So Much for the Summer “Slow Season”
Auction Results for week ending December 3.
It’s shaping up to be a great summer for sellers as auction clearance rates remain strong in the lead-up to the holidays.
Auction volume fell as expected from 3,398 last week to 3,173 this week. The combined capital city preliminary clearance rate rose to 75.0 percent in response, up from last week’s final result of 73.0 percent. In total, that means there were about 100 fewer sales at auction this week.
Last year at this time, supply was significantly higher as sellers made a mad dash for the exits in anticipation of a slower 2016 property market.
The City Stats
Melbourne was the standout performer this week with a preliminary clearance rate of 79.3 percent, on auction volume of 1,410. Last week’s final result was 76.1 percent, when 1,616 homes were presented at auction. One year ago, the clearance rate was 63.3 percent across 1,622 auctions.
Sydney’s preliminary clearance rate was 77.7 percent this week, up from last week’s final count of 77.1 percent. The number of auctions held fell from 1,262 last week to 1,158 this week. Over the corresponding weekend last year, a clearance rate of 52.9 percent was recorded across 1,070 auctions.
The Preliminary Numbers
Both supply and demand eased off this week in Melbourne and Sydney, just as you might expect for the first week of summer. There were about 180 fewer sales across the two cities combined compared to last week. The smaller capital cities saw an improvement this week and picked up some of the slack. Nonetheless, demand remains strong on the east coast, as a backlog of frustrated buyers keep showing up in the hope of casting a winning bid.
Clearance rates in the mid to high 70’s are historically consistent with rising prices. Financial Review reported this week on a 518 square metre vacant block in the Melbourne suburb of South Yarra that nearly doubled in value over the past twelve months. The sales price was $2.75 million. That’s what happens when interest rates remain artificially low.
What It Means For Investors
Speaking of artificially low interest rates, the RBA left the record-low cash rate on hold at 1.5 percent today, as expected. It’s a good thing because only God knows what would happen to Melbourne and Sydney home prices if they decided to cut rates again.
Some economists expect the cash rate to go higher next year, while others are forecasting at least one more cut in 2017. In my opinion, raising rates will be a tall order given our low wage growth and weak balance of trade. In light of our exporters’ dependence on a weak Aussie dollar, the Fed will need to lead the way into the realm of higher borrowing costs. I’m not holding my breath.
According to the RBA’s statement today, it sounds like our central bankers are hanging their hats on a rising surplus of apartments to put a damper on the east coast property market. Even at current interest rates, as long as bank’s keep lending, people will clearly keep borrowing, and bidding.
The results listed here are based on preliminary reporting by CoreLogic. The final results will be reported in next week’s post.
For the historical data of weekly auction clearance rates, click here.