Home buyer demand increased recently following the federal election and expectations of an imminent interest rate cut from the Reserve Bank of Australia (RBA).
As illustrated below, final auction clearance rates (current to 18 May) showed a marked rebound across Sydney, Melbourne, and the combined capital city markets.
This weekend’s preliminary auction results from Cotality (formerly CoreLogic) showed a clear response from last week’s 0.25% interest rate cut from the RBA.
Cotality reported a preliminary auction clearance rate of 71.3% across the combined capital cities, the second highest early result this year.
The strong result came despite the volume of capital city auctions jumping 40.8% relative to the prior week (to 2,512).
Source: Cotality (formerly CoreLogic)
“Auction results saw a similar pattern after the February rate cut, with the preliminary clearance rate bouncing to 72.1% a week after the announcement (the highest so far this year), before gradually drifting lower as some exuberance left the market. The preliminary clearance rate found a floor at 64.2% in the last week of April”, Cotality reported.
Just under three-quarters (73.7%) of Melbourne auctions have recorded a successful result so far, the fourth week in a row that the preliminary auction clearance rate has held above the 70% mark.
Sydney’s preliminary clearance rate also rose to 72.2%, a significant jump from 65.2% last week and the first 70%-plus preliminary result in ten weeks.
The following chart illustrates how home prices tend to track auction clearance rates.
The RBA’s rate cut has boosted the market, which should lead to higher prices.
There is more to come, too, with the futures market tipping three more 0.25% interest rate cuts from the RBA this calendar year.
