Fewer Australians are selling their home at auction as prices continue to fall

Mark Metcalfe/Getty ImagesAnyone have an opening bid? Anyone?
  • The number of residential property auctions taking place in Australia is tanking, falling by a massive 26.1% in the September quarter compared to a year earlier, according to new data from CoreLogic.
  • Falling prices and an increase in the proportion of unsuccessful auctions helps explain why vendors are shying away from this form of sale.
  • Broadly, the days of ferocious bidding wars at auctions are now over, at least in the current cycle.

The number of residential property auctions taking place in Australia is tanking, falling by a massive 26.1% in the September quarter compared to a year earlier, according to new data from CoreLogic.

“20,653 homes went under the hammer across Australia’s combined capital cities in the 3 months to September 2018, the lowest volume of auctions recorded in a quarter since the March 2017 quarter when 19,241 homes went to auction,” CoreLogic said.

“The September 2018 quarter was down from 25,824 homes auctioned over the previous June quarter, and much lower compared to the 27,953 homes that went to auction in 2017’s September quarter.”

While there were only 13 weekends in the September quarter of this year, down from 14 a year ago, CoreLogic said the sharp decline in volumes largely reflects “a weakening in vendor confidence driven by the softer housing market conditions.”

CoreLogic

Lower clearance rates also helps to explain why fewer vendors are choosing to sell their home at auction.

According to CoreLogic, the proportion of successful auctions across the capitals fell last quarter despite few properties going under the hammer, sliding to just 53.6%, the lowest percentage since the final three months of 2012.

That was down 4.2 percentage points on the levels recorded in the June quarter, largely reflecting continued declines in the number of successful results being reported in Sydney and Melbourne.

Just 50.9% of the 7,497 auctions that took place in Sydney during the quarter cleared, down 5.1 percentage points from the prior quarter. In Melbourne, regularly the busiest market facross the country, just 56.6% of the 9,629 homes that went under the hammer sold before, at or after auction, again, down 4.6 percentage points from the levels seen in the June quarter.

In early October, coinciding with a seasonal lift in auction volumes, clearance rates in Melbourne have softened even further.

At around 50% or lower, current clearance rates in both Sydney and Melbourne both point to further price declines in both cities in the period ahead, at least based upon historic relationships.

Based on recent data released by CoreLogic, median prices in both these cities have fallen over 4% already since the start of the year.

Across the smaller capital city markets, clearance rates last quarter were also lower in Canberra, Tasmania and Brisbane compared to the levels reported in the three months to June. In contrast to the broader theme, success rates improved in both Adelaide and Perth, the latter undoubtedly helped by a low base level in the prior quarter.

CoreLogic

From a longer-term perspective, clearance rates fell in all capital cities last quarter compared to the same period a year earlier, led once again by a steep drop in both Sydney and Melbourne.

CoreLogic

The lift in the proportion of unsuccessful auctions over the past year largely reflects the impact of tighter lending standards towards interest-only and high debt and loan to valuation borrowers as a result of macroprudential regulatory tightening introduced by APRA, Australia’s banking regulator, in recent years.

Along with other factors this has contributed to a weakening in demand, especially in those markets where the use of interest-only and high loan-to-income borrowing was prevalent in the past.

Given the decline in demand, and widespread expectations that home prices are likely to fall further in the year ahead, it all but confirms the days of relying upon ferocious bidding wars to get a bumper sales result are now over, at least in the current cycle.

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