Don’t Call It a Comeback

Results for week ending February 21.

It’s been twenty years since LL Cool J made the phrase famous. It’s not hard to imagine Sydney auctioneers sipping on cocktails and gloating Saturday evening:

“Don’t call it a comeback. The Sydney property market has always been strong. We’ve known all summer there was plenty of growth yet to be seen.”

The Stats

According to recent auction clearance rate figures, the Sydney bulls may seem on the surface to be justified. The NSW capital charged ahead again this week with a result of 77.2 percent on 724 auctions. Although volume is still down considerably from the same time last year, seller momentum keeps building week-on-week.

Melbourne beat out Adelaide with a solid clearance rate of 73.0 percent on 1,057 auctions. With volume virtually the same as one year ago, and the clearance rate only down 1.4 percent year-on-year, Victorian buyers are flexing their muscles, showing that they remain quite keen.

Brisbane continued to plod along this weekend, with a clearance rate of 54.5 percent on 169 scheduled auctions.

The Graph

The Numbers

The Analysis

In light of the last few weeks of stellar auction clearance rate figures, Sydney agents will no doubt be appealing to investors to jump on board the next wave of growth. While it may appear to some that the Sydney market could be staging a rally, it may not be wise to “call it a comeback” just yet.

While auction volume is trending up, it remains quite low in Sydney, so it’s too early to tell if another boom is on the way. March 19 will be another “Super Saturday,” a date toward which many agents will be drumming up both supply and demand. The fundamental strength of the residential property market should become much clearer by that time.

What It Means For Investors

Little has changed since last week when the recommendation was to “proceed with caution.” If you’re looking to buy soon for capital growth, be mindful that more market analysts seem to be turning bearish.

In its latest Property Insights report, the CBA expects 2016 to be a “volatile” year in real estate.

The investment firm Performance Property Advisory highlighted discouraging affordability trends and issued a “sell” rating for Melbourne and Sydney. It’s their conviction that “the market has moved past sound fundamentals.”

Time will tell.

Until then, you may want to have a read of my recent article, “How to Invest in Uncertain Times.”

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.