CoreLogic’s preliminary auction results recorded the first Sydney preliminary clearance rate below 70% since mid-March, in a clear sign the housing market is losing steam:
Source: CoreLogic
Across the combined capital cities, a preliminary clearance rate of 71% was recorded, which will dip into the 60s once final results are gathered.
But across Sydney, 702 homes went under the hammer this weekend, which was down 6.3% from the 749 held last week.
With 544 results collected so far, Sydney’s preliminary clearance (69.1%) rate dipped below the 70% mark for the first time since mid-March.
In his weekend wrap, prominent Sydney real estate agent and auctioneer, Tom Panos, warned that home prices would probably “drop a little bit” as the RBA’s rapid rate rises finally catches up with vendors:
“Let’s assume that they’re [the RBA] not going to put the rates up and that’s the end of the rate rises”.
“I have to say to you that doesn’t mean there’s no pain because there’s always a lag between rate rises and pain, and that pain is normally six to 12 months”.
“But most of the economists have agreed this time the pain might actually go a longer period And the reason why is that there were a large group of people that were protected by the fixed rates since May last year so they’re only really starting to feel that pain now”.
“What is going to happen with property prices? I have a view that they’re probably going to drop a little bit”.
“When I say drop, number one I’m not talking about 10% to 20% drops, but I’m talking underneath that”.
“You don’t need to have a bachelor of economics degree to know the way demand and supply works, and that as more stock comes up on the market in Spring, it will have some people that have to sell for financial reasons”.
“I mean I know a property today sold in Campsie – I did not auction it but I’ve been given the results – it sold lower than what the people bought it two three years ago. I think $100,000 less”.
“So there is going to be people that have to sell properties, and if they’re a distressed seller they’re going to sell it a little bit lower, so you’re going to have that variable also happening in September, October and November, so that stands to reason that it [the market] will drop”.
Panos’ comments follow those from Yellow Brick Road chairman, Mark Bouris, who has also tipped a double-dip housing correction.
Sydney has led the nation’s house price rebound, recording strong 8% growth since values nationally bottomed on 7 February:
However, the fade in clearance rates clearly signals that price momentum will slow:
In my opinion, house price growth will continue to decelerate (but not turn negative) across Sydney and nationally before picking up next year when the RBA begins to cut interest rates.
Record immigration, continued rental shortages and strong rent growth, and limited supply will all help to drive prices higher.
So, when the RBA does commence its easing cycle, a fire will be lit beneath the market.
