Short Supply Still Propping Up Clearance Rates

Date: 28/07/2016

Results for week ending July 24

Auction volume slipped further this week across the combined capital cities, down from 1,391 last week to 1,295 this week. Stock levels are now 40 percent lower than they were over the same weekend last year. This short supply kept the nationwide preliminary clearance rate buoyed above 70 percent for a third consecutive week.

The Stats

Sydney pulled back out in front with 75.3 percent of 448 auctions clearing successfully. It’s now been nearly three months since Sydney has seen a clearance rate in the 60s. Last week’s final result was 74.9 percent across 470 auctions.

Melbourne continued its run in the 70s for a fourth consecutive week, with a preliminary clearance rate of 72.4 percent. The city hosted 569 auctions, down from 709 the previous week.

Adelaide bounced back after last week’s mediocre result. Sellers there found successful bidders across 71.8 percent of 68 auctions.

The Graph

The Preliminary Numbers

	Sydney	Melbourne	Brisbane	Adelaide	Perth	Tasmania	Canberra
Clearance Rate	75.3%	72.4%	53.2%	71.8%	42.9%	50.0%	68.2%
Auctions	448	569	135	68	16	2	44

The Analysis

We continue to see enough buying activity relative to supply to keep prices moving up slightly. According to CoreLogic’s home value index, prices rose 0.2 percent this week in Melbourne and Sydney. Even Perth, which is down 3.5 percent on the year, managed to notch up the largest weekly increase of all capital cities at 0.5 percent.

What can we expect for the spring? Prepare to see more of the same short supply. Agents are already reporting that there is very little to come in the pipeline compared to the typical spring selling season.

What It Means For Investors

Conditions are ripe for ever-so-moderate growth in home prices as buyers will likely continue to outpace sellers in the near term. If the RBA cuts the cash rate next week, regardless of whether banks pass on the cut, the psychology of home buyers should remain optimistic.

However, beware of the growing supply glut of units in our largest capital cities. Uncertainties also remain overseas as Europe, China and Japan seek to stimulate their stalling economies.

Speaking of stalling economies, the June quarter consumer price inflation (CPI) report came out this week and our pace of growth is not looking good. The data from the March quarter was shockingly low, and became the catalyst for the RBA’s May rate cut to 1.75 percent.

Cash rate futures are currently pricing the odds of a 25 basis point rate cut next Tuesday at about 50 percent. Since we’re already at all-time lows, I don’t expect property investors to care much one way or the other.

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.