More vendors pulled their properties from scheduled auctions last week
The Reserve Bank’s hawkish stance has spurred caution in the auction market, with more vendors pulling their properties from scheduled auctions last week.
The withdrawal rate rose to 13.4% last week from 9.3% the week prior, according to The Australian Financial Review. The increase came after the RBA hiked rates by 0.25 percentage points and announced that further rate hikes would likely be necessary to tame runaway inflation.
The caution of some vendors impacted the clearance rate of 65.2%, a seasonally strong reading that was nonetheless down 2.2 percentage points from the previous week, according to CoreLogic.
Sydney’s preliminary clearance rate fell to 67.4% last week from 70.6% the week before, while Melbourne’s fell to 63.8% from 67.1% the week before.
February clearance rates are typically strong as a wave of buyers hits a market with limited listings, AFR reported. Auction volumes are on the rise, with 1,467 scheduled last week, up 11%.
However, the spike in withdrawals could signal “a worsening in vendor confidence following the more pessimistic inflation outlook and expectation for further rate hikes from the RBA,” CoreLogic said in an analysis.
“Once final figures are reported, it’s likely we’ll also see a rise in the portion of properties passed in at auction,” CoreLogic said. “As we navigate an uncertain interest rate environment, clearance rates and auction activity will continue to be an important marker for both buyer and vendor confidence.”
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Auction volume in the smaller capitals fell by more than a third from the previous week, AFR reported.
Among the smaller capitals, Brisbane was the only market where the preliminary clearance rate improved on the prior week, rising 11.5 percentage points to 63.4%. Adelaide saw a preliminary clearance rate of 71.2%, while Canberra posted a 60% clearance rate.
Louis Christopher, founder of SQM Research, said stronger clearance rates were typical for this time of year and were likely to continue through to March.
“We shouldn’t read too much into it at this point,” he told AFR.
The central bank’s hawkish stance last week caused some market watchers to revise their expectations for house prices. Jarden downgraded its prediction from a 15-20% overall price drop to a 20-25% overall drop.
Christopher, meanwhile, said a recovery in the housing market is possible by later this year, depending on the RBA’s next moves.
“If we have a pause [in rate increases] by May, if we don’t go over 4% [cash rate], I’m quite confident the market will bottom out on that pause and we’ll see its recovery in the second half of the year,” he told AFR. “If, on the other hand, they keep raising through to May inclusive and we go over 4%, I think that’s the crunch point. That’s where the risks start to exponentially rise of a hard landing in the housing market and a hard landing in the economy.”
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