Real estate 2022 forecast: What auction clearance rates will tell buyers and sellers

Buyers and sellers should know early on this year whether the real estate boom will continue or end, via one crucial indicator.

Auction clearance rates will need to get back into the 70s for 2022 to see anywhere near the resumption of the price growth seen over much of last year.

A continuation from December’s auction success rate in the low 60s will signal hits and misses when it comes to whether vendors achieve any fresh price growth this year. And should the clearance rate dip into the 50s there will be across the board price plateauing along with dips.

The February auction success rate will be the first sign of just how the property market returns after the long summer break.

With some eight weeks in a row of 80 per cent plus auction success rates in early spring, 2021 saw the biggest ever annual price boom which was uncharacteristically shared across the capitals and regions across Australia. I have never seen such unison as our residential property market cycles have typically run their own race.

House prices grew by an incredible 20 per cent across the country in 2021. Picture: Simon Bullard.

Some 311 Australian suburbs crossed the $1 million median house value, data from CoreLogic between May and December shows, lifting the nationwide total by 38 per cent to 1120 suburbs.

Of course auction results won’t be the only indicator of market direction.

Much will depend on whether listing volumes – both auction and private treaty – resume in huge numbers.

The early bird vendors who have listed in January will be joined by those who want to sell before Easter which will then see a seasonal lull come mid-April.

The federal election will likely be in May, rather than March, which will be a key factor in slowing market activity as elections historically create hesitancy among buyers and sellers.

These factors won’t determine the sale prices being achieved.

The banks were told last October by the Australian Prudential Regulation Authority (APRA) to be a bit more cautious about the size of their home loans which has had an impact.

And of course much depends on how the continuing Covid pandemic shapes our psyche and economic activity.

Auction clearance rates will need to get back into the 70s for 2022 to see anywhere near the resumption of the price growth seen over much of last year. Picture: Simon Bullard.

Interest rate rises will certainly be top of mind, although they really are underway well ahead of any official Reserve Bank of Australia (RBA) cash rate move. The international inflationary backdrop will impact the cost of sourcing money from overseas for Australian lenders.

Today’s local inflation result, of 3.5 per cent over the year to December, is suggested as being one of the “most influential economic statistics of the year”, potentially reshaping the narrative around the pandemic recovery and increasing pressure on the RBA to contemplate rate hikes later in the year.

With so many forecasters weighing in on how they see the future of the economy and property market, there is understandable confusion among buyers and sellers.

Staying somewhat informed will suffice, as you and your family do need to get on with your lives.

These are private decisions for you to make, as long as you sense your preparedness for any turbulence that may – or may not – lay ahead.

Originally published as Real estate 2022 forecast: What auction clearance rates will tell buyers and sellers