Home sellers are being warned to brace for tough months ahead after auction clearance rates slumped to new lows over the weekend, with an expert cautioning that the market is unlikely to thaw until spring.
Auction Results Decline Further as Winter Begins
An expert has warned that auction results will decline further now that winter has begun, as clearance rates hit fresh lows over the weekend. The preliminary clearance rate for Australia's combined capitals fell to 51.1 percent over the weekend, according to Cotality, marking the lowest level since the pandemic.
REA Group Executive Manager Angus Moore told Sky News Australia that he anticipates the trend will continue downward week-on-week through winter. "We tend to see quieter conditions through this part of the year. That's a fairly reliable, regular seasonal factor... things will start to pick back up as we get into September," he added.
Factors Driving the Downturn
Clearance rates have been trending downward in recent weeks, even before the federal budget, due to several factors, Mr. Moore explained. "It's really been a thing that we've been seeing since the middle of autumn... a couple of things have been driving that," he said.
One key factor is interest rates, which have led to a pullback in buyer demand. This effect has flowed through into home prices, which have been down in Sydney and Melbourne for three consecutive months. Additionally, there has been a high volume of properties on the market this year, making any given auction less competitive.
Melbourne and Sydney Clearance Rates
Cotality's data revealed that Melbourne's clearance rate crumbled to its lowest in five years over the weekend, hitting 52.3 percent. That figure was down 5.8 percentage points from the previous week. Sydney's rate rose one percentage point from last week to 52.9 percent, but it remains 5.2 percentage points lower than the same time last year.
Metropole's data reflected a similar national trend, with a 50.5 percent weekend clearance rate as of June 6. The official cash rate currently sits at 4.35 percent.
Interest Rate Outlook
The market currently sees a zero percent chance of a rate decrease, according to the Australian Securities Exchange's rate tracker. ANZ and the Commonwealth Bank predict that interest rates have peaked for now, while NAB expects a hike in August to bring the rate to 4.60 percent. Westpac anticipates two more hikes in August and September, taking the rate to 4.85 percent.
Inflation in Australia fell to 4.2 percent in April, though it remains outside the Reserve Bank's target band of 2 to 3 percent. Economists warn that inflation could rise again if the fuel excise is reinstated, with oil prices still elevated worldwide. An expected wage rise from the Fair Work Commission could also add inflationary pressure and potentially trigger another rate increase.
Political Context
Prime Minister Anthony Albanese on Monday suggested that poor Labor polling indicates Australians do not believe the economy is working for them. "Many people feel that the system isn't working for them, that they're working for the economy, not the economy working for them... If governments don't respond to that, there'll be a continued rise in populism, be it of the right or the left," he said in Canberra. "It's the economy, stupid," he added, "It's the economy that sets the parameters for debate."
His government's sweeping property overhaul, announced in the budget, passed the Lower House on Thursday last week. The government aims to move negative gearing and capital gains tax changes through the Senate before the winter break. A Senate economics legislation committee inquiry will commence next week, with findings due on June 22.
