The weekend’s auction market turned down following last week’s shock inflation result and the widespread expectation that the Reserve Bank of Australia (RBA) will now lift interest rates more aggressively.
According to CoreLogic’s preliminary results, the nations combined clearance rate slipped below 60% for the first time since late August:
With 1,501 results collected so far, 59.8% were successful, the first time the preliminary clearance rate has slipped below 60.0% since late August. Last week’s preliminary clearance rate was 2.9 percentage points higher (62.7%), revising down to 60.7% at final figures, while this time last year, 76.8% of reported auctions were successful.
SQM Research managing director, Louis Christopher, believes buyers are now concerned that the RBA will drive interest rates much higher:
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“One of the things that would have to be running through buyers’ minds right now is ‘what is the Reserve Bank of Australia going to do?’”
“The CPI number that came out this week was bad. And it reduces the probability of a Christmas pause in [increases in] interest rates. That may well start making some buyers a little bit nervous once more”.
Christopher also warned that many buyers’ mortgage affordability buffers, which were increased from 2.5% to 3.0% late last year by APRA, could soon be surpassed by the aggressive rate hikes:
“That’s going to be in the back of existing borrowers’ minds and potentially in would-be buyers’ minds.”
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Meanwhile, leading Sydney auctioneer, Tom Panos, has turned pessimistic again following last week’s inflation result, and is now worried the RBA will hike harder:
I am now concerned about the Real Estate Market 😰 I wasn’t 2 weeks ago!
Property prices appear to have stopped going down. There appears to be a bit of buyer hesitation.
It is clear fear is returning to Australia’s property market as players realize that we are not actually near the bottom and prices will continue to fall as rates rise.
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.
