Buyers Regain Control as a Flood of Properties Hit the Market
Property Market Update
for Week Ending 29 October 2017
- Auction volumes across the nation hit their highest level of 2017.
- Melbourne vendors broke the record for the number of auctions held.
- Auction clearance rates are slipping, giving more power back to buyers.
- Through September, Sydney house prices fell for the first time in over a year.
- Melbourne continues to show signs of relatively resilient demand.
This Week’s Preliminary Auction Activity (Week Ending 29 October)
This week marked the busiest week for auctions all year, with vendors offering up a whopping 3,690 properties at auction. Melbourne led the way, breaking an all-time auction volume record, with 1,983 homes presented.
All the capital cities posted clearance rates sub-70 percent, with the exceptions of Melbourne and Canberra. Melbourne’s result will likely be adjusted down into the 60’s by the time all results are counted later this week.
Here are the preliminary results for our largest capital cities this week:
Last Week’s Final Auction Results (Week Ending 22 August)
Sydney buyers barely cleared 60 percent last week, but buyers in Melbourne remained keen, clearing just over 70 percent. Across the country, the average auction clearance rate sat just below 65 percent.
Here are the final results for the capital cities for last week, followed by a breakdown of the sub-regions and key regional areas:
For the historical data of weekly auction clearance rates, click here.
Recent Home Price Movements
Over the month of September, Sydney prices fell for the first time in over a year. Melbourne prices, however, continued to climb.
The monthly results for October will be posted in a few days.
Looking back over the rolling quarter and year, although Sydney home prices are in the red for the last three months, annual growth still sits at nearly 8 percent. Melbourne home prices have risen 11 percent over the past twelve months.
Property Market Analysis
This week’s national auction supply exceeded even the pre-Easter result back in April this year. Melbourne carried most of that weight, where vendors pulled forward auction supply ahead of next week’s spring racing carnival festivities.
But Sydney also saw a sharp increase in the number of auctions held, showing that a significant reason for the increase in supply was seasonal. The number of properties on the market tends to gradually increase through the Spring months, before hitting a peak in early December.
As demand appears to be waning, especially in Sydney, an increase in supply through November should further embolden buyers. Auction clearance rates should likewise fall. Don’t be surprised if even Melbourne sees a decline in median house price next month.
That said, there’s still reason to be optimistic about the Melbourne property market. Not only is there room for prices to move higher relative to incomes (unlike Sydney), but competition should remain stiff. Victoria’s population growth is currently the highest in the country, at 2.4 percent per annum.
Record-low interest rates are the ultimate reason real estate is so expensive. Barring chaos in the overseas bond market or a shock rate-rise from the RBA, low borrowing costs will underpin demand and should prop up home prices.
What It Means For Investors
We’ll find out more on Tuesday next week about the RBA’s outlook for the economy. I expect little to change from Philip Lowe’s previous comments. Inflation and wage growth are low, household debt and home prices are high, and the Aussie dollar remains resilient, despite lacklustre economic data. All of that equates to a greater chance of a rate cut than a rate hike.
Much will depend on who Donald Trump chooses as the next Fed President. Janet Yellen’s watch is coming to an end, and Trump has floated two possible replacements. Based on past statements on economy theory, one of them is likely to continue on Yellen’s dovish path of low rates, while the other will tend to be more hawkish and favour a path toward higher rates. The latter would make life easier for the RBA, but higher rates overseas could push mortgage rates higher in Australia. Time will tell.
As I mentioned in my last update, barring chaos overseas, home price growth should remain relatively flat for the foreseeable future. After all, that’s what our regulators want, and they seem to be holding all the cards for now.
That being the case, if you have significant growth goals over the next five to ten years, simply buying and holding for generic capital growth could prove to be a tough gig. If you don’t want to rely upon the market gods to produce your returns, perhaps you should educate yourself, increase your skill and confidence, and take matters into your own hands.