ANZAC Holiday No Match For Buyers

Results for week ending April 24.

The combined capital city clearance rate strengthened again this week, rising several points to 70 percent. Sales volume was down slightly this week due to the ANZAC long weekend, and robust demand in Sydney provided a boost to the nationwide result.

The Stats

The Sydney market appeared strongest this week, as preliminary reports show buyers snapped up 78.4 percent of homes brought to auction, up from 69.8 percent last week. This represents a significant spike in demand, since sales volume rose considerably from 477 auctions last week to 626 this week.

Melbourne’s clearance rate remained on par with last week’s, although sales volume was down significantly, indicating a drop in demand. The clearance rate was 71 percent, down slightly from 71.5 percent the previous week. Only 595 homes were brought to auction this week, after 889 being on offer the previous week.

Brisbane and Adelaide both reported weaker results than previous weeks.

The Graph

The Numbers

The Analysis

Holiday long weekends are notorious for producing volatile results, so Sydney’s strength isn’t necessarily indicative of a new trend. That said, according to CoreLogic RP Data, prices in Sydney have risen by 2.5 percent over the last month. Buyers are proving themselves resilient in Australia’s most expensive city.

Melbourne is expected to host over 1200 auctions over the upcoming weekend, and Sydney sellers will present over 750 properties at auction. With supply increasing, next week will be an important test of demand in our two largest capital cities.

What It Means For Investors

Victorian sellers got some bad news last week as the state’s Treasurer announced an increase in the foreign property buyer tax from 3 percent to 7 percent, from 1 July 2016. Together with stamp duty, overseas investors will soon be paying well over 10 percent of the purchase price to the government.

This will of course redirect foreign investor demand away from Melbourne to other capital cities, likely Sydney and Brisbane. Considering the glut of new apartments in the already peaking property market of Victoria, it’s hard to imagine a scenario where prices aren’t impacted.

According to a recent building industry report, by June 2017, Sydney will be the only capital city in Australia without an oversupply. As long as interest rates remain low, the banks continue lending, the Coalition stays in power and New South Wales remains accommodating to foreign investors, Sydney property seems likely to simmer away. That’s a lot of variables though.

For the historical data of weekly auction clearance rates, click here.

By Jason Staggers

Jason was a personal mentor working with Steve McKnight's Property Apprentices. He helped hundreds of investors apply Steve's teachings in the real world and achieve greater results on their journey to financial freedom. Jason now lives in Perth, WA where he leads Neuma Church.