The Surge In Sydney Continues
Results for week ending August 16
Buyers were out in force in Sydney on the weekend pushing up the clearance rate to over 80%, but in cold, cold Melbourne, there was a slight decline.
The Stat
This week there were 2,103 capital city auctions, an increase of 34% over the number of auctions for the same week last year.
The Graph
The Numbers
Auction Clearance Rates | ||
Clearance Rate | Auctions | |
Sydney | 80.3% | 702 |
Melbourne | 76.5% | 801 |
Brisbane | 60.2% | 93 |
Adelaide | 71.2% | 59 |
Perth | 23.1% | 13 |
Tasmania | 60% | 5 |
Canberra | 77.4% | 50 |
| Source – Corelogic RPData | ||
The Analysis
There is definitely more sale comparable supply in 2015, and while auction clearance rates exceed 75% there is sufficient demand to keep prices steady.
What It Means For Investors
Economists will tell you that price is a function of supply and demand.
Theory has it that when supply exceeds demand then price falls (as suppliers reduce price to compete for buyers). Price rises when demand exceeds supply and buyers (demand) bid higher prices for stock in short supply.
As real estate investors, we use auction clearance rates as a measure of the strength of supply (number of properties being auctioned) and demand (auction clearance rate).
This week there were 34% more properties for sale than the same weekend in 2014. The auction clearance rate was 76.3%, and increase over 70.8% for the comparable period last year.
These results reveal that although housing supply has increased, demand has increased by enough to absorb the extra houses coming up for auction. This indicates both upwards pressure on prices and also a floor of support so that a dramatic price correction, although possible, is unlikely in the near term.
Winter is ending though, and soon the Spring market will be here. All eyes are on whether the extra supply in the pipeline will be absorbed by bullish buyers.
Comments
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Hi Steve & readers, would the higher clearance rate at auction be a resault of lack of rentable properties in the system & the interest rates down to a low level? Renters who have saved up a healthy deposit now realising this may be a prime time to enter into home ownership? We have our youngest daughter still at home with us & are encouraging her to save from her employment for a home before she gets married. With the banks requiring a healthy 20% deposit for a home loan keeps both parties committed. The requirements were about that ratio when I bought my first home in 1980. The strategy is to give new buyers a long term outlook.
Patrick & Jenny
Hi Patrick & Jenny,
The shortage of rental properties will have an impact primarily on rents (increasing) more so than a material impact on property prices (sales).
This is because it is not an easy substitute to buy as opposed to rent – due mainly to a lack of sufficient deposit and / or borrowing ability. More likely, as rents increase, people are forced to earn more, co-share, downsize their expectations, shift housing product (houses to units, 2 br to 1 br, etc.)
That said, the is always movement in and out of the rental / home owner markets as people buy and sell.
You may like to read this article from Peter Koulizos in reference to your daughter: http://quest.newspaperdirect.com/epaper/viewer.aspx
Regards,
– Steve