Clearance rates have lifted but home prices are still sliding

Stephen Pond/Getty Images
  • Australian auction clearance rates improved again last week.
  • Volumes were significantly higher than a week earlier. Reporting rates were also far stronger.
  • Nationwide clearance rates and volumes still remain well below the levels seen this time a year ago.
  • While clearance rates are improving, there’s no sign yet that home prices are close to bottoming.

Australian auction clearance rates continued to improve last week despite a large increase in the number of properties going under the hammer.

However, that was not enough to prevent further steep declines in Australian capital city home prices over the same period.

According to CoreLogic, Australia’s combined capitals preliminary clearance rate rose to 55.2% last week, up marginally from the initial estimate of 54.1% reported seven days earlier.

CoreLogic

According to the group, 1,444 auctions look place across the capital cities, up from 929 in the prior week. Of those, CoreLogic received results from 1,076, representing a reporting rate of 74.5%.

That too was an improvement on the prior week when just 67.5% of results were reported to CoreLogic for the preliminary estimate.

595 homes sold prior to, at, or after auction while 481 properties were passed in, including 85 that were withdrawn prior to going to market.

Preliminary clearance rates for houses stood at 55.5%, almost identical to the 55.3% level for units.

Despite the continued improvement in clearance rates from the record-lows struck late last year, last week’s preliminary estimate still remained well below the final reading of 66.1% recorded in the same corresponding week a year earlier. Back then, a far larger 1,992 homes also went under the hammer.

Given the tendency for preliminary estimates to be revised lower as late results come to hand, the final reading for the week — released on Thursday — is likely to be lower than the preliminary figure.

In the prior week, the preliminary reading was revised down to show a final clearance rate of 51.1%.

As seen in the chart above, it’s not unusual for nationwide clearance rates to improve at this time of the year given auction volumes are typically well below the levels seen in spring and autumn. With volumes this year even lower than usual, it may explain why the size of the improvement had been so large so far in 2019.

Showing why the recent bounce in clearance rates can’t yet be regarded as a promising sign for a bottoming in home prices in the near-term, CoreLogic’s daily hedonic home value index continued to slide last week.

According to the group, median prices across Australia’s mainland state capitals fell by a weighted average of 0.25% last week, led by falls of 0.35% and 0.33% respectively in Melbourne and Sydney.

Prices also fell by 0.1% in Perth and were relatively unchanged in Adelaide and Brisbane.

Since the start of the month, prices in these cities have now fallen 0.6% in weighted terms, largely reflecting declines of 0.8%, 0.7% and 0.6% respectively in Melbourne, Sydney and Perth.

“Although clearance rates and activity remain low, the early flow of auction data for 2019 is showing a subtle bounce back in the clearance rate relative to the lows recorded through December last year which is a seasonal trend similar to what has been seen over previous years,” CoreLogic said in early February.

“Comparing results to one year ago, volumes and clearance rates are significantly lower than what were seen over the corresponding week last year.”

CoreLogic

By individual capital city, preliminary clearance rates in Melbourne and Sydney were both higher last week than in the first weekend in February, lifting to 54.2% and 61% respectively from 53.7% and 59.2% seven days earlier.

“Melbourne was host to 657 auctions this week with preliminary results showing a clearance rate of 54.2%, increasing from last week when the final clearance rate was recorded at 52.4% across 350 auctions,” CoreLogic said.

“Over the same week last year, the auction clearance rate was significantly higher with 69.8% of the 932 auctions returning a successful result.”

Identical patterns were also seen in Sydney over the same period, CoreLogic said.

“There were 521 auctions held in Sydney this week with preliminary results showing a 61.0% clearance rate, up from 54.0% across 322 auctions last week.

“Over the same week last year 737 homes were taken to auction across the city returning a clearance rate of 67.8%.”

So clearance rates rose in both cities compared to a week earlier, although they still remain well below the levels seen during this period in 2018 in terms of volumes and success rates.

The reduction in volumes over the past year reflects weaker market conditions, one factor that has also led to some vendors preferring to sell via private treaty rather than at auction.

Along with the possibility of more realistic price expectations being set by vendors, this may have contributed to the improvement in clearance rates in both cities since the beginning of the year.

Across the smaller capitals, preliminary clearance rates improved in Adelaide and Canberra from a week earlier but softened in Brisbane and Perth.

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