The fear of paying too much as interest rates rise and prices fall is playing on the minds of property buyers, says Ray White boss Dan White, as auction clearance rates ticked up slightly over the past week, but auction volumes fell more than 20 per cent to fewer than 1500 homes.
“There are still a lot of buyers in the market, but they are very concerned about overpaying. They want to know where other buyers are at,” Mr White told The Australian Financial Review.
“They get confidence when others are bidding, that’s when transactions are happening.”
Ray White, the country’s biggest real estate agency, reported a preliminary clearance rate of 59 per cent over the past week – in line with national figures compiled by both CoreLogic and Domain. The Sydney market was the quietest since Easter.
Mr White said buyers were happy to pay the market price “but not more than that”, in contrast to last year’s red-hot market where buyers were prepared to pay above market prices and sometimes, because of pandemic restrictions, purchase sight unseen.
“Buyers are being cautious as they are concerned about the outlook,” Mr White said.
He said the high proportion of unsuccessful auctions was driven by the growing gap between vendor expectations and what the market was prepared to pay.
Despite this, Ray White managed to sell $4.6 billion of residential real estate last year, not far off the $4.76 billion it sold last year when house prices were booming.
Quietest since Easter
“Just because auction clearance rates have dropped does not mean it is a worse method of sale than private treaty. Clearance rates are a lot lower in private treaty sales,” he said, a point highlighted by the growing number of unsold, older listings.
Sydney, where house prices are falling at their fastest rate in 30 years, had its quietest auction week since the Easter long weekend with 476 homes offered under the hammer, according to CoreLogic.
Of these, 61 per cent sold under the hammer based on preliminary figures, up from 56 per cent last week. Domain reported a 57 per cent preliminary clearance rate, up from 56 per cent last week.
In Melbourne, auction clearance rates rose fractionally to 62 per cent despite volumes falling 23 per cent to 620, according to CoreLogic. Domain recorded a 59 per cent preliminary clearance rate, up from 58 per cent a week ago.
AMP Capital chief economist Shane Oliver said he expected a final clearance rate of 53 per cent in Sydney compared with an “August norm” of 68 per cent, and 55 per cent in Melbourne compared with 69 per cent.
Sales still falling
“Clearance [rates] were up a bit again, but sales are depressed and still falling, and the trend is likely to remain down as rising mortgage rates continue to impact,” Dr Oliver said.
Nationally, the preliminary clearance rate rose by 0.7 of a percentage point to 59.5 per cent compared with a week ago – implying a final figure of about 55 per cent. This time last year, 74 per cent of auctions held were successful.
Each of the smaller capital cities had a decrease in auction activity this week, as Adelaide, Brisbane and Canberra recorded declines in the preliminary clearance rates.
Adelaide recorded the strongest preliminary clearance rate, with 66 per cent of auctions reporting a successful result, followed by Canberra (49 per cent) and Brisbane (46 per cent).
The latest auction figures follow dwelling values falling by 1.3 per cent in July, marking the third consecutive monthly fall, according to CoreLogic’s national Home Value Index.
Five of the eight capital cities recorded a month-on-month decline in July, led by Sydney and Melbourne where values fell 2.2 per cent and 1.5 per cent respectively.
Brisbane also edged into negative growth territory for the first time since August 2020, with values down 0.8 per cent.
Dr Oliver said he expected Sydney’s house price falls to accelerate each month until the end of the year as rates rise.
“The pace of decline is gathering speed, so it’s conceivable we could be seeing monthly declines of 4 per cent in a few months which would surpass the peak monthly increase of 3.7 per cent in March last year,” Dr Oliver said.
Mr White said the outlook depended on where interest rates ended up.
“For every negative there are positives. Unemployment is low and immigration is coming back. If you look back in history, in Sydney there has been a dip and then things flatten out,”
The question for buyers, he said, was how long to wait.
This article is from Australian Financial Review, please click the following link for the original article: https://www.afr.com/property/residential/easter-quiet-hits-housing-as-auctions-fall-20220807-p5b7us