A Not-So-Cold Winter for Real Estate
Results for week ending June 5
Winter isn’t coming. It’s here! But in the world of real estate things are still peachy-warm.
Buying activity remained strong over the weekend, with the preliminary combined capital city clearance rate pushed higher to 70.4 percent, up from last week’s final reading of 67.7 percent.
Supply is contracting as expected with the arrival of winter. Sales volume declined just over 21 percent from last week with 1,953 sellers auctioning their homes.
The Stats
Despite the horrid weather, Sydney’s run as the dominant auction capital continued for a fifth straight week. The preliminary clearance rate jumped to 76.7 percent, up from last week’s final result of 73.2 percent. There were however a noticeable less number of homes available at auction – 811 last week compared to 654 this week.
In Melbourne, where the weather was also gloomy, the clearance rate remained above 70 for an eighth straight week. A solid 959 homes were taken to auction, and 71.4 percent found successful bidders. Last week 71.5 percent of 1,170 auctions cleared.
The Graph
The Preliminary Numbers
Sydney | Melbourne | Brisbane | Adelaide | Perth | Tasmania | Canberra | |
Clearance Rate | 76.7% | 71.4% | 55.4% | 67.2% | 30.0% | 50% | 46.8% |
Auctions | 654 | 959 | 129 | 98 | 10 | 8 | 77 |
The Analysis
This Saturday’s auction volume will be low in light of the Queen’s Birthday long weekend. Only about 700 auctions are scheduled for Melbourne and Sydney combined.
Historically, sales volume dips as we move deeper into winter. This year however, low interest rates are pulling forward demand, which may also have the effect of pulling forward supply. We could see a relatively active winter for the property market.
What It Means For Investors
In broader news, the RBA left the cash rate on hold today at a record low 1.75 percent. In light of Australia’s meager inflation outlook, another cut remains likely, perhaps by August. Some economists are even forecasting a cash rate as low as 1 percent by sometime next year.
What will cheaper credit mean for real estate prices? Lower mortgage rates pull forward home buyer demand, putting upward pressure on home prices. But there’s only so much demand out there to pull forward. Eventually, incomes will need to rise or property prices will level off at best.
How much higher can home prices go before the “level-off point?” That is the million-dollar question. One thing’s for sure: betting against a central bank in favour of market fundamentals can be a dangerous game.
For the historical data of weekly auction clearance rates, click here.
Comments
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Why am I receiving emails from other credible sources stating that the clearance rates in Melbourne are in the 60s over the last few weeks?
Who are your credible sources?
We reference RP Data’s results (http://blog.corelogic.com.au/category/auction-results/), which I believe are more reliable than Domain, which seems to report consistently rosier figures.
The truth is, the collection of this data is somewhat subjective as RP Data and Domain rely on agent reporting. Also bear in mind that the preliminary results are based on initial reporting and could change slightly by the end of the week.
It’s best to pick one reporting agency and follow it consistently. Treat it as a rough guide of supply/demand, mainly in the Sydney and Melbourne markets. The other capital cities are less indicative as a much smaller percentage of their listings are sold at auction.
Thx Jason. Just going off the realestate.com.au weekly emails. Melbourne has been in the 60s for a few weeks now.