Australian auction clearance rates hit the lowest level on record last week.
- No capital city recorded a final clearance rate of more than 44.2% last week.
- Sydney’s clearance rate fell to 38.8%, the lowest level since July 2008.
- Conditions in the housing market could get worse before they get better.
Australian auction clearance rates hit the lowest level on record last week, a fitting end to what’s been a tough year for the property market.
According to final figures for CoreLogic, just 40% of reported auctions resulted in a sale, the lowest proportion since CoreLogic first started collating the data in 2008.
CoreLogic received results from 2,078 of the 2,406 auctions held. A total of 834 of those sold before, at or after auction, while 946 were passed in, including 298 that failed to make it to market.
One year ago, Australia’s final combined capitals clearance rate stood at 60.7% from 2,890 auctions held.
A paltry 38.6% of houses across the capitals sold under the hammer last week, slightly below the 43.4% level of apartments.
By individual capital, Sydney’s clearance rate tumbled to 38.8%, a level not seen since July 2008. Melbourne, at 44.2%, actually recorded a small improvement on the 43.8% level of the previous week.
A year ago, Sydney and Melbourne recorded final clearance rates of 52.7% and 65.9% respectively. Melbourne’s auction market, in particularly, has cooled dramatically over this period, mirroring what was previously seen in Sydney.
As seen in these charts posted by CoreLogic Research Analyst Cameron Kusher on Twitter, while Sydney clearance rates currently sit at decade-lows, those in Melbourne aren’t faring much better.
Here’s the evolution in Sydney auction clearance rates going back to 2011.
And the same chart but only for Melbourne.
According to separate data released by CoreLogic, median prices in Sydney and Melbourne fell by 0.3% and 0.5% respectively last week, extending the decline in both cities over the past month to 1.6%.
Across the smaller capitals, clearance rates improved week-on-week in Brisbane but fell in all other markets. No individual capital recorded a clearance rate in excess of 44.2%.
It was a rock bottom end to 2018.
The only question now is whether clearance rates will fall further in 2019.
While APRA, Australia’s banking regulator, will remove interest-only lending restrictions for some lenders from January 1, eliminating one factor that undoubtedly acted to cool property prices, especially in Sydney and Melbourne, early in the downturn, it’s doubtful this will lead to a meaningful turnaround for clearance rates and prices in the near-term.
Throw in potential risks from the final report from the Hayne Royal Commission and Australia’s federal election, and it’s not inconceivable that conditions in the housing market may actually get worse before they get better.
However, labour market conditions remain firm and population growth continues to increase at a brisk pace of 1.6% per annum, two factors that should, in the absence of an economic shock, help miminise the potential for the housing downturn to morph into something far worse.