The outlook for Australia’s housing market continues to darken.
The weekend’s auction results disappointed again, with the national capital city preliminary clearance rate falling to 53.2%, down from 56.5% the prior weekend, before being downgraded to 48.9% on final figures.
Source: Cotality
On the same weekend last year, 70.0% of auctions sold based on preliminary results. Volumes over the weekend were also 31.9% lower than this time last year.
Auction results were soft across the board, with only Sydney recording a mild improvement from the prior weekend. However, Sydney has had 16 weeks in a row where the preliminary clearance rate has been below 60%.
Commenting on the results, leading Sydney auctioneer Tom Panos was blunt, stating, “We are still in a buyers’ market”. That seems like an understatement.
Meanwhile, the price correction continues to accelerate amid broad-based declines.
The monthly decline has accelerated to 1.2% across the five major capital cities, led by Sydney (-1.6%) and Melbourne (-1.2%), with solid falls also recorded across the mid-sized capitals:
The quarterly rate of decline has also accelerated to 3.0% across the five major capital cities, again led by Sydney and Melbourne:
MB’s new “price crash tracker” is presented below, which plots the current decline from peak across the five major markets against the largest declines on record, as recorded by Cotality:
As you can see, the current 3.7% decline across the five major markets is 57% below the largest decline on record: -8.6%, recorded between October 2017 and May 2019.
Sydney’s and Melbourne’s price corrections are most advanced and closest to reaching their record declines.
My view remains that this episode will end up being the largest price correction on record owing to:
- This correction beginning with record levels of overvaluation relative to incomes and rents.
- The highest mortgage rates in around 15 years.
- The federal budget’s changes to negative gearing and capital gains tax, which have stifled investor demand.
- The newly implemented money laundering rules relating to real estate, which will further stifle demand.
- Likely immigration cuts.
- Likely austerity from federal and state governments.
A “perfect storm” of factors is conspiring against Australia’s housing market.
