Australia’s auction clearance rates edged past 70 per cent last week, following a strong month of auction activity in February, but it’s too soon to interpret the improvement as a sign that the downswing is over, experts say.
This weekend’s auction clearance rate of 70.3 per cent was up from last week’s 69.7 per cent, which revised down to 66.8 per cent at final figures, CoreLogic reported.
CoreLogic said that while the clearance rate will revise lower once remaining results are collected, it will likely hold around the high 60 per cent range for the third consecutive week.
Melbourne’s preliminary clearance rate stood at 71.2 per cent, while Sydney’s stood at 72.1 per cent.
It was Adelaide, however, that outperformed, posting a clearance rate of 80.8 per cent.
CoreLogic Head of Research, Eliza Owen, said that the clearance rates, which were well up on the 50 per cent to 60 per cent figures record in the last quarter of 2022, were a sign that markets were stabilising.
“It’s definitely a another signal that there’s been some stabilising in housing market performance of the past few weeks,” Ms Owen said.
“In the four weeks to February 25, the final clearance right, was coming out at around 65 per cent and we haven’t consistently seen those kinds of clearance rates and before the rate hiking cycle in 2022.”
“I’d say that the auction clearance rate is a corroborating piece of evidence that the housing market has seen better performance through the start of 2023.”
Ms Owen said that while auction volumes were far below what they were at the same point in 2022, they were closer to decade averages.
“That relatively tight stock position might be what is insulating housing market declines,” she said.
“Having said that, if we look a little bit further back to say the decade average volumes, it’s probably more on par with what we would see this time of year.”
Ms Owen said that the looming test for auction markets this year would be how they cope with more stock.
“The test for the market over the course of the year is going to be higher levels of volumes,” she said.
This test would take place in the context of “the looming expiry of fixed rate home loans, more interest rate rises expected over the year, and the looser labor market anticipated over 2023”, she said.
“The question will be if these events trigger higher listings volumes, and how successfully demand can absorb those listings as well.”
Asked to identify why Adelaide’s auction market was still witnessing high clearance rates, Ms Owen said the city was benefiting from several economic trends.
“I think the market overall has been very resilient to interest rate rises,” she explained.
“It’s one of Australia’s most affordable cities, and so it might be a buying opportunity for potential homeowners.
“And it’s seeing positive migration trends both from the return of overseas migration, which actually makes up a relatively high portion of population growth in South Australia, but also internal migration, which is unusual for South Australia.”
Tristan Tomasino, Managing Director and Senior Auctioneer at Buxton Inner West, said that while it was tempting to read into strong auction figures it was important to keep in mind not all auction results were being reported.
He explained that his agency was still doing auctions for some well-presented homes in “certain price points” but was choosing to do expressions of interest campaigns or private sales for other properties.
He predicted that rising interest rates and the end of low fixed rate mortgages would drag on clearance rates this year, but said some properties were continuing to perform well in the current market.
“I think we’re just in the sweet spot at the moment where there’s a lack of supply and construction costs are incredibly high so that yes, good homes are doing well,” he said.
“There’s a lot of buyers have been looking for six months and they’re in a fortunate position where they maybe got a lot of a lot of capital saved up even you know up to 20 per cent and they’re not having to pay lenders mortgage insurance, so they can still be competitive on properties and that’s why we’re seeing multiple bidders on a lot of those renovated homes.”
But a further rise in rates could easily push the current buyer/seller dynamic out of whack, he said.
“(Sellers) are at the point now where they’re willing to work and understand the market a little bit more agents and probably pricing properties at a realistic level, so buyers understand that it’s a great opportunity, a great time to buy,” he said.
“Everyone’s on the same page, right? And I feel like that could easily shift again if we see another interest rate rise in March and potentially April.”