Australia’s auction clearance rates rebounded over the weekend, with the national preliminary clearance rate lifting to 62.3%, up from 59.1% last week (revised down to 55.8% on final figures).
Sydney’s preliminary auction clearance rate rose to 60.0%, up from 56.9% last week (later revised down to 51.7%). Whereas Melbourne’s preliminary clearance rate was 64.7%, up from 61.3% last week (revised down to 59.7% on final figures).
Preliminary auction clearance rates rebound.
After experiencing one of the quietest auction weekends in a while, whereby only three out of six homes sold, leading Sydney auctioneer and Real Estate Influencer, Tom Panos, declared that buyers are “anxious” over the upcoming interest rate hike from the Reserve Bank of Australia (RBA):
“It was very obvious that today people were cautious because they are anxiously waiting to see this Tuesday if there is a rate rise… What we don’t know is if that interest rate rise is going to be half a percent, or it’s going to be 0.25%… And we clearly know the speed of increases of the Reserve Bank is highly impacting market sentiment”.
“So, all I can say to you is we will anxiously wait until 3pm on Tuesday to see what they do”…
The impact of the RBA’s rate hikes is plain to see in the next chart. Days after the RBA commenced its rate hiking cycle in early May, dwelling values across Sydney and Melbourne began plummeting, in turn dragging down the broader market:
House prices crash following RBA rate hikes.
The consensus among economists and market participants is that the RBA will hike interest rates another 0.5% on Tuesday, lifting the official cash rate (OCR) to 2.35%. From there forecasts differ.
CBA, NAB and AMP believe that the OCR will peak at 2.6% per cent, whereas ANZ and Westpac forecast a 3.25% peak in early 2023.
The futures market is even more aggressive, currently tipping a peak OCR of 3.9% by July 2023.
The impact on Australian home buyers from these scenarios is illustrated in the below table.
Australian mortgage repayments could soar further.
Under the lower CBA, NAB and AMP OCR forecast, Australia’s average discount variable mortgage rate would lift to 5.95%, in turn raising average monthly mortgage repayments by 34% versus their level in April before the RBA first began lifting rates.
The higher OCR forecasts of ANZ/Westpac and the futures market would send the average discount variable mortgage rate soaring to 6.70% and 7.25% respectively, in turn lifting monthly repayments by 45% and 53% respectively.
Based on these forecasts, no wonder Australian home buyers are anxious. Because they could face a crippling lift in mortgage repayments while the value of their newly purchased home falls.
