Auction clearance rates nationally and in the two biggest markets, Sydney and Melbourne, remain well below 60 per cent, a strong signal there is more downside to come in the housing correction.
Sydney recorded a preliminary clearance rate of 56.9 per cent on CoreLogic’s tally, slightly down on the week before, but still ahead of where it was at the end of June, when fewer than half the properties listed sold.
The preliminary clearance rate of 55.4 per cent in Melbourne was down 3.8 percentage points from the week earlier. Nationally, the clearance rate was 56.4 per cent, down 2.2 percentage points from the previous week.
AMP chief economist Shane Oliver said there appeared to be some easing in the swift decline of clearance rates in Sydney and Melbourne experienced over the early weeks of the correction, in response to fewer new listings and vendor discounting,
“But I suspect there is more downside ahead,” Dr Oliver told The Australian Financial Review.
“Interest rates are still on the rise, property price data is continuing to weaken. There’s significant discounting occurring.
“Sometimes clearance rates lead prices, but lately it’s been prices leading clearances down.
“As the prices have come down, you’re getting more discounting, which has helped some sales get through. And, of course, some vendors have pulled their properties, which has reduced pressure on the auction clearance market.
“I’d be doubtful that the apparent stabilisation [in clearance rates] around 50 per cent or just above is a sign that the market is bottoming out. The reality is it’s just a temporary stabilisation in clearance rates. The underlying situation remains very weak.”
Weakness spreads to smaller capitals
Across the smaller capital cities, Adelaide recorded the strongest
preliminary clearance rate at 69.7 per cent of auctions returning
a successful result, followed by Canberra on 64.5 per cent and Brisbane on 44.8 per cent, according to CoreLogic.
Nicola Powell, Domain’s chief of research and economics, said the softening that had been felt first in Sydney and Melbourne was spreading to the smaller capitals.
“It has clearly shifted into a buyer’s market, with buyers having much more opportunity. People are much more mindful of how much they spend and what they buy,” Dr Powell said.
“The idea of compromise just isn’t there now for buyers, particularly in Sydney and Melbourne.”
Yet even as buyers count their pennies more closely, there are still firm prices being struck for desirable properties, such as a three-bedroom warehouse apartment at St Peters, in inner-city Sydney, which sold for $1.19 million, $90,000 above the reserve.
There were three bidders for the house-sized apartment, one in a group of 13 units created from a warehouse conversion at 33-37 Crown Street.
The buyers were a young couple from Redfern purchasing their first home, while the sellers were upsizing to a five-bedroom home in Newtown, according to selling agent Ercan Ersan of Ray White Surry Hills.
The market was performing better for some assets than others, Mr Ersan said.
“I’m finding smaller stuff with one or two bedrooms is slowing down, but bigger stuff like three-bedroom apartments and houses are performing well,” he said
In Melbourne, top-end buyer’s agent David Morrell, of Morrell & Koren, noted that several upmarket properties had simply passed in at the weekend, amid dwindling attendances.
“The auction scene isn’t there. People are holding back from listing, preferring to wait a few more months,” he said.
“The virus is starting to come into vendors’ conversations. [They are] thinking they will wait to the storm passed. It’s going to be a lot longer winter than previous years.”
This article is from Australian Financial Review, please click the following link for the original article: https://www.afr.com/property/residential/it-s-a-buyer-s-market-as-auction-weakness-spreads-20220717-p5b26g