- Auction clearance rates fell to fresh five-year lows last week.
- Less than 60% of properties cleared in Sydney and Melbourne.
- Prices in these cities have been falling for several months. Many forecasters expect the downturn will continue for quite some time yet.
There’s no shortage of forecasters out there predicting that recent declines in Sydney and Melbourne property prices will continue for some time yet.
Some believe it could last for years, rather than months, before prices lift again.
If the latest batch of auction clearance rates are anything to go by, they could well be right.
While it comes with the usual disclaimer that last weekend was a public holiday in many parts of Australia, meaning activity levels were far weaker than usual, clearance rates across the capital cities fell to fresh, multi-year lows, according to final figures from CoreLogic.
Combined, just over half of properties that went under the hammer sold last weekend, well below the 67.8% level in the corresponding week a year ago.
“Last week saw the combined capital city auction market slowdown ahead of the Queen’s birthday public holiday with only 904 homes taken to auction,” CoreLogic said.
“The lower volumes did little to improve clearances rates last week with the weighted average declining further returning a 53.8% final auction clearance rate, the fifth consecutive week of falls across the combined markets.”
The final result was below the 54.1% level of the previous week, leaving it at five-year lows.
As seen in the table below from CoreLogic, clearance rates in both Sydney and Melbourne remained anchored below 60% last week.
“Sydney was the busiest auction market last week, outperforming Melbourne in terms of clearance rate and number of auctions,” CoreLogic said.
“There were 415 Sydney homes taken to auction last week returning a 56% success rate, increasing on the prior week when the final clearance rate dropped to 47.1%.”
Melbourne’s clearance rate tumbled to 54.9%, down from 59.8% a week earlier, leaving it at the lowest level since 2012.
Brisbane, Perth and Tasmania all saw an improvement in clearance rates during the week, while Adelaide and Canberra’s fell.
While some dismiss the signals provided by clearance rates, pointing out opaque reporting from agents, late withdrawals from the market and changes in volumes, among others, it comes as little surprise that the last time that clearance rates this low were recorded was during the last price downturn in 2011-12.
Here’s how Sydney’s currently compares to prior years.
And for Melbourne.
For all the criticisms, the relationship between clearance rates and prices still appears to be there.
It’s little wonder why economists at ANZ Bank are watching developments in auction clearance rates closely given they are a timely indicator of what is happening in the housing market.
“We are currently very focused on the housing market, since a slump in house prices would pose a considerable threat to our outlook for the economy,” ANZ says.
After the holiday slowdown last week, Australia’s auction market will face another test this week with volumes rising sharply across most major markets, including Sydney and Melbourne.
“[We’re] currently tracking 1,886 capital city auctions this week, rising on last week when final figures showed 904 auctions held,” CoreLogic says.
“Melbourne is set to be the busiest auction market with a total of 932 homes scheduled for auction. Volumes are also set to increase across Australia’s second largest auction market, Sydney, with a total of 680 homes scheduled to go under the hammer.”
The busiest individual suburbs are all located in Melbourne with Reservoir, Craigieburn, Glen Waverley, Richmond and South Yarra all hosting 12 auctions or more.
Outside of Sydney and Melbourne, volumes will also increase sharply in Adelaide, Canberra and Perth.