Auction volumes have remained high, but clearance rates have steadily declined in recent weeks, as pent up demand levelled out following the end of lockdowns in NSW and Victoria.
New CoreLogic data shows that across Australia’s combined capitals, 3,276 homes were taken to auction, the third busiest week of the year, as sellers continue to capitalise on the growth of property prices.
The median price for a house in Australia has reached almost $1 million, with the country hitting a record 21.9% annual price growth rate this year.
However, while auction volumes have remained high, clearance rates have declined steadily in recent weeks as NSW and Victoria moved out of lockdowns.
Australia’s capital cities recorded a preliminary clearance rate of 76.1%, down from a peak of 83.2% in the last week of October.
Since restrictions were lifted in Sydney on October 11, the city’s weekly auction volumes have increased by nearly 50%, the data showed.
CoreLogic’s data showed Sydney had its busiest auction week since March and its second-busiest of the year, with 1,228 homes going to auction.
Over the same period, clearance rates have steadily declined. “As pent up supply continues to flow to the market these metrics will likely continue to decline,” the report said.
In Melbourne 1,395 homes were taken to auction this week, down from 1,752 held in the previous week. The city recorded its lowest preliminary clearance rate since mid-September, with just 72% of auctions resulting in a sale.
Across smaller markets, Canberra recorded the highest preliminary clearance rate at 91.4%, followed by Adelaide and Brisbane at 85.8% and 84.7% respectively. Perth recorded a preliminary clearance rate of 50%.
Eliza Owen, head of research at CoreLogic, told Business Insider Australia the most recent outcomes reflected a subtle downshift from the frothy market conditions that have defined the past nine months.
It comes as a raft of factors diminish demand, including an ongoing return of investors to the market, constituting a growing proportion of demand coupled with a decline in the number of first home buyers — who are dropping out of the market as prices continue to climb.
The latest ABS data shows the value of new loans rose for the ninth consecutive quarter in July, with new investor loans now 121% higher than at their lowest point in June last year.
In contrast the data shows a 15% decline in first-home buyer activity over the three months to September.
The recent auction results reflect a start of easing conditions, Owen said.
“There’s definitely a few headwinds accumulating in terms of continued growth,” Owen said, pointing to increased levels of stock available as people come out of lockdown, affordability restraints reducing demand, at the same time as supply is beginning to pick up.
Owen said the introduction of slightly tougher credit rules by APRA, which increased the minimum interest rate buffer on home loan applications from 2.5% to 3% in October, was further limiting new entrants into the property market.
“All of these factors are taking a little bit of momentum out of the market,” Owen said.
With the clearance rate sitting above 75%, it is still a seller’s market, Owen said.
“But there’s no doubt week to week those auction clearance rates are showing a gradual decline in momentum.”
Owen said in the case of Sydney and Melbourne, emergence out of lockdown was impacting supply, with a surge of new stock coming onto the market.
There have been over 11,000 new properties advertised in Melbourne in the past four weeks; the highest of any capital city, she said.
“Across the combined capital cities we’re still going to be seeing prices growing,” Owen said, however a divergence between major capital cities like Sydney and Melbourne — where an increase in listings was slowing growth — and smaller capital cities where stock was still “very constrained” was now impacting prices.
“The growth rates are still holding up pretty strong and I’d expect that for these cities this will continue until the end of the year.”