Supply Surge Tests Home Buyer Demand

Results for week ending May 29

Sellers made a comeback last weekend, resulting in a spike in auction volume of more than 25 percent. A total of 2,419 homes were auctioned across the combined capital cities, compared to 1,920 last week. Importantly, buyers rose to the occasion with the nationwide clearance rate staying more or less put at 68.0 percent.

The Stats

Sydney buyers dominated the nationwide market for a fourth straight week. The preliminary clearance rate climbed nearly two basis points to 75.0 percent. Supply was up again this week as well, with 773 homes on offer.

Melbourne’s run in the 70’s continued for a seventh straight week, despite a spike in volume. Buyers posted a clearance rate of 70.8 percent on 1,157 auctions, up from 843 auctions last week.

Brisbane buyers were the most reluctant, with only 40.2 percent of auctions finding successful bidders.

The Graph

The Preliminary Numbers

 The Analysis

With winter on our doorstep, it seems the important autumn property market has delivered solid results, ably assisted by the drop in home loan interest rates.

The winter property market is usually subdued, but with the election poised to go either way, it is unlikely to be as uneventful as prior years. The growing demand in the established housing market begs the question, “Are investors already rushing back into real estate in case negative gearing is scrapped?”

Of course, the outlook of low borrowing costs can’t be hurting either.

What It Means For Investors

On that note, AMP Capital joined the easy-money chorus this week, forecasting a 1.25 percent cash rate by year-end. With Australian wage growth already at record lows and expected to slow further, the housing market will happily take all the stimulus it can get.

A higher median income is one of the most important underlying fundamentals for sustainable growth in home prices. Without wage growth, only super-cheap debt and favourable tax concessions can save the day. Thankfully we have both, for now.

Even amidst record-low interest rates, the real estate industry is taking no chances. With barely a month remaining until we learn the fate of negative gearing, real estate lobbyists are hoping their most recent propaganda piece will gain viral momentum.

If only the lobbyists could convince the RBA to suppress interest rates forever…

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.