The Correction That Just Won’t Seem To Come
Results for week ending July 31
A 2016 record result for Sydney and another stellar performance for Melbourne pushed the combined capital city clearance rate up to 73.9 percent this week. Supply levels rose as well, with 1,585 auctions held nationwide, compared to 1,329 last weekend.
The Stats
The preliminary reports show Sydney’s clearance rate spiking up to just over 80 percent. The city was host to 494 auctions, which was nearly on par with last week’s volume of 473. Buying activity appears to be significantly higher than the 71.5 percent final result last week and even up from last year’s boom time clearance rate of 76.0 percent.
Melbourne’s preliminary clearance rate climbed higher to 75.6 percent, up from 71.6 percent last week. The city also saw a sharp increase in volume, returning to a level near last year. In the Victorian capital, sellers brought 749 homes to auction, up from 572 last week.
Adelaide had another strong showing, with a preliminary clearance rate of 71.6 percent. Volume also surged to 106 auctions, up from 68 last week.
The Graph
The Preliminary Numbers
Sydney | Melbourne | Brisbane | Adelaide | Perth | Tasmania | Canberra | |
Clearance Rate | 80.4% | 75.6% | 55.4% | 71.6% | 42.9% | No sales reported | 75.0% |
Auctions | 494 | 749 | 152 | 106 | 33 | 5 | 44 |
The Analysis
Homebuyer demand in Sydney and Melbourne appears to be on the rise. The boost in buying activity is even more pronounced by the increase in supply. If the auction volume increases, even more bidders must be successful to increase the clearance rate. Though Sydney’s supply remained flat, both Melbourne and Adelaide auction volume spiked.
In line with strong clearance rates, capital city home prices on average have continued to rise. According to CoreLogic’s index, Sydney, Melbourne, Adelaide and Hobart are recording monthly price increases greater than 1 percent; offsetting declines in Brisbane, Perth and Darwin. Sydney’s median house price is now back above $1 million and Melbourne’s median has surged to a new record of $740,995.
What It Means For Investors
Even though property values have never been higher, the mindset of homebuyers remains very optimistic. We are the lucky country that has not experienced a recession in over 25 years. It will take more than a little drama in Europe to bring a correction.
In fact, it’s hard to see anything other than higher interest rates or a credit crunch overseas that could diminish buyer demand. We almost certainly won’t be seeing higher interest rates anytime soon.
The RBA just cut the cash rate even further, to a record low 1.5 percent. Now we wait to hear whether any lenders will be kind enough to pass along their savings. Don’t hold your breath, as the banks will likely be facing tougher capital requirements in light of rising home prices, and will still need to deliver profits to shareholders.
For the historical data of weekly auction clearance rates, click here.
Comments
Got something to say? Post a comment...
You must be logged in to post a comment.
CBA announced 0.13% discount within minutes and NAB announced shortly there after around the same.
Looks like the govt gave a wink and a nod to the banks that this 0.25% didn’t need to be passed on in full.
…..tell me the game isn’t rigged.
and still, bank shares took a beating
Hi Jason,
Is THIS the correction you were talking about:-
https://www.propertyinvesting.com/topic/4393180-best-advice-dont-invest-into-property-the-australian-market-is-crashing/
Mind you, the original poster was talking WAY more than a correction (more like 50+% drops in value…)
With about 2 years since the last “bump” to that thread, I figured it was time for another. The thread started in 2008, citing impending doom’n’gloom.
Since then, in reality there was a bit of “settling back” (a correction of 10% to 20%) as the GFC bit, but property has been on a roll once again in the last few years.
So, another correction due, do you think Jason? Or are $1m medians in Sydney sustainable in your view?
Benny
The employment numbers are still good although wages are stagnating. I’d say it all depends on whether the money keeps flowing from the overseas wholesale lending market.
It’s hard for me to imagine prices going up much higher, but I’m sure the Chinese were saying that when their home price to income ratios were only 12 to 1.
It has taken a combination of factors to first instigate and maintain the demand and ongoing increase in property prices. It is certainly mind boggling how it has continued to defy gravity. Living and working abroad for most of my life I have watched Australia drift further and further away from being any kind of lucky country. The things I used to boast about about Australia, are the values that have all but disappeared as we move closer to the a country that is taking on the worst attributes of other countries. It astounds me that no one seems to look at other countries mistakes and learn from them. They just seem to go ahead and make decisions that inevitably lead to bad outcomes without looking to places that have already gone down that path and are paying the price for it. I guess when you have systems of government where someone with no relevant education can be elected to Ministerial positions with no experience, be the Minister of Health this week and the Minister of Education next week and so on… I feel that unless there is a drastic change in the system in which our country is managed, there is very little hope for us to ever return to the quality of life our kids will never know.