Australian auction clearance rates continued to slide last week, coinciding with a flood of new stock hitting the market.
According to CoreLogic, a preliminary clearance rate of 67.8% was recorded across Australia’s capitals last week, down from the prior week’s preliminary reading of 69.4%.
It was also well below the 74.4% final clearance rate in the same week a year earlier, continuing the trend seen in recent months.
The small weekly decline corresponded with a surge in the number of properties being taken to auction, rising to the highest level seen this year.
“The combined capital cities saw the number of auctions held reach a new year-to-date high, with a total of 3,690 held, surpassing the previous 2017 high recorded over the week prior to Easter when 3,517 auctions were held,” CoreLogic said.
Melbourne, often the busiest auction market nationally week-to-week, drove the national increase with the number of properties going under the hammer rising to the highest level on record.
“This week’s surge in volumes can be attributed to activity across Australia’s largest auction market in Melbourne where volumes across the city reached their highest on record this week,” CoreLogic said.
The flood of properties being taken to auction saw Melbourne’s preliminary clearance rate fall to 71.7% from 73.3% a week earlier. It was also well below the 77.5% final clearance rate reported in the corresponding week in 2016.
Although not to the same scale in Melbourne, Sydney also saw a sharp increase in auction volumes, rising to 1,196 from 823 a week earlier.
Like Melbourne, it too saw its preliminary clearance rate fall week-on-week, coming in at 64.1% from 68.8% a week earlier. A year ago Australia’s largest and most expensive housing market recorded a final clearance rate of 80.5%.
“Sydney’s clearance rate has been consistently below 65% since the first week of October,” CoreLogic said.
The decline in clearance rates has coincided in a sharp slowdown in price growth in Sydney in recent months.
Tim Lawless, Head of Research at CoreLogic, said the lift in activity levels in Australia’s largest housing markets likely reflected seasonal patterns along with vendors bringing forward auction dates ahead of the Melbourne Cup long weekend next week.
“Partly, it’s seasonal,” he says.
“Auction markets tend to gather pace through the Spring season, historically culminating in peak level of activity in late November or early December.
“It’s also the week before Melbourne Cup, so there is likely to be some pull forward of demand due to the spring racing carnival festivities.”
Across Australia’s remaining capitals, preliminary clearance rates rose in Canberra, Perth and Adelaide but fell in Brisbane and Hobart.
Brisbane, Australia’s third-largest city, put in a particularly weak performance with just 47.1% of properties taken to auction selling.
With the national preliminary clearance rate falling to 67.8%, it’s likely that the final figure for the week — released on Thursday — will come in below the 64.7% level reported one week earlier.
Final clearance rates tend to be revised lower as late, often unsuccessful results are reported to CoreLogic.
Demonstrating that relationship, Sydney and Melbourne’s final clearance rates for the week ending October 22 — initially reported at 68.8% and 73.3% — were subsequently revised down to 61.3% and 70.3% respectively.
With Sydney’s preliminary reading falling to 64.1%, there’s a possibility that its final reading may fall below 60% for the first time in two years.
While auction volumes look set to fall dramatically in the coming week as attention switches from the housing to horse betting markets, CoreLogic says that volumes are likely to remain elevated in the month ahead, providing a further litmus test of housing demand at present.
“Historically auction volumes have peaked around late November [and] early December,” it says. “If this trend holds true this year, we could see new records being set for auction volumes as the Spring season concludes.”
CoreLogic will release updated weekly house price data for Australia’s mainland state capitals later in the session. That will be followed on Wednesday by its more comprehensive monthly Home Value Index for October.
In September, the index reported that prices in Sydney fell for the first time in 17 months, leaving the increase over the quarter at just 0.2%. Price growth in Melbourne fared better, lifting 0.9% over the month.