Despite a busy auction weekend, clearance rates plummeted as rate increases continue to bite
The auction clearance rate tanked over the weekend, falling to its lowest level in nearly five months as would-be home buyers factored in the latest hike in interest rates.
Despite it being one of the busiest weekends of the year, with 2,667 homes taken to auction – the highest number since May – the combined capital city clearance rate tumbled to 57.9%, according to a report by The Australian Financial Review.
The tumble points to further price drops heading into next year, CoreLogic warned.
This weekend will be the last big auction of the year, with about 2,300 homes scheduled for auction, before the market enters its summer slowdown, AFR reported.
AMP chief economist Shane Oliver told AFR that last week’s rate hike to a decade-high 3.1% was yet another hit to prospective buyers’ borrowing capacity. Since April, a buyer with average earnings and a 20% deposit has seen their borrowing power shrink 27%.
Oliver said that for a $500,000 loan, a buyer would now need a minimum pre-tax income of $181,000 – up from $122,000 in April. He said that the Reserve Bank’s repeated rate hikes were starting to bite.
“Housing-related indicators are all very weak,” he told AFR.
Those indicators include new home sales, which tumbled 23% in the three months to November compared to the prior quarter, the Housing Industry Association reported.
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While buyers are more cautious after the latest rate hike, Ray White Victoria & Tasmania chief auctioneer Jeremy Tyrell said they were still out there. Tyrell said 82% of the agency’s 253 auctions received a bid.
“The sale for most [auctions], however, resulted when sellers’ expectations aligned with that of the buying market,” Tyrell told AFR.
Buyer’s agent Emma Bloom told the publication that she attended an auction for a house in Melbourne’s inner north-east where she was the only bidder.
“It was just me and two estate agents,” Bloom said. “I wasn’t going to bid against myself and so the property was passed on to me. Later we agreed a sale at just over $1 million. I saved my client about $100,000.”
However, Bloom said that agents were “not doing a good job managing their vendors’ expectations.”
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