Super Saturday Auction Results “Defy Logic”
Auction results for week ending November 27
This weekend’s supply surge was no match for the plethora of buyers hoping to lock in a home purchase before the holidays. Despite auction volume hitting the second highest level for the year, with 3,367 properties going under the hammer across the combined capital cities, the clearance rate actually increased to 76.0 percent.
Last week’s final result was 74.4 percent on volume of 2,987 auctions. Over the same weekend last year, buyers closed 60.1 percent of 3,729 auctions.
The City Stats
Sydney’s preliminary result was back up above 80 percent this week. A total of 1,236 homes were auctioned with 81.9 percent finding buyers. Last week, the final clearance rate was 79.6 percent, across 1,082 auctions. One year ago, vendors brought 1,306 homes to auction with a clearance rate of 56.2 percent.
Melbourne was host to 1,618 auctions, which was the second highest reported for the city this year. The preliminary clearance rate was 76.9 percent, down from 79.4 percent last week when 1,303 auctions were held. Over the equivalent weekend one year ago, 65.9 percent of 1,876 auctions were successful.
The Graph
The Preliminary Numbers
Sydney | Melbourne | Brisbane | Adelaide | Perth | Tasmania | Canberra | |
Clearance Rate | 81.9% | 76.9% | 53.5% | 66.3% | 36.7% | 50.0% | 72.2% |
Auctions | 1,236 | 1,618 | 190 | 140 | 65 | 6 | 112 |
The Analysis
For a summary of some of the extreme lengths to which buyers are going to secure a winning bid, check out this article from Financial Review. At one apartment on the lower north shore, 300 people showed up for an inspection, garnering 19 registered bidders. You can imagine how that auction went.
Looking deeper into the auction results at the total number of sales compared to last year’s figures, we can see that Sydney is the stand out performer with the larger backlog of frustrated would-be buyers. This week, Sydney saw 1,012 total sales at auction compared to 861 last week and 860 one year ago. There’s just not enough supply to meet the fierce demand.
That’s not to say Melbourne is lagging too far behind. The Victorian capital saw 1244 homes sell at auction this week, compared to 1034 last week and 1236 last year. Demand in Melbourne is on par with last year, but the limited supply is giving buyers less choice.
One Melbourne buyer’s agent said, “This defies logic. We can’t go on at this rate.”
What It Means For Investors
So how long can this go on? Based on the large number of keen buyers struggling to find a home, and the relative shortage of sellers, unless APRA puts a damper on demand by slowing down the flow of cheap mortgage credit, we may pick up in February wherever we leave off in December.
It sure doesn’t seem like the Liberals will do anything to get in the way of the raging housing market. Scott Morrison just announced the federal government has made it easier for foreigners to buy new apartments.
The rules have now changed to allow a foreign buyer to purchase an off the plan dwelling that another foreign buyer has failed to settle on. Prior to the change, these were considered second hand sales, which would have prevented other overseas investors from purchasing them since foreigners can only buy new dwellings.
This is clearly a pre-emptive move to open up the pool of potential buyers able to absorb an anticipated over-supply of apartments scheduled to hit the market due to failed settlements. Prices have already been falling, and many buyers will be forced to exit their deals as final valuations come in below contract prices.
Whether it’s enough to stop contagion that spreads to the established housing market is yet to be seen. If developers can’t find other buyers and end up going bust, the banks could be left holding devalued assets, which would leave them with less capital available to lend to homebuyers.
Between a beleaguered apartment market, inflation worries, and unknowns around a Trump presidency, APRA may be waiting to see what happens in 2017 before making a move.
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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.
Comments
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Jason>>> “Scott Morrison just announced the federal government has made it easier for foreigners to buy new apartments.”
Hmmm, true – but then, only a few months back, wasn’t there another law changed stating that overseas investors were to pay a higher cost of purchase – like a 30% extra impost on….. what was it? Stamp Duty? But then, aren’t Stamps a State Tax?? Not sure…..
Can you clarify please, Jason?
This sounds a bit like “One foot on the accelerator, and the other on the brake” re that market. Crazy.
Benny
PS Though I DO applaud the latest move, it is almost “too little, and too late”. This new move may at least give the local investor SOME hope that values may not plummet so much in what seems to be a potential over-supply.
BUT, any sale of a second-hand apartment actually OWNED by an overseas investor CANNOT be sold to another o’seas investor (except as above – i.e. the first investor failed to settle, thus it was never OWNED by them) so the danger still exists to a large extent for local investors who purchase these apartments.
If some overseas financial drama occured, and many o’seas investors HAD to sell, a glut of second-hand apartments could still swamp the local apartment market, driving values down for any/all local investors.
Perhaps OK for those experienced investors who are able to capitalise on the budget prices, but this could be catastrophic for any NEWER investor who chose to go the way of an apartment as their first or second IPs.
Great point Benny. Regardless of what the government does, it looks like holders of apartments are in big trouble.
Yes, the previous tax increase was higher stamp duty at the state level for foreign investors, as well as higher FIRB application fees at the federal level.
The primary aim of the latest loosening of restrictions is not to prop up apartment values for individual investors but to keep developers from collapsing. If developers can’t sell their new apartments, then they will default on their loans and banks will be left holding land that they can’t develop. This would hurt their balance sheets, leaving them less money to loan out in the form of mortgages. Then we would see a contagion of sorts as credit markets tighten up and cheap credit stops flowing into the broader housing market, causing all property values to fall.
So this move is about propping up the entire housing market, not just apartment values.