RBA Throws Log On The Fire
Results for week ending May 10
Sydney clearance rates remained at record high levels at 88.7%. Melbourne continued its strong performance. Canberra dropped off from last week’s high result.
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
Auction Clearance Rates | ||
| Week Ending 10/05/15 | Clearance Rate | Auctions |
Sydney | 88.7% | 924 |
Melbourne | 77.5% | 1064 |
Brisbane | 55.5% | 176 |
Adelaide | 63.9% | 92 |
Perth | 26.3% | 42 |
Tasmania | 42.9% | 11 |
Canberra | 63.0% | 76 |
Source – Corelogic RPData | ||
The Analysis
Sydney continued this weekend with record high auction clearance rates at 88.7%. It is no surprise then that the median auction price for houses in Sydney was $1.25 million. Melbourne also continued its strong performance at 77.5% with $679 million worth of property up for auction over the weekend.
Strong results in Sydney and Melbourne were underpinned by our low interest rate environment. However, Andrew Wilson of the Domain group argued that the Reserve Bank’s last cut wasn’t its most important in terms of “the psyche of buyers”.
The rest of the nation remained stable with their performance. However, Canberra did come down from its high result last weekend and was more in line with previous results.
What It Means For Investors
As canvassed last week the Reserve Bank did put another log on the property fire. This will do nothing to slow down the already hot Sydney and Melbourne markets. I have previously argued for a ‘winter hibernation’ of sorts but there are voices around arguing that any ‘hibernation’ may be less prone to happen this year. Auction volumes for the upcoming week have dropped by 15-20%. So it is definitely one to watch.
The proverbial ‘log on the fire’ may also give some of the other states a boost. Tasmania is one such place where things are starting to happen. Whilst not big players in the auction game Tasmania is showing improvement. Better economic fundamentals, and growing interest from mainland investors, has seen a strong increase in sales activity in both Hobart (+20%) and Launceston (+25%) from 12 months ago.
Comments
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….and yet supposedly its the “overseas buyers” that are causing the price rises…..
Here’s a recent take on the ‘overseas buyers’ role in the market based on a recent government inquiry into housing affordability. http://www.news.com.au/finance/real-estate/housing-affordability-are-foreign-investors-to-blame-for-australias-high-property-prices/story-fndban6l-1227154627010
I reckon it’s both. Interesting statistic I just read on the USA market pre-GFC… In 2005 and 2006, only 60% of buyers were owner-occupiers. 28% were investment purchases and 12% were holiday homes. Sound familiar?
Will we see a repeat of 2002 to 04 ? It seemed to me that investors had been buying in Syd and Mel until IP’s got too expensive – then they all descended on Brisbane and doubled its values within 2 years.
By the way, for any who believe “The investors are stopping our kids from buying homes!” let me just say that the years leading up to 2000 had rents being FAR more costly than buying a house. That part of the cycle is an ideal time for renters to buy their own home.
And those kinds of numbers are obviously why investors DID descend on Brisbane, buying up everything not nailed down…. i.e. Investors buying are a “lag” signal, aren’t they??? :p
Are we getting there again? Seems to me this could be so. Of course, no two times in history are exactly the same, but similar?? Sure.
We are seeing rents higher than mortgages again (thanks to the historically low Interest Rates, but maybe also because many Home Buyers are nervous about buying – waiting until the prices start going up, or perhaps down – are they waiting for the “crash”?).
Wages don’t seem to have grown so much though, keeping many nervous about taking on high debt, even if “good debt”.
By the way, I don’t believe Brisbane’s prices will double in the next wee while. I don’t believe there is enough “heat” to have that happen.
Last time, we had lived through those 17% IR’s, and then the “Recession we had to have”. This stalled things right thru the early to mid 90’s until the market started to move in Sydney (97 or so wasn’t it?). Brisbane was starting to move in 99, and we were buying with 8% and 9% returns without even knowing what we were doing !! Home buyers could have (should have?) been buying then.
Of course, after 3 or 4 years, the high yields dropped as the prices grew. This made it a better time to keep renting (as per this article – https://www.propertyinvesting.com/buy-properties-in-australia/) as mortgages had climbed, likely forcing the new Home Buyers into rentals while they saved a deposit. Investors then would go looking for “better yields” and allow the property clock to tick on to the next hour, and the next …..
Values would then level out (and even drop), rents would slowly climb, wages would rise, and (at SOME point in the future) it would again become a GOOD time to buy.
Good heavens – it seems like a cycle of sorts !!! ;)
Is it 7pm in Brisbane?
Benny