Cupid’s Arrow Hits Sydney Buyers

Results for week ending February 14

Sydney’s auction clearance rate surpassed Melbourne for the first time in over four months, as buyers flooded back in to our most expensive market. Supply remains quite low compared to this time last year, but we’ve seen a steady increase of homes coming to auction over the past few weeks.

The Stats

The combined capital cities clearance rate increased again this week, rising over two points to 72.3 percent. Over 1,300 auctions were scheduled nationally, up from 916 last week, but still not matching last year’s tally of 1,541. Sellers still seem to be in a “wait and see” mode.

Sydney bounced dramatically to a bullish 78.6 percent, up over 3.5 points from last week. Only 439 auctions were held in the NSW capital, compared to 662 one year ago. While there are more buyers coming out to bid, the sellers are still holding back.

The Adelaide market seems to really be buzzing. It brought in the strongest result for the week at 81.4 percent, on similar volume as last year.

Melbourne took out the number three position, at 73.6 percent. The Victorian capital had the most active market last week, with 539 auctions held. That’s a solid number, considering 584 auctions were held over the same week last year.

The Graph

The Numbers

The Analysis

As I said last week, until auction numbers increase, we won’t really know what to make of these higher clearance rates. The recent surge in buyer activity should however be an encouragement to sellers. We’ll find out in the coming weeks whether these stronger results are here to stay.

Some real estate agents are worried that the recent stronger auction results could “trigger a deluge of houses and apartments for sale, overwhelming the limited buyers.” If this scenario plays out, expect clearance rates to fall dramatically leading into April.

Most of this new demand is from owner-occupiers who are finding it easier to borrow since APRA took measures to curb investor demand. According to a recent ABS statistic, the number of new home loans to owner-occupiers has risen to a six-year high.

What It Means For Investors

Without the same level of activity that we saw from investors during the first half of last year, it’s hard to imagine how recent clearance rates can be sustained. Until supply increases, and we see how the market plays out, bullish buy and hold investors should proceed with caution.

For the historical data of weekly auction clearance rates, click here.

By Jason Staggers

Jason was a personal mentor working with Steve McKnight's Property Apprentices. He helped hundreds of investors apply Steve's teachings in the real world and achieve greater results on their journey to financial freedom. Jason now lives in Perth, WA where he leads Neuma Church.