Hey Supply, Wait Up

Results for week ending October 18

Damn you Westpac.

Or was it those pesky negative analyst predictions from last week?

Maybe it’s simply that some sanity is being restored to our capital city property markets.

Whatever the case, if you’ve been holding out to sell your Sydney or Melbourne home, you may be about three months too late. The recent preliminary auction figures reveal that demand is now struggling to keep pace with the spring surge in supply.

The Stat

The nationwide clearance rate came in at 69.3 percent, on a total of 2,817 homes taken to auction. Both Sydney and Melbourne posted their lowest clearance results of the year. In fact, as we await the final tally from the weekend, some are suggesting Sydney just broke through a three year low.

The New South Wales capital offered up an ominous 66.6 percent, on auction volume of 1,074. Melbourne remained in the lead, both in supply and demand, albeit with a moderately shorter stride from the previous weeks. The early figures suggest that 73.6 percent of 1,193 total auctions cleared in the Victorian capital.

The Graph

The Numbers

The Analysis

While Melbourne investors may find reason to remain optimistic, Sydneysiders must face the harsh reality that a clearance rate deep in the 60’s authoritatively indicates a softening market. No surprise there for our readers.

That said there are still buyers out there willing to go big. The prize for highest priced property for the weekend is shared by these two homes on the North Shore of Sydney, both selling at $4.255 million. Second place goes to this four-bedroom home in the Melbourne suburb of Brighton. It sold at auction for $3.9 million.

What It Means For Investors

Don’t be surprised if both buyer and seller confidence continues to wane. The weaker Sydney auction results may fuel a negative feedback loop in the collective psyche.

But the big question on many investors’ minds is how soon will demand catch up with supply. Will the market level off and consolidate, or will prices drop significantly?

It’s a fair question. Fifteen percent corrections in Melbourne and Sydney would only take us back to 2014 levels. A catastrophic 35 percent bust would be like going back in time a whopping two years.

Remember back then, when those greedy first homebuyers were whinging about getting priced out of the market?

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.