Auction clearance rates in Sydney – a property market widely assumed to be cooling following increases in investor loan rates imposed by banks last year – have been gathering steam again.
Last weekend the clearance rate in the city rose to 78.6%.
Nationally, the clearance rate was 72.3%, according to CoreLogic RP Data. This was up from 70.1% the previous week and almost in line with the national clearance rate of 74% this time a year ago, just a few months before intervention from the banking regulator APRA led to major banks tightening lending restrictions and increasing their investor loan prices.
This chart from CoreLogic RP Data shows the startling rally in clearance rates in Sydney over recent weeks:
The clearance rate for some of the most expensive areas of Sydney played a big part in lifting up the average: North Sydney and Hornsby saw clearance rates of 92.5% on 68 auctions in total, while the eastern suburbs and the city and inner south saw clearance rates of 88.4% and 89.1%.
It’s not a dissimilar picture in Melbourne, where clearance rates have been rebuilding:
This is significant because, as Deutsche Bank noted last year, the clearance rates remain well above the levels at which prices tend to start falling in Melbourne and Sydney. Deutsche has noted that historically at least, prices only start falling year on year when clearance rates hit:
- 45% for Sydney, and
- 55% for Melbourne.
Sydney’s clearance rate flirted with that level during the holiday months but now appears to be regathering pace. Of course it will be seen in the coming weeks whether this is simply a bounce after the summer.
The huge east coast apartment building boom of recent years has led to an unprecedented level of supply of units in Australia’s major cities. Even the RBA has been concerned about a supply glut in the apartment market, and there have been signs that prices for units bought off the plan are actually falling in some places.
But at least in the auction market the demand from buyers looks to be holding up for now.