Lending curbs loom as home prices boom

185 views 2021-09-29 12:43:18

Sydney’s auction market has achieved its best result since April, with the other capitals all posting strong clearance rates – including Melbourne, where a ban on home inspections has been lifted.

The countrywide spring bounce pushed the clearance rate nationally to 82.4 per cent – its strongest since March – and comes as seemingly relentless house price growth puts the prospect of lending curbs back on the agenda.

In Sydney, of the 747 results collected so far, 84.3 per cent of auctions were successful – the highest preliminary clearance rate Sydney has experienced since the week ending April 18, based on CoreLogic figures.

A drop in the number of auctions withdrawn across Melbourne and Canberra was another factor contributing to the high clearance rate nationally. Of the 254 results collected so far in Melbourne, just 16.1 per cent were withdrawn, pushing the preliminary auction clearance rate up to 77.2 per cent, its highest since late May. A week earlier withdrawals were nudging 40 per cent.

Strong demand as sellers held off listing has made for buoyant clearance rates, pushing prices steadily higher over recent months. With the end of Sydney’s long lockdown in sight, sellers are gaining more confidence, according to veteran analyst Louis Christopher at SQM Research.

“Here in Sydney, agents are now seeing the listings coming through; they are really starting to pick up,” he said, as the city prepares for a likely reopening in mid-October, allowing physical auctions to resume.

“Today’s [final] result is going to be firm. I’m not concerned at this stage that even if we do see a rise in listings we’ll see a big dip in clearance rates in Sydney.

“One of the questions that remain is that we’ll be opening up with quite a few [coronavirus] cases – will that put off buyers still going to the properties, and will it put off buyers going to a physical auction? I’m not so sure [it will]. I think some of fear around the virus is not as heavy as what it used to be.”

Illustrating buyers’ appetite was an epic hour-long online bidding battle that went down to $500 increments for a two-bedroom waterfront apartment at Cremorne Point.

With views across Shell Cove Bay to the Opera House, 4/22 Milson Road changed hands at $2,721,500, some $370,000 above its reserve.

Belle Property Neutral Bay’s Helen Wilson, who brokered the apartment with colleague Chris Davies, said the apartment had appealed to a broad range of prospective buyers from couples and families to downsizers and investors.

“We really didn’t know who was going to buy it. However, it was clear that there were two stand-out bidders among the eight registered when the auction started. They went back and forth between them in the longest auction I’ve ever done. It took an hour, largely due to the $500 bids between the two towards the end.”

Also smashing its reserve was a four-bedroom corner terrace at Erskineville, in Sydney’s inner west, handled by Ray White Surry Hills. It changed hands at $3.242 million, well above its reserve of $3.05 million.

In Melbourne, 40 bidders were registered for the renovated four-bedroom home at 3 Hopkins Close in Rowville, before it sold for $1.517 million, well ahead of its reserve of $1.32 million, through Ray White Ferntree Gully.

“There’s no doubt that customers in Melbourne have eagerly awaited the return to physical inspections and with confirmation this week from the government that property marketing can once again recommence, this is great news for everyone that we can again operate,” said Stephen Dullens, chief executive for Ray White in Victoria and Tasmania.

The smaller markets also popped, with Adelaide racking up a preliminary clearance rate of 87.7 per cent from 166 auctions on CoreLogic’s count. Brisbane achieved a 79.7 per cent success rate from 187 listings and Canberra notched up 85.9 per cent from 80 listings.

Lending curb warnings

While the breakneck rate of house price growth has eased since hitting 3.7 per cent in Sydney in March, it is still strong enough to prompt a warning from the Reserve Bank of Australia. The central bank last week said it may become necessary to clamp down on household debt-to-income levels as growing debt driven by booming property prices raises the risk of financial instability.

The International Monetary Fund also sounded alarm bells last week, flagging a need for macro-prudential measures,  while Commonwealth Bank’s Matt Comyn and ANZ’s Shayne Elliott both warned the steep rise in property prices had become concerning.

AMP Capital’s chief economist Shane Oliver agreed the prospect of lending curbs was rising, with the most likely measures to revolve around tougher interest serviceability tests, caps on higher loan-to-valuation ratio lending and on lending to high debt-to-income borrowers.

“Despite two months of lockdown in Melbourne and three months in Sydney, the property market is still roaring along. It is unbelievable how strong it is,” Mr Oliver told The Australian Financial Review on Sunday.

“To be honest, I thought the RBA and APRA [Australian Prudential Regulation Authority] might have tightened the screws a few months back. Maybe the lockdowns got in the way.

“The history of property booms in Australia is that once prices start to take off and the property market gets hot, then it’s inevitable that lending standards start to get lax. It’s better to act pre-emptively rather than wait until lots of bad loans have been made and there’s a major problem.”


This article is from Australian Financial Review, please click the following link for the original article: https://www.afr.com/property/residential/auctions-clearances-bounce-prices-rise-lending-curbs-loom-20210926-p58utk


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