Australia’s auction market has eased in activity, with mere 1,994 auctions scheduled across the combined capitals this week. In practical terms, the data shows a market that is still transacting, but with significantly reduced competition at auction.
The Agency founder and CEO Matt Lahood says vendor behaviour has shifted, with a growing number of auction campaigns being withdrawn before auction day as sellers wait for greater clarity.
“A lot of auctions are just being pulled off the market.”
He said this reflects a broader hesitation cycle, where participants pause in response to uncertainty before reassessing conditions once expectations stabilise.
“People sit back, they watch, they wait, they listen to the media, and then they go, ‘it’s not as bad as they think.’ But right now, there’s just a lot of hesitation.”
Speaking on current conditions, he said the market is being driven far more by interest rate pressure and borrowing capacity constraints than by any single policy announcement or headline.
Mr Lahood also pointed to the impact of lending policy and expiring pre-approvals as a short-term driver of urgency in parts of the market, which he said is distorting activity.
“If you’ve got approval now, you’ve got to find something now before it expires,” he said. “Otherwise you get re-rated and your borrowing capacity drops.”
He said bank stress testing at significantly higher interest rates than current mortgage levels is already constraining purchasing power, meaning even small rate changes can materially alter borrowing limits.
“They’re testing people at around nine per cent rather than six. If rates move again, borrowing capacity drops substantially. You’ve got buyers out there rushing to secure a property before their loan approvals expire, because if they have to go back to the bank and get reassessed after another rate rise, they could end up being able to borrow significantly less.
“Then on the other side, you’ve got existing owners whose mortgage repayments keep going up. Interest rates are killing them, and some of those people may eventually be forced to sell because the holding costs are becoming too much.”
He said both sides of the market are being squeezed simultaneously, with new buyers struggling to enter and existing owners reassessing affordability as repayments rise and refinancing conditions tighten.
On first home buyers, Mr Lahood was blunt about the structural affordability challenge.
“I’m not going to mention first home buyers because I personally think they’re locked out of the market, full stop,” he said.
“What these politicians don’t understand is the average price of apartments and houses in the main cities. They’re all north of $800,000 or $900,000, and you need a 20 per cent deposit.
“Even with the five per cent deposit schemes, it’s irrelevant because you still have to pay the interest on it. The bank of mum and dad is going to be helping young people get into the market. What might have happened before is younger people would stay at home and buy a cheap investment property first, what they call rent vesting, but that’s all changed now.”
Despite this, he rejected the idea that the market is in decline in a traditional sense, instead describing it as a redistribution of activity rather than a collapse in demand.
“There’s always opportunity in every situation,” he said. “You know where we’ve gone straight to after all this. All our owners that have got new apartments, all our agents that have access to developers. That’s where I’m excited, because there are going to be investment properties coming through again.”
He said Budget related changes to negative gearing are likely to shift investor attention toward new apartment stock and off the plan development, after several years of subdued activity in that segment.
He said that part of the market has been “in the doldrums for the last few years off the plan sales,” but may now see renewed activity as capital reallocates.
He argued that reduced investor participation in established housing will likely have flow on effects for rental supply and agency growth.
“There’s going to be a shortage of investment properties for sure. I don’t think there’ll be as much new business for real estate agents in the rent roll because there’s not going to be as many investors coming in.”
He added that upward pressure on rents is now effectively locked in as a consequence of reduced supply rather than demand growth alone.
“The rents are going to go up. That’s a given. And that’s what they’re actually trying to stop, but it’s exactly what happens when you reduce supply.”
Despite these pressures, he said transactions are still occurring daily, with success increasingly defined by market share rather than overall volume.
“Someone is still buying and someone is still selling every single day,” he said. “It’s just about how much market share you’ve got.”
He said agencies that continue to operate actively through softer conditions are more likely to gain ground as others step back.
“If you’re serious about your business, you have to see this through, you can’t stick your head in the sand.”
He described current conditions as a phase of adjustment rather than structural decline, with interest rates remaining the central driver of behaviour across both buyers and sellers.
“It’s not collapse,” he said. “It’s adjustment. Interest rates are still the main story, everything flows from that.”