- Australian auction clearance rates have fallen to fresh six-year lows.
- Both Sydney and Melbourne recorded sub-50% results again last week. The success rate in Sydney was the lowest since December 2008.
- Auction volumes will lift substantially in Melbourne this week. They’ll also be slightly higher in Sydney
Australia’s housing market remains in the doldrums with auction clearance rates tumbling to the lowest level in over six years last week.
According to CoreLogic, a final combined capitals clearance rate of 42.7% was recorded, down from 47% a week earlier.
It was the lowest success rate since April 2012.
The result came despite a sharp reduction in the number of properties going under the hammer, falling from 2,928 to 1,541.
Reporting rates were also weak with just 82.1% of results received, suggesting the true success rate was likely significantly lower.
In the corresponding week a year earlier, a final clearance rate of 61.5% was reported. That was despite auction volumes being higher at 2,046.
Helping to explain the weakness in the national figure, final clearance rates in Sydney and Melbourne were down sharply from the levels reported a week earlier.
In Sydney, just 42.6% of reported results cleared, the lowest level since December 2008. That was down from 45.3% a week earlier and well below the 59.8% level reported a year earlier.
Despite a sharp reduction in market activity due to the Melbourne Cup Carnival, Melbourne’s auction clearance rate also declined, falling to 45.7% from 48.6% a week earlier. In comparison to Sydney, Melbourne’s auction market has softened substantially over the past 12 months when clearance rates regularly sat in the mid to low 70% region.
While some analysts see clearance rates as a lead indicator for home prices, Justin Fabo and Ric Deverell says weak results are a symptom, not the cause, of the recent decline in property values in both cities.
“Some analysts show clearance rates against year-ended growth in housing prices so that it appears to show a leading relationship, but no such leading relationship exists,” they say.
“Auction clearance rates in the major capital cities move coincidentally with housing price growth.
“Housing prices will definitely fall further but it’s not because of weak clearance rates.”
With clearance rates continuing to print sub-50% in both Sydney and Melbourne, it suggests there’s still a wide gulf in price expectations between vendors and buyers right now. At a time when demand is soft and listing levels are elevated, recent price declines suggest some vendors are having to lower their expectations in order to meet the market.
Mirroring the results from Sydney and Melbourne, success rates across the smaller capitals were also weak with Adelaide the only city to record a final clearance rate above 50%.
Hardly spectacular results, and levels that could actually worsen further in the coming weeks as auction activity picks up ahead of the summer holidays.
According to CoreLogic, there are 2,276 properties set to go under the hammer this week, a near 50% increase on seven days earlier. Much of that increase reflects a substantial increase in Melbourne as attention switches back from the horses to the property market.
Volumes will also pick up marginally in Sydney while the smaller capital city markets will all see a decline in market activity.
CoreLogic will release preliminary auction clearance rates for the week on Sunday, November 11.