate hikes all but certain, ‘fear of overpaying’ will continue to dominate the market, meaning buyers will remain on the sidelines while house prices continue to fall.
Australia’s housing market will continue to worsen so long as interest rate hikes remain in play.
