The days of wild bidding wars at Sydney and Melbourne property auctions are now well and truly over

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  • It’s been a tough few months for anyone attempting to sell their home via auction in Australia.
  • In each of the past three weeks, less than half of all auctions across the capital cities have resulted in a sale. Clearance rates in Melbourne sit at the lowest level since December 2012. Sydney’s clearance level continues to languish near levels not seen in a decade.
  • As is typically the case at this time of year, auction activity will increase this week, led by stronger volumes in Melbourne and Adelaide. Reflecting how weak conditions are, national volumes are running around 20% lower than the same period a year ago.
  • The recent downshift in clearance rates has seen one economist predict larger price falls in Sydney and Melbourne before the downtrend comes to an end. Further weakness will likely see others follow.

It’s spring in Australia. The weather is getting warmer, the days longer and the flowers are in full bloom.

Many regard it as the best time of the year to sell your home. However, if that is true, 2018 hasn’t gone to script.

Home prices are falling across many parts of the country, led by Melbourne and Sydney. Sentiment towards the outlook for prices, be it from consumers or property professionals, is also at the lowest level since at least the GFC, perhaps longer, suggesting many believe the downturn will continue for some time yet.

For anyone attempting to sell their home, there’s rarely been a tougher time to get a desired result with markets that were previously red-hot now ice-cold.

Just ask half the vendors who have attempted to sell via auction in spring.

For the third week in a row, less than half of all homes taken to auction across the capital cities failed to sell last week, a prolonged period of weakness not seen since 2012.

According to CoreLogic, just 47% of reported auctions cleared, down from 49.5% one week earlier.

CoreLogic received results from 1,571 of the 1,851 auctions held. With 280 results not reported, the true level of successful sales was likely lower.

Underlining how market conditions have softened over the past year, in the same corresponding week in 2017, a clearance rate of 67.1% was reported. A year before that, they stood at close to 80%.

CoreLogic

With less than half of all properties now selling at auction, it suggests the gulf between vendor price expectations and what prospective buyers are willing or able to pay remains extremely wide in a majority of circumstances.

Based on historic evidence, the current level is also consistent with ongoing falls in prices.

As has been the case in recent weeks, the weak national figure largely reflected the performance of Australia’s busiest auction markets, Melbourne and Sydney.

Just 50.4% of reported auctions in Melbourne were successful, the lowest level since December 2012. That result was marginally weaker than the 50.6% level of a week earlier.

A year earlier, clearance rates in the city stood at 73.2% despite a significantly larger number of properties going under the hammer.

After plunging to the lowest level in a decade in late September, auction clearance rates in Sydney continued to languish at similar levels, falling to 45.1% from 46.1% a week earlier.

Like Melbourne, despite higher auction volumes, Sydney’s clearance rate a year ago was 63.3%.

Citing the recent downshift in clearance rates in Melbourne and Sydney, Shane Oliver, Chief Economist at AMP Capital, says the peak to trough for prices in these cities is now likely to be larger than the 15% declines he forecast just two months ago.

He now says price falls will reach 20% as “credit conditions tighten, supply rises and a negative feedback loop from falling prices” develops.

According to data from CoreLogic, prices in Sydney and Melbourne have fallen 6.8% and 4.9% from their respective cyclical peaks.

CoreLogic

Similar trends to Melbourne and Sydney were also seen across the smaller capital cities with clearance rates in Brisbane, Adelaide and Canberra all weakening from a week earlier. Perth was the only capital to register an increase, lifting to 15.4% from 11.1% a week earlier.

With school holidays now over and the footy finals done and dusted, Australia is now entering a period that is traditionally the busiest in terms of auction activity, providing a stern test of market conditions as supply levels increase.

That will begin this week with CoreLogic currently tracking 2,009 auctions across the capitals, an increase from 1,851 from seven days earlier.

As many as 1,020 homes are scheduled to go under the hammer in Melbourne, making the city once again the busiest market across the country. Hinting that weak conditions are dissuading vendors from selling via auction, just 640 will take place in Sydney.

Adelaide, one of the best performing markets so far this year, will see a notable increase in weekly volumes with 124 auctions scheduled to take place, up from 72 in the prior week.

Volumes in Canberra and Perth are also expected increase while those in Brisbane and Tasmania will fall.

CoreLogic will release preliminary clearance rates for the week on Sunday, October 21.

NOW READ: Sydney and Melbourne homeowners are piling their properties onto the market — and prices keep falling

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