Competition Heats Up As Supply Falls

Results for week ending May 15

The combined capital city clearance rate improved this week, but total auction volume fell nationwide by nearly 400 homes, or 18 percent. The preliminary results show 68.9 percent of 1,824 auctions clearing successfully.

The Stats

Sydney posted the strongest numbers again this week. Bidders met reserve on 75.6 percent of auctions, an improvement of about 4 basis points from last week. A total of 614 homes were auctioned, down from 676 homes the week before.

Melbourne continues to have the most active market, although volume fell for a second week to 859 homes, down from 1,150 the previous week. Early reports suggest 70.6 percent of sellers found buyers, down from last week’s result of 73.2 percent.

The Graph

The Numbers

The Analysis

Leading into the election blitz, the stars seem to be aligning for continued property growth, as lower interest rates, fewer sellers and the fear of negative gearing changes spur competition amongst buyers.

After the RBA cut interest rates to 1.75 percent earlier this month, one bank economist tipped the cash rate to fall to 1.25 percent by year-end. An outlook for low borrowing costs is bullish for home prices, unless bank regulators step in to curb homebuyer and investor appetite.

Investor activity is certainly experiencing something of a comeback with the ABS recording an increase of 30 percent in residential investor borrowing during the month of March. This is the most active month for investors since the market peak of September 2015.

As is normal leading into the winter months, auction volume is diminishing. If the number of buyers increases when the number of sellers decreases, prices should rise.

What It Means For Investors

The wildcard here is the election. If Labor is elected and follows through on its housing policy, then there will be a substantial change to the rules and expectations of how people invest in property.

Given the election is only six weeks away, is the upside of making a decision today worth the downside of buying something you later regret? As Steve McKnight often says, “Make good choices.”

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.