Easy Money Yet To Flow

Results for week ending May 8.

The combined capital city clearance rate slipped four basis points this week, dropping to 65.7 percent. Auction volume was also down across the country.

The Stats

Sydney sellers were the most successful over the weekend, with preliminary reports showing 72.6 percent of 647 auctions were successful. This appears to be an improvement from last week, when the final clearance rate was 71.7 percent of 818 auctions.

Melbourne was host to 1,135 auctions, half the volume of the entire country. Early numbers suggest 71.2 percent of sellers found buyers. That result is down a few basis points from the previous week, when 73.5 percent of 1,404 auctions cleared.

Brisbane experienced its busiest weekend in six weeks, as 192 homes were presented at auction. Buyers rose to the challenge, successfully bidding on 43.9 percent of them, a figure nearly on par with last week.

The Graph

The Numbers

The Analysis

In the highly efficient, auction-loving markets of Sydney and Melbourne, the clearance rate remains above 70 percent. Until it falls below that point, there’s reason to remain bullish on price growth.

CoreLogic RPData confirms this, revealing that prices have grown year to date 6.6 percent in Sydney and 4.3 percent in Melbourne. Even in Adelaide, where the clearance rate has averaged in the mid-60s, prices have increased 4.6 percent.

It’s still dark days in Perth, where prices have fallen around 2 percent on the year. Things may get worse as the number of available rental properties on the market has reached record levels. Let’s hope these investors don’t all decide to sell at the same time.

What It Means For Investors

Wait! The RBA just cut the cash rate. Shouldn’t the clearance rate have gone up this week?

Any new tide of buyers being drawn into real estate will likely need a little more time to form an opinion on what and where to buy. We may also see a little hesitance in light of both the RBA’s drastic move and the upcoming election.

Historically, lower borrowing costs have been the catalyst for rising property prices. This time though, a drop to record low rates when homes prices are already at record highs may have some wondering if the economy is in trouble.

Add to that the uncertainty brought on by an impending election, especially given the squabble over negative gearing, there’s no wonder the market is searching for direction.

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.