Australian home prices continue to slide despite stronger clearance rates

Spencer Platt/Getty Images
  • Australian auction clearance rates rose marginally last week.
  • Auction volumes were weaker and reporting rates were stronger.
  • Prices continued to ease across most mainland state capital cities over the week, the one exception being in Adelaide.

Australian auction clearance rates rose marginally last week, led by small improvements in Melbourne and Sydney, Australia’s busiest auction markets.

According to CoreLogic, Australia’s combined capitals preliminary clearance rate rose to 55.0% last week, a small increase on the initial estimate of 54.1% reported seven days earlier.

Across the capitals, 2,204 homes went under the hammer, down from 2,303 in the prior week.

Of those, CoreLogic received results from 1,628, representing a reporting rate of 73.9%. That figure was an improvement on the 70.4% preliminary estimate seen seven days earlier.

Of the results received, 896 homes sold prior to, at, or after auction while 732 properties were passed in, including 110 homes that never made it to market.

Preliminary clearance rates for houses stood at 53.7%, marginally below the 55.7% level for units.

The improvement in the national reporting rates points to the likelihood of a small downward revision to CoreLogic’s final clearance rate for the week when it’s released on Thursday, likely in the vivacity of 50% or a little higher.

In the prior week, the preliminary estimate was revised down from 54.1% to 49.4%.

In the same week a year earlier, Australia’s final clearance rate stood at 63.6% from a significant larger 3,206 auctions that took place.

CoreLogic

The reduction in volumes over the past year reflects weaker market conditions, one factor that seen some vendors prefer to sell via private treaty, rather than at auction, or not sell at all.

“Given the combined capital cities posted another month on month decline in home values in February, its expected vendors will remain reluctant to auction their property while selling conditions remain challenging and year on year volumes will continue to trend lower throughout the year,” CoreLogic said, referring to the 0.7% nationwide decline in home prices recorded last month.

By individual capital city market, preliminary estimates in both Melbourne and Sydney — Australia’s busiest auction markets — both rose from seven days earlier.

1,046 auctions were held in Melbourne during the week, up from 1,144 seven days earlier when a preliminary estimate of 53.1% was reported.

In Sydney, 799 homes went under the hammer, delivering a preliminary clearance rate of 61.3%. That was higher than the 58.6% level of the prior week when 795 auctions were held.

Reporting rates in both cities were also higher than seven days earlier.

CoreLogic

While both cities are now regularly recording preliminary estimates higher than late last year, they still remain below the low to mid 60% level seen in the same corresponding week one year ago.

Based on CoreLogic’s daily hedonic home price series, the bounce in clearance rates in recent weeks has also done little to slow the pace of price declines compared to what was seen late last year.

Indeed, last week, prices in Sydney and Melbourne fell 0.3% and 0.2% respectively from seven days earlier, according to settlement data. Since the start of 2019, prices in these cities have fallen 2.5% and 2.8% respectively.

“The recent surge in clearance rates has given some analysts renewed confidence that price declines in Australia may soon come to an end,” says Ben Udy, Economist at Capital Economics.

“The rise in auction clearing rates in early February is probably just temporary.

“Housing remains overvalued and other leading indicators point to a continued decline in house prices. We therefore still think the housing downturn has further to run.”

Capital Economics retains the view that home prices in the combined capital cities will eventually decline 15% from their peak in 2017, led by falls in Sydney and Melbourne.

The bounce in national clearance rates is seasonal, regularly occurring at this time of year. More realistic price expectations from vendors, along with significantly fewer auctions taking place, are other factors that may explain the recovery seen in recent months.

Across the smaller capital city markets, preliminary clearance rates last week rose in Perth but fell in Brisbane, Adelaide and Canberra.

Over the same period, prices in Brisbane eased by 0.2% and by 0.4% in Perth. In contrast to the prevailing theme, values in Adelaide were steady.

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