It’s Autumn, But Demand For Housing Remains Hot

Auction Results for week ending March 5, 2017.

There’s still no slowdown in sight for our two largest capital cities. The preliminary combined clearance rate remained high at 77.8 percent across 2,714 auctions. This represents a slight decline in demand from last week, when 78.4 percent of auctions were successful. Supply also fell from last week’s record high volume of 3,301 auctions.

The City Stats

Neither rain nor Mardi Gras could keep buyers away, as Sydney posted its fourth straight week in the 80’s. The preliminary clearance rate jumped slightly to 80.5 percent from a final reading of 80.0 percent last week. The number of homes taken to auction fell significantly from 1,210 last week to 866 this week. This time last year, demand was dramatically lower, when vendors only managed to clear 68.7 percent of their 708 auctions.

Melbourne also had a strong weekend, with preliminary reports showing that of the 1,399 total auctions held, 80.4 percent attracted a winning bidder. This is down slightly from last week’s result of 81.0 percent across 1,635 auctions. Over the same weekend last year, the clearance rate was 72.1 percent, with 1,236 homes presented at auction.

Brisbane nearly cleared 60 percent, posting a preliminary success rate of 59.8 percent.

The Graph

The Preliminary Numbers

The Analysis

Although the clearance rate was only slightly lower, the drop in volume shows that the number of homes that sold this week fell significantly. In Sydney, there were 281 fewer sales, and in Melbourne, the number of sales at auction declined by 149. Fewer sales tends to always accompany lower volume, but the fact that there were fewer buyers out shopping this weekend reveals that demand was not as robust compared to the previous week.

Expect a sharp decline in volume in Melbourne to around 350 homes, as Victoria enters the Labour Day long weekend. Buyers there will also no doubt be distracted. In Sydney, auction volume is expected to fall to around the 750 mark.

What It Means For Investors

Until borrowing costs rise, or policy makers finally decide to discourage property investment, we should not be surprised to see home values in Sydney and Melbourne continue to rise. Brisbane can likewise expect some ripple-effect growth, as investors seek out less expensive properties.

Speaking of borrowing costs, the RBA met today and, as expected, decided to keep the cash rate on hold at a record low 1.5 percent. Sure, inflation is low and the economy could really use a boost, but even more credit flowing into housing is the last thing the RBA wants.

So, let the easy-money party continue, but keep an eye out for rising borrowing costs, nonetheless. Lenders already seem to be preparing themselves for tougher capital controls and rising interest rates overseas.

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The results listed here are based on preliminary reporting by CoreLogic. The final results will be reported in next week’s post.

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.