Both clearance rates and listings are down as the spectre of sharper interest rate rises looms
National auction clearance rates have tumbled below 60% for the first time since August as skyrocketing inflation raises the spectre of sharper interest rate hikes, according to new data from CoreLogic.
The preliminary auction clearance rate fell to 59.8% last week, while the volume auction listings also fell, to 1,908 from 2,169 the week prior, CoreLogic reported. Listings tumbled most sharply in Melbourne, which observed an unofficial four-day weekend ahead of Tuesday’s Melbourne Cup, according to The Australian Financial Review.
The clearance rate in Sydney crept up to 62.3% even as listings rose, AFR reported. In Melbourne, the clearance rate was 60.7%, while the volume of listings plummeted to 582 from 1,163 the week prior.
Among the smaller capitals, Adelaide had the highest clearance rate at 68.2%. Canberra posted a rate of 59.8%, while Brisbane had a rate of 45.7%, CoreLogic reported.
While some buyers had previously begun to hope that the end of the rate-increase cycle was nearing, those hopes were dashed after official data showed annual inflation had spiked to 7.3%.
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“One of the things that would have to be running through buyers’ minds right now is, ‘What is the Reserve Bank of Australia going to do?’” SQM Research founder Louis Christopher told AFR. “The CPI number that came out this week was bad. And it reduces the probability of a Christmas pause in [hikes to] interest rates. That may well start making some buyers a little bit nervous once more.”
Christopher also warned that as the likelihood increases of the official cash rate peaking at closer to 4%, the 3% serviceability buffer used by banks to assess loan applications is at risk of being overtaken. That means current mortgage holders could see interest rates they were never prepared for.
“That’s the threshold of being stress-tested. And if we do get [a cash rate of] 4% or more, this will be uncharted waters for many borrowers, who were only stress-tested up to 4%,” Christopher told AFR. “That’s going to be in the back of existing borrowers’ minds and potentially in would-be borrowers’ minds.”
