The Song Remains the Same

Results for week ending October 23.

Auction volume across the combined capital cities increased by about 200 homes this week, with 2,641 properties presented. Despite the jump in supply, the preliminary clearance rate rose four basis points to 80.2 percent, the highest rate recorded for the year so far. Last week’s final result was 76.2 percent.

The City Stats

Competition increased in Sydney as buyers saw a drop in supply from 913 auctions last week to 866 this week. This pushed the preliminary clearance rate up to 85.6 percent, the highest result for the year to date. Last week’s final tally found that 81.4 of auctions were successful. Over the same weekend last year, 61.3 percent of 1,024 auctions found winning bidders.

The number of Melbourne sellers increased this week, with 1,378 auctions held across the city, up from 1,182 last week. Buyers rose to the supply challenge, clearing 81.8 percent of auctions, based on preliminary reporting. This is a spike from last week’s final clearance rate of 77.7 percent, and far higher than last year’s result of 69.7 percent on supply of 1,690.

Adelaide buyers also stepped up, posting a preliminary clearance rate of 77.4 percent on auction volume of 98.

The Graph

The Preliminary Numbers

* In Tasmania, 10 homes were auctioned, but only 4 results have been reported so far, with 4 sales.

The Analysis

As expected in Sydney, the decrease in volume this week caused a spike in the clearance rate. The total number of sales appears to be around 741, which is virtually the same as last week, but considerably higher than the 627 sales for the week one year ago.

Melbourne strengthened remarkably this week. The total number of sales at auction was up from 918 last week to 1127 this week. That’s nearly as high as last year’s boom time spring result of 1178 for the week.

The Melbourne Cup will put a damper on next week’s auction listings, as only 563 properties are scheduled to go under the hammer in the Victorian capital. Sydney’s auction volume is expected to jump by about 100 properties, which will make up for a little of Melbourne’s slack. Adelaide will do its part as well, where an extra 50 or so auctions are teed up beyond this week’s numbers.

What It Means For Investors

After the RBA’s warning to investors a few weeks ago that falling apartment prices could wreak havoc in the property market, Scott Morrison has now stepped into the spotlight to go to bat for first homebuyers. He’s calling on states and territories to remove “unnecessary” land planning regulations, in hopes of increasing the supply of housing in Melbourne and Sydney.

In an article I wrote earlier this year, “Is Urban Planning to Blame for Inflated Property Prices?” I presented the problem our Treasurer is referring to. A report from the US private consultancy firm Demographia claims that these policies “severely ration land for development” by restricting supply and forcing density growth into specific areas through zoning laws.

If Morrison can put some pressure on states to loosen up supply (don’t hold your breath), perhaps it could release some steam from the housing market. But let’s not forget – the ultimate reason real estate is so expensive is the availability of cheap credit. Until interest rates rise, or credit markets tighten up, the first homebuyers’ songs of woe may very well remain the same.

So in solidarity with those who cannot afford to buy homes in the current market, let’s observe a moment or two of silence as we listen to one of the greatest rock bands in history. Hopefully this will redeem me from referencing a Sonny and Cher song in my last auction clearance rate post.

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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.

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.