Who’s the April Fool?

Date: 05/04/2016

Results for week ending April 3.

The joke was definitely not on sellers this weekend, as 1,543 capital city auctions were held nationally. Though the clearance rate slipped understandably from the previous low-volume, Easter holiday weekend, the preliminary results show that a healthy 67.0 percent of auctions were successful.

The Stats

In a repeat of last week, the Sydney market was the most active, with 648 homes brought to auction. Sydney maintained more robust demand than Melbourne for a third week in a row, with a clearance rate of 70.9 percent.

Melbourne appears to have dropped below the key 70-benchmark for the first time this year, recording a preliminary clearance rate of 68.0 percent. Plenty was on offer, with 567 auction held across the city. St Kilda East, Watsonia and Albert Park remain the hottest suburbs, where according to Domain, 100 percent of auctions have found buyers over the past three months.

The strongest capital city market this week was Adelaide, with 75.4 percent of auctions closing successfully. Perth continues to post weak numbers, with only 37.5 percent of auctions finding winning bidders. Brisbane is holding steady, posting consistent figures in the mid-50s.

The Graph

The Numbers

	Sydney	Melbourne	Brisbane	Adelaide	Perth	Tasmania	Canberra
Clearance Rate	70.9%	68.0%	57.0%	75.4%	37.5%	28.6%	52.3%
Auctions	648	567	140	75	37	9	67

The Analysis

With demand in Sydney and Melbourne remaining vigorous after the Easter holiday, the remainder of autumn appears to be poised for solid and steady results. Auction activity should continue to increase leading into the Queen’s Birthday in mid-June, which generally marks the beginning of the calmer winter months for the real estate market.

What It Means For Investors

Although pressure is mounting for the RBA to cut the cash rate to 1.75 percent, our reserve bank left rates on hold at 2 percent for a tenth straight meeting today. While a rising Australian dollar is problematic for exporters, most economic commentators don’t expect the RBA to take action until the Aussie soars past 78 US cents.

Apart from a boost in credit demand through lower interest rates, home buying activity will likely plateau. With rising auction volumes and steady demand, we may even see clearance rates trend down slightly over the coming months.

But if the RBA comes to the party, and APRA is happy for the big four banks to pass on their interest savings (which appears to be a long shot), the winter months could heat up. Just in case, you’d be wise to remind yourself “Who’s the Fool.”

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.