The latest auction clearance rates data confirms what we already knew, the traditionally busy spring selling season is ending with a whimper as it falls to the lowest this year amid weak buyer demand. Of course, clearance rates are a poor proxy for property market health, but the low quality of many listed properties, combined with over aggressive pricing are part of the story.
Add in expectations of higher for longer interest rates with ANZ pushing out a rate cut to May 2025, “We are shifting our view on the start of the RBA’s easing cycle from February 2025 to May 2025. We now also only expect two 25 basis point rate cuts in total [down from three],” said ANZ Bank’s Adam Boyton on Friday.
In addition expected falls of say 5 per cent in house prices in Sydney and Melbourne next year are reinforcing the trend. Borrowing capacity is also continuing to be crimped.
Also, costs of living pressures are hitting home, with an article over the weekend covering a Red Bridge survey which said that more than one third of Australians have delayed medical treatment because of the costs of living crisis, while almost half have put off buying a home, car or other purchase. 28 per cent of those polled say economic conditions have caused them to put off having children, while 20 per cent say they have delayed their decision to get married.
As the AFR says, this week was a big test of demand, with more than 1000 auctions scheduled in Sydney and Melbourne, and over 2600 scheduled nationally. However, just 63.4 per cent of homes sold under the hammer, based on preliminary auction numbers tallied by CoreLogic, down from 65.3 per cent last week. This matched the result of the first week of November, which was the lowest early clearance rate of the year. Once all the results are collected, it is expected that the final clearance rate will be below 60 per cent for the seventh consecutive week. “The auction market ended the spring selling season with a whimper,” said CoreLogic research director Tim Lawless.
Domain preliminary results also mirror the decline in clearances, mirroring price falls in some markets especially in Melbourne and Sydney, and on Monday, CoreLogic will release its monthly Home Values Index, which will show further declines in house prices in both Cities.
The two leading indicators for housing prices – auction clearance rates and the amount of stock on market – suggested price drops in those cities would persist, SQM’s Louis Christopher said.
Bottom line is the property market is taking an early holiday, and 2025 looks pretty shaky especially in the major markets.
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