- Sydney and Melbourne property markets had their strongest auction performance in more than a year, following a period of decling property prices and sluggish sales.
- The return of confidence has been credited to multiple factors including cheaper borrowing due to an interest rate cut, and the preservation of negative gearing and capital gains concessions following the federal election.
- Commentators say if strong auctions numbers continue, it may indicate that declines in Sydney and Melbourne markets have run their course.
Despite the winter chill setting in, auctions around the country again appear to be heating up.
After a prolonged period of decline in Sydney and Melbourne – which saw real prices fall 16.5% and 11.8% respectively from their recent peaks – both have enjoyed a boom in sales over the last week.
That flurry of buying helped lift the percentage of homes sold nationally to over 60% for the first time in over a year, according to data from property research firm, CoreLogic.
Preliminary figures show that 66.4% of properties sold at nearly 1500 auctions around the country.
That was boosted by a breakout week in the Sydney market where almost three out of four homes sold.
“The good news is that the 74.7 per cent clearance rate for Sydney is the strongest preliminary clearance rate since about July 2017,” CoreLogic commentator Kevin Brogan told Business Insider Australia.
For comparison, less than one in two cleared at the same time last year in Sydney according to CoreLogic’s data.
Meanwhile, auctions in Melbourne reported clearing 67.9% of its properties over the weekend, compared to 56.2% the year prior.
While yet to be finalised, AMP Capital chief economist Shane Oliver said in a tweet that he expected those figures from Sydney and Melbourne to firm up to around 66% and 62% respectively.
Prelim Domain auction clearances. Syd 71% (=final ~66%, last wks final 48%). Melb 65% (=final ~62%,last wks final 58%)
Volumes still low
But Syd’s estimated final of 66% is best in ~2yrs & Melb’s estimated final is best in ~15mths
Post election/rate cut bounce continuing#ausecon pic.twitter.com/XfwOPMIjej
— Shane Oliver (@ShaneOliverAMP) June 15, 2019
That would make this week the best in up to two years for Sydney and more than one year for Melbourne.
The results come after the Reserve Bank of Australia (RBA) cut the official interest rate to 1.25% in June and the big four banks – ANZ, Westpac, Commonwealth Bank, and NAB – announced they would pass on the cuts either partially or in full to their variable home loans.
It also followed house price rises in the week proceeding the federal election.
Brogan said that a “significant increase” in auction activity was to be expected after a Coalition government victory guaranteed favourable housing market policies.
“The election saw a return of confidence in the market and that had to with the continuation of negative gearing and capital gains tax concessions for investors.”
Clearance rates are generally considered a key indicator of how markets are faring, but last week’s figures need to be taken with a grain of salt.
That’s because the number of houses on the market remains low. That’s as much a result of a subdued property market as it is to the typically slower winter period.
Compared to the same time last year, there were 267 fewer auctions in Melbourne and 186 less in Sydney this week.
“The hope is this will be the bottom of the market but we may have to wait until Spring when a lot of new properties hit to market until we know,” Brogan said.
Aside from Canberra, which also enjoyed a surge of sales activity, the auctions results elsewhere remained much more subdued.