Beware the Election Weekend Anomaly

Results for week ending July 3

We may not yet have a clear election winner, but there were few losers in the property market over the weekend.

The auction clearance rate across the combined capital cities was back up above 70 percent, thanks to a fall in supply. Only 811 homes were brought to auction nationwide, giving determined buyers much less choice.

The Stats

Sydney remained the strongest performer with its first reading in the 80s since the peak of the market last August. Preliminary results show that 80.4 percent of vendors were successful and only 341 properties were auctioned. Last week’s final clearance rate was 73.5 percent.

Melbourne climbed back up to 71.6 percent on weak supply. Only 268 properties were brought to auction, down from 1,029 the previous week, when the clearance rate was 67.3 percent.

Adelaide also posted a strong result, with only a moderate decrease in the numbers of homes auctioned. Sellers in the South Australian capital were successful on 74.2 percent of auctions. Supply dropped from 90 last week to 69 this week.

The Graph

The Preliminary Numbers

The Analysis

While Sydney and Melbourne seem to be heating up in the wake of a low interest rate outlook, this week’s strong numbers are somewhat of an anomaly. Very few auctions were scheduled thanks to both the Federal Election and the school holidays.

Next week’s auction volume will be back up to 489 in Sydney and 582 in Melbourne. Although it’s an improvement from this week, this level of supply will only be about half of what we’ve seen in previous weeks.

Listings will likely not begin to increase significantly again until August. If demand proves resilient through July, clearance rates should look unusually strong.

What It Means For Investors

While the impact of Brexit upon our property market is yet to be seen, it’s hard to imagine anything other than buoyant prices as long as the RBA continues to suppress interest rates. In light of the uncertainty in Europe and Canberra, economists expect the cash rate to remain on hold this afternoon, but to be cut further at the August meeting, and perhaps again in September. That would put us at 1.25 percent coming into the Spring selling season.

There are, however, other factors that can cause interest rates to rise independent of the RBA, like ineffective politicians causing a loss of Australia’s AAA credit rating. While a few ratings agencies have said we’re not under immediate threat, they assure us we will be if our government keeps spending more than it takes in.

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.