For the past two months, the nation’s auction market has been on an upward trajectory, which has been reflected in the sharp rebound in house prices:
There were fears last week that the Reserve Bank of Australia’s (RBA) latest 0.25% interest rate hike to 4.10% might be ‘one too many’.
In an email sent to subscribers, SQM Research managing director Louis Christopher said he now expects “distressed activity to rise based on a new round of forced and panicky selling starting sometime the second half of this year”.
Christopher also advised market participants “to be prepared for a new round of housing price falls starting in the second half of 2023”.
Chris Joye, founder of Coolabah Capital, also said that leading real estate agent Alexander Phillips called him, saying the “market is turning” and that he was being inundated with calls from “nervous vendors” who wanted to offer their properties swiftly before prices dropped:
Phillips also reportedly thinks that the improvements in home prices seen over the past quarter will be erased by the end of the year.
Finally, well-known Sydney real estate agent and auctioneer Tom Panos thinks the RBA might have raised rates to the “tipping point” where the housing market will fall.
With this background in mind, it was worth noting that last week’s rate rise does appear to have dented the auction market.
CoreLogic’s preliminary auction clearance rate was 72.4% across the combined capital cities, which was “the lowest in six weeks, suggesting the June rate hike may have tempered buyer and vendor confidence”:
Melbourne recorded its lowest preliminary clearance rate (73.7%) in seven weeks, down -2.1 percentage points from the previous week’s preliminary rate of 75.8% (revised to 72.6% at final numbers).
Last week, Sydney recorded its highest preliminary auction clearance rate (79.6% revised to 74.2% on final figures) since mid-October 2021.
This week, Sydney’s preliminary rate was -3.7 percentage points lower, with 75.9% returning a successful result.
Obviously, we will only know in hindsight whether this is indeed the ‘tipping point’ for the housing market.
This price rebound is highly unusual given it has occurred alongside a decline in sales volumes, rising mortgage rates and shrinking borrowing capacity.
The reality of increasing borrowing costs and diminished borrowing capability is bound to set in at some point.
