CoreLogic’s preliminary auction clearance rate lifted to 63.7% over the weekend, up 3.8% from the previous weekend and the strongest result since late May:
The next chart below shows that the national auction clearance rate has rebounded significantly over recent months:
However, auction volumes remain depressed, with the number of homes taken to auction over the weekend (1,883) 43% below the same weekend last year (3,292).
Experts believe the rise in auction clearances has been caused by vendors being more flexible on prices and willing to meet buyers’ lower offers. However, the sharp increase in mortgage rates has shrunk buyers’ budgets, driving the sharp fall in prices.
Domain chief of research and economics, Dr Nicola Powell, noted that “it takes time for the impact of interest rate rises to settle and for the market to become adjusted” and that “buyers and sellers are now meeting each other better”.
And because interest rates are still rising, “sellers will have little choice but to adapt to further rate rises and potential price falls”.
Jellis Craig Fitzroy partner and auctioneer, Michael Amarant, likewise noted that “most people coming into the market are pretty sober and realistic about prices” and that it is now “easier to find a common accord, or common ground”.
Aussie house prices will continue to fall so long as the Reserve Bank of Australia (RBA) continues hiking interest rates, given mortgage rates are the key determinant of borrowing capacity.
The 2.75% of tightening delivered since May has already lifted average variable mortgage repayments by 37%, which has eroded both borrowing capacity and home buyer budgets:
With the RBA tipped by all and sundry to keep hiking, borrowing capacity and household budgets will shrink further, driving house prices lower.
Ultimately, how far Australian house prices fall will depend on the aggressiveness of the RBA’s monetary tightening.
