CoreLogic’s preliminary auction results for the weekend report a slight rebound in clearances; albeit off relatively thin volumes.
Across the combined capital cities, the clearance rate was 59.5% – up from 58.8% the previous weekend (later revised to 54.0% at final figures).
Importantly, both Sydney and Melbourne reported preliminary clearance rates above 60% – both higher than the previous weekend – albeit they will fall into the 50s on final figures:
Rebound in Sydney and Melbourne auction clearances rates.
In his weekend update, “Australasia’s #1 real estate coach and trainer”, Tom Panos, claimed the market is “settling” after seven of 10 homes that he auctioned in Sydney sold under the hammer.
Essentially, Panos believes that vendors have adjusted to the sharp price falls and are now meeting the lower offers from buyers:
“70% sold today, which is telling me two things. Number one that there is settling and normality coming into the market. And let me tell you, the best vendor manager in the market at the moment is the media… Nine out 10 vendors tell me ‘we know it’s hard. And we know it’s getting harder’. And for that reason you are either getting vendors that are giving reserves that are realistic, or they’re giving you optimistic reserves with a fallback number which is normally good enough to sell a property. So they’re adjusting their reserves”…
“There is a settling in the market and people are accepting that these are the new values. The real question is going to be: what’s going to happen in September, October, November as the market appraisals start lining up now as we end the winter, and we enter the spring selling season upswing in listings?”…
“One would assume that more listings will see a softening of prices. But the softening’s already happened. I’ve said it before, there’s a data lag that economists are missing by about 3-4 months. The market has already be repositioned in most areas by 10%, even 15%. Some markets even 20%. But realistically, we’re probably going to see another softening of around 5% to 10%… We’re close to the bottom”…
“Every time there’s a rate rise of 1%, it basically means borrowers get 10% less from their bank. So if you get a 2% increase in interest rates, you’re roughly looking at approximately a 20% drop in borrowing availability for a buyer from a bank… What’s it’s basically telling us is that if rates keep going up at the speed that they’re going up, that buyers are going to have less money”.
“And that’s why I think right now there’s a few buyers that are rushing in and snapping up property because they’ve sat down with their mortgage broker and their broker has basically said to them ‘listen… yes there might be a further dropping of prices, but since they’ve already dropped, and you’ve got this loan approval, use it, secure a home that you like, and even if you haven’t bought at the bottom, you are keeping it for the next 5-10 years… But if you don’t buy it right now, you might not have the same amount of money in the marketplace because you’re going to be re-rated by the banks”…
Buyer’s agent Catherine Cashmore noted similar with respect to Melbourne’s auction results via Twitter:
Therefore, it looks like sellers are capitulating and accepting lower prices for their homes. Hence the “settling” of the market described by Tom Panos.
That said, prices will continue to fall so long as the Reserve Bank keeps hiking rates. More rate hikes automatically means less borrowing capacity, which means less demand and falling prices.
