Australia’s auction market continues to rebound, with CoreLogic’s preliminary auction clearance rate posting its strongest result in 12 weeks.
Across the combined capital cities, 62.6% of auctions were reported as sold, up from last week’s 61.5% preliminary result (later revised down to 56.0%).
Melbourne’s preliminary clearance rate fell to 64.9% from 65.9% last week (later revised down to 58.8%). This was its first weekly decline in five weeks.
Sydney recorded a preliminary clearance rate of 63.4%, which was up from 59.7% last week (later revised down to 54.7%). This was its strongest result since late April.
Preliminary auction clearances rebound.
After eight of his nine properties sold on Saturday, leading Sydney auctioneer and Real Estate Influencer, Tom Panos, declared that “we are very close to the bottom of the real estate market”:
According to Panos:
“We’re back in business baby… Here is what I am forecasting… If there was a clock, right now, and you have the 12 and six. Where is the market? I reckon we’re at five… We are very, very close to the end of this correction… And to everyone that’s reading out headlines ‘property prices are going to drop 20%’, well wake up. They already have. 15% at least in most areas, some 20%. That correction has happened”…
“So here are the factors that are going to indicate how far we are from the bottom. Because Spring is going to be a test.”
“Number one: we clearly know that fixed rates long-term have come down… That’s sending a message to buyers that interest rate rises are not a long-term chronic thing that we are going to live for. They can tell that it’s a tool that is being used in the short-term to take care of inflation”.
“Number two: the next factor that is going to determine whether we drop another 5% or 7% is supply of new listings. If the supply of new listings becomes high in Spring… Keep your eye on that…”
“Number three: the speed of increase in rate rises and the magnitude of those increases… As rates rise, borrowing capacity goes down… and offers on properties reduces”…
“Number four: The return of investors… They are seeing high yields. There is a rental boom taking place in many areas… Property becomes an attractive asset against inflation”…
“These are the factors. I’m calling it, I reckon we are five on the clock. Not far from the bottom. There’s probably still a little bit [of downside] to happen. Those factors are going to indicate how much more”.
I would largely agree with Panos if reported prices had already fallen by 15% to 20%, like he says.
The problem is that the data reported by CoreLogic is showing only a 3.8% decline across the five major capital cities, with prices falling at a rapid pace:
Australian dwelling values still falling fast.
This means that the dwelling values indices from CoreLogic and other data providers still have much further to fall to match Panos’ 15% to 20% estimate.
Ultimately, how far Australian house prices will fall depends most on what the Reserve Bank of Australia (RBA) does with interest rates, with the volume of listings over Spring playing a secondary role.
The pace of interest rate rises is unprecedented and we are in uncharted waters.
So, if the RBA hikes as aggressively as, say, the market is predicting, and the official cash rate rises to 3.6% by June next year (inferring a discount variable mortgage rate of around 7%), then dwelling values will fall very sharply.
However, if the RBA soon stops hiking, then price falls will slow before stabilising.
Either way, I cannot see house prices actually rebounding until after the RBA begins cutting rates, which probably won’t occur until at least mid-2023.
