The Auction Market Just Had a Record-Breaking Week

Date: 23/08/2016

Results for week ending August 21.

Low borrowing costs and limited inventory are pushing auction clearance rates to new highs.

The preliminary combined capital city clearance rate was 76.6 percent this week. Volume was slightly higher than last week but remained unseasonably low, as 1,747 homes were brought to auction. Once the dust settled last week and all reports were in, 75.0 percent of 1,471 auctions cleared successfully.

The Stats

Sydney appears to have pushed through a fourteen-month high and logged the highest August weekend result on record. The preliminary clearance rate was 86.4 percent, after 654 auctions were held. Last week’s final result was 78.3 percent on volume of 610 auctions.

Melbourne was host to 785 auctions this week, up from 605 last week. The clearance rate fell a few basis points to 76.1 percent, after last week’s strong 78.9 percent reading.

The Graph

The Preliminary Numbers

	Sydney	Melbourne	Brisbane	Adelaide	Perth	Tasmania	Canberra
Clearance Rate	86.4%	76.1%	56.5%	72.7%	20.0%	40.0%	72.2%
Auctions	654	785	124	93	25	5	44

The Analysis

The story remains the same as previous weeks. Demand is increasing, while supply is struggling to catch up, especially in Sydney. There was so much stock brought to market last spring that sellers are now few and far between. That means that a greater number of buyers are competing for a fewer number of properties.

Continue to expect a lower than usual amount of inventory through the Spring. The big question is how high will Sydney and Melbourne buyers push the nationwide clearance rate.

As you can see in CoreLogic’s graph above, auction clearance rates have been trending up for the last five years. Will we break through last year’s combined capital city high of around 80 percent? That depends on our regulators.

What It Means For Investors

Where is all this demand coming from? Low interest rates are pulling it forward from the future. Buyers that normally wouldn’t be able to afford a home until perhaps 2018 or 2019 are able to enter the market today. We’re also continuing to see speculative investors pour into the market.

Bank regulators have been happy to see the investor segment of the lending market grow at a maximum of 10 percent per year. That target will most likely be going down soon as the RBA will need to redirect credit growth away from housing if it hopes to continue easing and stimulate higher growth in wages.

I’ve been saying for weeks that APRA will step in later this year to put a dampener on investor demand. Now we’re beginning to hear rumblings of this in the media. Unless demand drops off for some other reason, expect credit to tighten in September or October.

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.