Hold On To Your Hats This Ride Is Getting Crazy
Results for week ending 22 March
Auction clearance rates for Sydney and Melbourne continue to soar keeping results at six year highs. Perth failed to reach any height with a national low clearance rate of 17%.
The Stat
Auction clearance rates report the number of properties sold compared to the number of properties offered up for auction. A figure of 80% and above indicates a strong performance. The real estate industry aims for 70%.
The Graph
The Numbers
The Analysis
Auction clearance rates remain at record highs with Sydney experiencing its fifth consecutive weekly result above 80%. Such strong demand is seeing top dollar being paid for homes across the city. Even this derelict house sold for a cool quarter of a million dollars above reserve!
Melbourne continues its hot run with a weekend result of 78%. The rest of the country remains solid with a notable exception in Perth where a paltry 17% of homes were cleared at auction.
What it means for investors
If you’re in Sydney and Melbourne you could be forgiven for closing your eyes and feeling the adrenaline flowing through your veins. Senior economist for the Domain Group, Andrew Wilson, is certainly feeling this thrill. Dr. Wilson openly wondered if there were any gears left to speed up the ride. With the ongoing low level of interest rates he noted that the psychology of home buyers was being affected. Wilson said “buying decisions are now being brought forward, particularly in the mid-range and upper price range changeover buyers.”
Gains in affordability for first home buyers are now being eroded by price hikes from this ongoing activity. Investors buying into a hot market also need to assess the value of their investment wisely.
As a final thought the good news for the housing market is that it follows on from last week. ie. the market fundamentals remain strong. Clearance rates continued at a six year high even with a 20% increase in supply to the market.
Comments
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I guess the only question remaining is will this thrill ride level off, or are we about to feel the “exhilaration” of another dip.
I think there’s a few points to be made. Cash rates are at record lows and corners of the housing market are going along for the ride. I think this accounts for most of the action. Seasonally too we are at the point where market activity is at it’s strongest for the year. So I think there is going to be a strong performance up to the winter ‘hiatus’. On the other hand general economic conditions are a bit shaky at the moment. If you look at the easing in GDP, the upward trend in unemployment, dropping inflation, weakening in commodity prices, dropping business and consumer confidence … there’s reasons not to get too carried for the longer term. My best guess is that things will remain elevated whilst interest rates are low and economic conditions don’t deteriorate too much further. So I don’t think we’ll see the exhilaration of a serous dip in activity just yet. But hey, famous last words!
I found this to be interesting reading in regards to our current market run… http://drbenway.blogspot.com.au/2015/02/property-valuation-and-bubble-economy.html
Hi firefly, thanks for your comment.
Is the market distorted by various government interventions? Yes. In many ways it probably reduces volatility – at least that’s one part of the theory. But I also think there are measures which limit market growth too (eg. stamp duties, regulatory limitations on credit).
It’s certainly a good discussion point and one that has been raging on here since at least 2006. https://www.propertyinvesting.com/topic/4385726-property-bust-not-here-yet-worse-to-come/ Bonus points to anyone who reads all 57 pages of this famous forum topic!
Sincerely
Andrew