- Australian auction clearance rates remain well below the levels seen a year ago.
- More apartments than houses are selling at auction at present, fitting with ongoing demand for lower-priced properties.
- Softer clearance rates suggest that recent price weakness in Sydney and Melbourne is unlikely to dissipate anytime soon.
Australian auction clearance rates remain well below the levels seen a year ago, hinting that recent price weakness in Sydney and Melbourne is unlikely to dissipate anytime soon.
According to CoreLogic, a preliminary capital city clearance rate of 65.3% was recorded in the first full week of April, largely unchanged from the 65.5% preliminary reading seen prior to the Easter long weekend.
The result was also well below the final 74.8% level reported in the same corresponding week in 2017.
The group said 1,813 properties went under the hammer during the week, well above the 670 level of a week earlier when a final clearance rate of 64.8% was reported.
Of the 1,813 properties put up for auction, the group received results from 1,376. Of those, 907 properties sold.
Given the tendency for final clearance rates to be revised lower, it’s likely that last week’s figure will fall to the low 60% region when the group releases updated figures on Thursday — especially given the large number of unreported results seen in the preliminary report.
By type of property, 70% of units sold during the week, above the 63.4% clearance rate for houses.
This fits with recent reports that suggest recent price weakness has been driven by the the top end of the housing market.
By individual capital, CoreLogic said auction volumes increased compared to the levels reported during the Easter long weekend.
Sydney, the busiest auction market for the week with 775 properties going under the hammer, recorded a preliminary clearance rate of 67.1%, down from the final reading of 67.9% reported one week earlier.
In Melbourne, where 720 auctions took place, the preliminary figure rose to 69.6%, above the final reading of 65.5% reported during Easter.
Across the smaller capitals, clearance levels ranged from 59.7% in Adelaide to just 33.3% in Hobart.
As clearance rates have historically acted as a lead indicator for prices, it suggests that recent weakness — lead by Sydney and Melbourne — is unlikely to reverse course in the short-to-medium term.
Markets will get further news on that front later today with CoreLogic set to release weekly price changes for Australia’s mainland capitals.
Recently, price weakness in Sydney and Melbourne has masked better performances from Australia’s smaller capital city markets.
“Property prices in Sydney and Melbourne likely have more downside, but a crash is unlikely in the absence of much higher mortgage rates, much higher supply and a long continuation of recent high construction activity,” says Shane Oliver, Head of Investment Strategy and Chief Economist at AMP Capital.
“A further tightening in lending standards as banks get tougher on borrowers’ income and living expense levels along with rising supply and more realistic capital growth expectations by home buyers will see Sydney and Melbourne property prices fall another 5% or so this year with further falls likely next year.”