No Love In This Elevator

Date: 24/11/2015

Results for week ending November 22

With record supply on offer, demand in our two largest cities has tumbled. Melbourne just recorded its lowest clearance rate in over two years, and Sydney has now tallied three consecutive weeks below 60 percent.

The Stats

Melbourne’s clearance rate fell sharply, down five points since last week, on strong supply of 1,477 auctions. Only 64.7 percent of homes taken to auction were successful.

Sydney has fallen to yet another three-year low. RP Data’s preliminary rate for Sydney was a meagre 59.3 percent, even on considerably weaker supply than the previous week. Domain’s initial report was even gloomier, showing that only 57.5 percent of auctions found a buyer.

Our other capital cities are also feeling the pinch of higher interest rates. Brisbane only cleared 43.6 percent of auctions, chalking up a third week in a row deep in the 40s.

The Graph

The Numbers

	Sydney	Melbourne	Brisbane	Adelaide	Perth	Tasmania	Canberra
Clearance Rate	59.3%	64.7%	43.6%	66.7%	36.4%	20.0%	63.6%
Auctions	1,080	1,477	226	141	39	5	111

The Analysis

With more and more properties being passed in, a downward trend in demand is now well and truly established. The only question is how far down this elevator will go.

While many investors believe population growth will continue to prop up house prices, the smart money will be watching the lending market. Homebuyers must have a steady supply of cheap credit if property values are to remain elevated.

Much will therefore depend on the RBA’s next move, and any subsequent balancing act from APRA.

What It Means For Investors

With buyers heading for the hills, the immediate future looks rather gloomy for sellers and speculators with open positions. As I reported several weeks ago, we’ve historically seen prices begin to fall when clearance rates hit the 40s in Sydney, and the 50s in Melbourne.

Which floor will you be getting off on?

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.