Buyers Come Up Trumps
Auction Results for week ending November 13.
Supply increased, but demand surged even more, as the combined capital city preliminary clearance rate shot up to 77.5 percent from last week’s final tally of 73.6 percent. Auction volume swelled from 2,517 last week to 2,843 this week.
Although supply has been trending upward, there still remains over 400 fewer sellers in the market than last year. Over the same weekend one year ago, 3,274 homes were presented at auction with a clearance rate of 62.3 percent.
The City Stats
Sydney is showing no signs of a slowdown leading into summer as preliminary reports show that 84.2 percent of 1,062 auctions cleared successfully. Last week, 1,087 homes were auctioned, with a clearance rate of 78.8 percent. Over the same weekend last year, 1,223 homes were auctioned, with only 58.0 percent finding winning bidders.
The number of Melbourne auctions jumped significantly, up from 927 last week to 1,313 this week. The clearance rate remained relatively steady, with preliminary feedback showing 77.2 percent successful, up slightly from last week’s final reading of 76.1 percent. Last year, 1,567 auctions were reported and 69.0 percent of those auctions resulted in buyers.
Canberra nearly dethroned Sydney this week with a preliminary clearance rate of 83.3 percent.
The Graph
The Preliminary Numbers
Sydney | Melbourne | Brisbane | Adelaide | Perth | Tasmania | Canberra | |
Clearance Rate | 84.2% | 77.2% | 53.5% | 68.3% | 43.8% | 44.4% | 83.3% |
Auctions | 1062 | 1313 | 191 | 129 | 42 | 9 | 97 |
The Analysis
Buyers continue to outnumber sellers in the Sydney and Melbourne markets. Home prices in our largest capital cities have achieved double-digit annual growth for two months in a row, thanks to a convergence of low interest rates and a limited supply of homes for sale.
Stock levels are expected to increase in the coming weeks as we reach the seasonal peak of the spring market. This will further test the strength of homebuyer demand leading into Christmas.
As you can see in the following chart from CoreLogic, the four-week average clearance rate (dark blue line) seems to have peaked and may now be trending down:
What It Means For Investors
The future of property prices in Australia ultimately comes down to the availability of cheap credit and the number of sellers in the market. If rates rise or if supply spikes, the party will end.
RBA Governor Philip Lowe has indicated his hesitance to ease further, however, let’s not forget, he’s at the mercy of the US dollar. The direction of the Greenback is a little less certain in light of the Trump wild card. Some believe the US President-Elect will be more prone to encourage the Fed to raise rates. Others believe he will continue the same easing bias as his predecessor.
All we know so far is that Trump hopes to decrease taxes for the rich, in order to spur capital investment and create jobs, while also increasing spending on defence and on infrastructure. Unless he and congress plan to cut costs elsewhere, that sounds like a widening budget deficit to me, which would equate to even more debt.
If that’s the path the Republicans choose to take, good luck to them raising rates. US interest payments already amount to 6 percent of revenue, and that’s with rates near zero. If the Fed keeps rates low, the US dollar should weaken, which may require another rate cut from the RBA to help our exporters.
Unless something crazy happens overseas, it’s hard for me to see Aussie property prices softening in the short-term.
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The results listed here are based on preliminary reporting by CoreLogic. The final results will be reported in next week’s post.
For the historical data of weekly auction clearance rates, click here.
Comments
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“All we know so far is that Trump hopes to decrease taxes for the rich, in order to spur capital investment and create jobs, while also increasing spending on defence and on infrastructure.”
Ever since I heard that (about 2 weeks ago) I wondered if it might in fact lead to the USA taking in more Tax than before? I don’t have numbers, but, let’s say that a big operation spends $millions on accountants to minimise their taxes. Could it be that if taxes are cut enough, that more companies would simply pay the lower tax rates and save on other areas – e.g. accounting staff.
In years past, I recall someone saying “If we all paid 2% Tax for every transaction we did, there would be no need for all the other duties, levies, etc. Is this workable? Could Trump be considering something in this vein?
Benny
I think that’s the hope, that as the corporate tax rate is cut, it will eventually increase company profits and leave more money in their coffers for capital investment and wages, eventually leading to economic growth and more tax revenue. It should also encourage companies to repatriate US dollars that are overseas in tax shelters. All the new job creation could also lead to additional tax revenue.
The big question is will it be enough to not only offset increases in spending but to also pay down debt. All of these ideas are easy to sell the American people. The tougher sell is reducing government spending. At the end of the day, unless the citizens of any nation take responsibility for their own economic prosperity, they have little hope of a bright economic future.