- New South Wales and Western Australia lifted their prohibition on live property auctions and inspections over the weekend.
- It saw Sydney’s auction clearance rate jump to 65%, from around 50% the weekend prior, and in the 30s before that.
- However, with a little over 100 properties going to auction in Sydney, properties typically advertised for four weeks prior, and ongoing economic uncertainty, the outlook is anything but clear.
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Starved of so many other recreational pursuits, Sydneysiders jumped at the chance to return to auctions over the weekend.
The decision by the New South Wales government to lift a 6-week prohibition on live auctions and inspections appears to have helped stabilise a run of paltry auction sales.
According to preliminary figures, around 68% of properties sold at auction over the weekend with the expectation it will be finalised at 65% – well up from a slew of near-record low figures and even the more respectable 50% clearance rate recorded on the previous weekend.
“The clearance rate has bounced back to levels we were seeing prior to the bans, with the weekend being the highest since mid-March,” Domain senior research analyst Nicola Powell told Business Insider Australia.
The results, Powell says, reflect improving sentiment as Australians “see the light at the end of the tunnel” as restrictions of all stripes begin to be lifted.
“I think that low stock has probably helped to drive up that clearance rate at the weekend but it will help to drive a bit of confidence within the market and it should help to encourage more vendors to use their homes,” she said. “It looks like we’re now starting to see those auction volumes rise in the coming weeks.”
Given just 143 Sydney properties went to sale, the market has certainly seen better days. Before the coronavirus clouded forecasts, Sydney auctions clearance rates were hovering around 80% with 700 plus properties routinely going under the hammer.
Since then, a lack of market and economic confidence has seen homeowners largely withdraw from the market, effectively turning what had been a hot market onto its head.
“One of the things that we still saw this weekend was quite a lot of these properties actually sold prior to auction day, which has been a trend during this auction banned period – about 36% of auctions. But the biggest difference that we’ve seen is a much lower level of withdrawals,” Powell said, noting many sellers had opted for private treaty instead.
It certainly had plenty of room to fall, with the below chart demonstrating just how sharply withdrawals had spiked.
Given the influence of sentiment on the market, Powell believes this fall in withdrawals and the weekend’s stronger performance may help provide some stability.
“When COVID-19 appeared, we really were in uncharted waters which really did unnerve buyers and sellers and understandably given something like this had never happened before,” she said.
“Australia’s response was so quick and so strong that it surpassed everyone’s expectation and I think it’s helped drive optimism back into the market now,” Powell said, noting the utility of the JobKeeper package and mortgage freezes.
Meanwhile in Melbourne, where property prohibitions are still ongoing, there’s some way to go. Less than half of the 115 properties that went to online auction in the city managed to attract a final buyer.
Powell believes a possible Victorian relaxation could provide anther floor to the market, expecting clearance rates to hold firm as volumes begin to lift.
All that being said, Australian property is hardly out of the woods just yet.
While the lack of properties on the market make it difficult to get a clear read on what the market is doing, expectations remain that large price declines are on the way. The Commonwealth Bank, for example, is forecasting 10% price falls this year, although this could change based on a variety of factors.
AMP Capital chief economist Shane Oliver notes the oncoming Australian recession means there’s still plenty of unknowns ahead.
“[A] decline in listings and [the] move to easing lockdown may help support prices but rise in unemployment and economic uncertainty will weigh,” he said in a tweet reflecting on the weekend’s results.
With Prime Minister Scott Morrison suggesting the JobKeeper could be scaled back before its six month mandate, with a review due in June, a possible wind back could send the market reeling again if it were to raise levels of distressed sales.
“Our objective is, is to grow the economy and get people back into jobs, and we’re making sure that people are being supported by the economy, and not the taxpayer, as quickly as possible,” he told media on Friday. “It’s not envisaged – [and] never was – to be a longer-term arrangement.”
While the weekend’s results may appear to offer light at the end of the tunnel, it isn’t over the hump quite yet.