Auction clearance rate across Australia edged higher last week, according to preliminary figures released by CoreLogic over the weekend.
And, mirroring the recent recovery, prices continued to push higher led by another 1% plus surge in Melbourne.
Nationally, 72.4% of properties taken to auction sold during the week, led by strong performances from the Melbourne, Adelaide, Sydney and Canberra markets.
The result was slightly higher than the 70.7% preliminary figure of the prior week, something that was subsequently revised down to 68.4% when final results were reported by the group last Thursday.
“The final clearance rate has nudged slightly higher over the last two weeks after reaching a year-to-date low of 66.5%,” said CoreLogic, adding that “it will be interesting to see if this is still the case on Thursday when the final figures are released”.
Melbourne, at 77.4%, retained the title as the strongest auction market of all capitals during the week.
“The strongest clearance rate was recorded across the Outer East, with 90.9% of the 55 reported auctions clearing, followed by the South East region with a clearance rate of 86.2%, CoreLogic said.
Adelaide, Sydney and Canberra also registered clearance rates in excess of 70%, continuing the trend of Australia’s southeastern capitals outperforming other parts of the country.
Based on past relationships, a national clearance rate of around 70% has typically coincided with a national increase in house prices of around 10% per annum, according to research from UBS.
As shown in the table below from CoreLogic, prices nationally increased by 11.2% in weighted terms over the past year, led by an enormous 16.8% surge in Melbourne.
Last week alone prices in Melbourne jumped by 1.4%, leaving the gain this year at 9.1%. Prices in Sydney, the second-hottest auction market in recent months, rose by 0.7% for the week, leaving them up 7.6% year-to-date.
While current clearance rates point to still-brisk house price growth across Australia’s capitals, Scott Haslem, George Tharenou and Jim Xu, economists at UBS, believe that price growth will slow further over the remainder of 2017 and again in 2018.
Amid weaker sentiment towards housing and a sharp deterioration of housing affordability, we still see further slowing to 7% year-on-year by the end of 2017, the trio wrote in a note released late last week.
“We then expect only 0-3% growth in 2018, as the lagged impact of higher interest rates and tighter macroprudential policy more noticeably weaken demand ahead.”
This chart from UBS reveals how auction clearance rates act as a lead indicator for annual growth in house prices.