Sydney’s property market, the largest in the country, has been receiving even more attention than usual in recent weeks. After an prolonged period of enormous house price growth, which has seen the median property in the city rise by 15.53% over the past 12 months to a mind boggling $938,440, there are increasing signs that the boom times are coming to an end.
Sentiment has softened substantially, as evident in recent surveys from Westpac and the NAB, while investor activity, one of the chief catalysts behind the recent surge in prices, is slowing following a raft of regulatory measures introduced by APRA, the banking regulator.
Now, after an unprecedented period of demand, auction clearance rates are starting to roll over, albeit from very elevated levels.
According to analysis conducted by CoreLogic RP Data, of the 1,024 properties auctioned in Sydney last weekend, only 61.3% sold at auction. This, as they note, was a far cry from the strength seen earlier in the year when the city recorded clearance rates of over 80% for 22 consecutive weeks.
Now, Sydney’s property market is about to receive a massive litmus test, perhaps the largest seen in the past two years.
This weekend there will be 1,450 auctions held across the city, the largest number since March and significantly higher than the 1,259 auctions held on the same weekend last year.
Many, whether vendors, buyers, homeowners or just those generally interested in whether or not it can continue to defy deteriorating fundamentals, will be watching the results closely.
Deutsche Bank noted this week that clearance rates of 60-70% are “hardly” a cause for concern, noting that actual falls in prices tend to be associated with clearance rates of around 45% in Sydney and 55% in Melbourne.
There is a lot of stock coming onto the market at a time when sentiment is weakening, right when prices are sitting at the highest level on record.
Given a combination of the three, the risk of a similar outcome to last weekend, or weaker, is building.