Australian auction clearance rates and house prices weakened last week, adding to evidence that conditions across the broader housing market are cooling.
According to data released by CoreLogic on Monday, a preliminary capital city auction clearance rate of 71.8% was achieved last week, continuing to subside from the levels regularly reported earlier in the year.
While above the 69.8% final clearance rate reported in the prior week, the preliminary figure has a tendency to be revised lower as tardy, often unsuccessful auctions, are reported the group. Indeed, CoreLogic reported a preliminary clearance rate of 73.9% for that previous week.
Given that trend, it suggests that last week’s final figure could also print below 70% when CoreLogic releases updated data on Thursday.
This table from CoreLogic shows how each individual capital city fared last week, comparing the result to final figures released for the same period one year ago.
According to the group, Melbourne recorded the highest preliminary figure at 77.1%. It was followed by Adelaide and Sydney at 73.9% and 71.3% respectively.
In the prior week, the final clearance rates for Sydney and Melbourne were both the lowest reported so far in 2017.
While largely a continuation of the theme seen earlier this year, there has been a noticeable softening in the data recently, particularly in the Sydney market.
Clouding the results somewhat, CoreLogic said that auction volumes were significantly lower due to the Queens Birthday holiday in most Australian states and territories on Monday.
“The number of auctions held this week saw a significant decrease, with 1,265 properties taken to market across the combined capital cities, down from 2,578 over the week prior,” it said.
“The decrease in auction activity this week is attributable to the Queen’s Birthday long weekend, which has affected activity across most states, including Australia’s two largest auction markets.”
While activity levels were significantly reduced, in stark contrast to what has been seen recently with auction numbers higher than usual for this time of year, one familiar trend remained unchanged — prices across most markets continued to decline, following on from the weakness reported in May.
CoreLogic said that prices in Sydney fell by 0.2% from a week earlier, taking the decline over the past four weeks to 0.8%. Prices also fell in Brisbane and Adelaide, but rose in Melbourne and Perth.
In weighted terms, that saw prices across Australia’s five mainland state capitals ease 0.1%, leaving the decline over the past month at 0.5%.
Over the past year prices across these capitals have risen by 9% in weighted terms, a far cry from the percentage gains in the high teens reported earlier this year.
Helping to explain why auction clearance rates and prices are now starting to cool, the ABS reported that the value of housing finance fell by 1.6% to $32.474 billion in April, led by a sharp 2.3% decline in the value of investor loans.
That followed out-of-cycle mortgage rate increases earlier this year, aimed predominantly at investors, along with the decision from Australia’s banking regulator, APRA, to limit interest-only lending to just 30% of total new lending at the end of March.
“We expect further slowing in the investor segment in coming months and broadly see the housing market as cooling from here,” said ANZ following the release of the housing finance report.
Given the early evidence at hand, it appears that’s already starting to happen.